This year marks the 20th anniversary of the start of Korea’s mobile phone service. Korea Mobile Communication, the predecessor of SK Telecom, launched Korea’s first analog mobile phone service on July 1, 1988. In just twenty years, mobile phones have become an indispensable part of Korean life and have powered the growth of Korea’s IT industry. What is the secret to the success of mobile communication and which way should Korea’s mobile phone service be headed? Today we have invited science and technology writer Kim Ha-jin to answer these questions. First he explains how the mobile phone service changed over the past two decades.

The first mobile communication service in Korea actually began in 1984 in the form of car phone. At the time mobile phone service was launched in Seoul and Busan, and the basic fee cost 27 thousand won or nearly 26 U.S. dollars. A call cost about 25 cents per 10 seconds and the installation fee almost 620 dollars. So a three-minute call from Seoul to Busan was 1,286 won or about $1.20 in 1988, but the same call now costs only 324 won or roughly 30 cents. Given the inflation over the past 20 years, today’s mobile call rate is only one-thirty-sixth of that in 1988. Back in the 1980s Korea was really behind in mobile communication technology. It was only in the 1980s when every Korean home had access to wired phones. But since Korea began the mobile communication service in 1988, the nation shot up the ranks of the wireless communication industry to become a pioneer in third generation mobile communication technology. Korea has grown to be the greatest IT powerhouse in just 20 years.

Mobile communication had its start in 1948 as a phone service for vehicles. Then in 1988, ahead of the Seoul Olympic Games, the nation introduced its first mobile phone communication service for individuals. At the time a mobile phone handset was priced at 4 million won. The price of a small car was 5 million won. But now wireless phones are so commonplace that 92% of the Korean population has one. How was Korea able to achieve so much in just 20 years?

The mobile communication service started in 1988 and a nationwide standard phone charge system was adopted in the 1990’s. The Korea Mobile Communication was changed to SK Telecom and a new service provider by the name of Shinshegi Communications entered the picture in 1994 to check the monopoly of SK Telecom. A little later, KTF, LG Telecom, and Hansol PCS jumped into the ring, bringing the number of service providers up to five. Competition among these five companies fueled the development of mobile communication services. In 1988 only 780 people subscribed to mobile services, but that number grew to about 180 thousand in 1992, 5 million in 1997, and 10 million just a year later. As of May 2008, the number of mobile service subscribers in Korea stands at nearly 44.74 million, which translates to a penetration rate of 92.2%. That means just about every Korean has a mobile phone.

It was fierce competition that propelled Korea’s mobile phone service. In 1991 Korean manufacturers like Samsung, Gold Star, the predecessor of LG, and Hyundai entered the wireless phone market dominated by foreign phone makers like America’s Motorola and Britain’s Technophone. Then the start of the PCS business in 1996 took Korea’s cell phone industry to a higher level. Development of one technology or one service by a company immediately gave rise to a competing technology or service. Then, in 1996, Korea succeeded in developing the world’s first CDMA technology, opening the global market to Korean-made mobile phones and powering the Korean economy.

The start of the PCS service was the biggest contributor to the economic recovery of Korea following the financial crisis. Korea commercialized the world’s first CDMA technology and DMB technology. Quantitatively, Korea posted just 2 trillion won or 1.9 billion dollars by today’s exchange rate in IT revenue two decades ago, but by 2006 the amount grew more than 100 times to 24 trillion won or nearly 23 billion dollars. IT accounted for about 2% of the national GDP in 1988, but now it’s 30%. You can see the significant role IT technology plays in the national economy and how much it has driven Korean economic growth.

The PCS service and CDMA technology have powered the Korean economy, taking the place of the outdated smokestack industries. The export of mobile phones grew from 470 thousand dollars in 1996, when the first export took place, to 18.6 billion dollars in 2007. Korea has solidified its status as the world’s leading mobile phone giant by introducing cutting-edge IT infrastructure and services, but the nation has to address the following challenges to keep its hold on the top position.

A 92% saturation of the domestic wireless phone market means that just about everyone has a cell phone. In order for IT technology to develop, venture firms and small businesses must challenge large conglomerates. But in the last decade, the venture bubble burst and young, talented people no longer found small venture firms attractive, which left only large companies to lead Korea’s IT sector. Now it’s the government’s role to address the issue and create new opportunities to bring promising workers to small businesses and nurture them. If the government doesn’t start now, Korea will again be a laggard in the global IT industry.

In the 1990s when the mobile phone business was just taking off, Korea adopted the motto “Cyber Korea 21” to let the world know of its determination to lead the information revolution in the new century. If the Korean mobile communication companies and the government re-establish their resolve of two decades ago, mobile phones will again drive the Korean economy forward.