VoIP becoming mainstream in Korea and Japan

Different approaches to VoIP adoption

For immediate release, 21 January 2008. Korea and Japan are the most advanced telecoms markets in the Asia-Pacific region. Both countries have high broadband penetration, but the trajectory of VoIP adoption has been different in each market.

In Japan, substitution of legacy telephony by VoIP is underway. In 2Q07, Japan reported over 15.3 million VoIP subscribers, which corresponded to 56.5% of broadband subscribers and 28.2% of total voice subscribers.

"However, the growth has slowed during the last couple of years and high-quality VoIP services, which use the normal telephone number range and offer emergency service access, have been growing rapidly, with 145% year-on-year growth in 2Q07," said Ovum Senior Analyst Suran Seong. The incumbent NTT is the main driver of this. With this improved quality, VoIP is no longer merely a second line solution.

In Korea, the situation has been different. Although the first VoIP services began in 1999 and the regulatory framework was set up in 2005, adoption of VoIP services has been low, with around 200,000 VoIP subscribers with a dedicated prefix at the end of 2007.

Suran Seong, based in Seoul, believes that VoIP will become a mainstream service in 2008. "With the introduction of number portability in early 2008, the incumbent KT is likely to change its defensive stance on VoIP and try to take the initiative in the VoIP market to protect its broadband subscriber base." Ovum expects VoIP will take around 10% telephony market share in Korea by the end of 2008.

"It is also interesting that the two markets have taken different approaches to VoIP," added Seong. Japanese VoIP operators have accepted that the value proposition for consumer VoIP is a simple low-cost voice service with equivalent quality to the legacy telephony service.

In contrast, Korean operators have strived to differentiate VoIP by adding additional functions such as personalisation and mobility, adding local wireless technologies to the existing voice service. While this looks reasonable from a technical perspective, we are sceptical about the actual effects of these efforts.

"The different market development in the two countries implies that high broadband penetration is a necessary but not sufficient condition for the success of VoIP. A favourable regulatory framework, including interconnection arrangements and numbering reform, is also needed," added Seong.

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