South Korea is fast developing a reputation as the world's laboratory for digital technology, boasting among the world's most advanced broadband and wireless internet markets.

International scrutiny of South Korea's technology revolution will intensify later this month when soccer's World Cup finals kick-off in Seoul.

South Korea's mobile operators and handset makers are planning to use the event, which draws hundreds of thousands of visitors and billions of television viewers from around the world, to showcase their products and services.

Visitors will find the streets of Seoul buzzing with young people routinely using data services through their colour-screen Samsung or LG handsets.

Youths download games, ringtone melodies, photographs and cartoon characters and book cinema tickets or buy CDs while on the move. Adults place bets on sports events, trade shares and check news headlines through their handsets.

More than 7m, or nearly a quarter, of South Korea's 30m mobile users were subscribers to 2.5G (between second and third generation) services at the end of March, a near four-fold increase on six months ago. The number is expected to more than double to 15m by the end of the year, according to ING, the Dutch-based banking group, leading to sharp increases in operators' revenues from data services.

Market-leader SK Telecom, which services more than half of South Korea's mobile users and 70 per cent of 2.5G subscribers, increased data sales by nearly 19 per cent last year to Won258.7bn. That sum remains a modest 5 per cent of voice revenues but data's share is forecast by ING to double to 10 per cent this year and to reach nearly 20 per cent of voice sales in 2003.

Demand for internet- enabled handsets in South Korea has allowed the country's cellphone makers to take leadership roles in the global industry. Samsung Electronics is the world's fastest-growing handset maker, having increased its sales last year by 37 per cent to 29m units, focusing on the advanced end of the market. Samsung launched a camera-equipped handset last month, allowing users to take and send pictures by mobile phone.

LG Electronics is also rising up the ranks of phone makers. The country's handset exports grew by 32 per cent to $1.97bn in the first quarter of this year.

Seoul attracts developers

"The Korean telecoms industry is the Mecca for carriers and handset manufacturers around the world. Everybody in the industry is coming to Seoul to see what's happening," says Eli Reifman, chief executive of Emblaze Systems, a wireless technology developer. "Korea is doing better than the rest of the world because they have a more advanced infrastructure and the people are more open-minded about crazy new services."

However, while Europeans and Americans visiting for the World Cup will be able to see South Koreans enjoying the online wireless world that has proved elusive in their own countries, few of them will be able to sample the services for themselves.

European handsets, which use GSM technology, are incompatible with South Korea's CDMA network. About 65 per cent of the world's mobile networks use the GSM system, leaving South Korean operators isolated and deprived of revenues from international roaming.

South Korea's technology clash with the rest of the world fuelled a heated debate about what system the country's third generation services should be built on. Should Korea adopt W-CDMA technology, the global standard 3G platform, that would make the country's network compatible with those in Europe, and some networks in North America and Japan? Or should it simply upgrade its existing CDMA infrastructure?

The argument ended in a fudge last year when the South Korean government split three 3G licences between the two technologies: SK and KTF would build W-CDMA networks, while LG would offer CDMA2000 1XRTT services. The CDMA2000 standard was pioneered, like its forbear, by US-based Qualcomm.

Some analysts, eyeing delays to 3G launches in Europe and the poor uptake of DoCoMo's fledgling 3G service in Japan, still doubt whether W-CDMA will ever be fully introduced in South Korea.

Sceptics argue that 2.5G data services have already reached 3G standard in South Korea without heavy investment in new W-CDMA networks. Data, they claim, can be downloaded via CDMA2000 1XRTT - which is backwardly compatible with the existing CDMA network - as fast as a true 3G service, leading some people to question why South Korea needs W-CDMA.

With 2.5G data revenues growing nicely and customer demand for more sophisticated services unproven, South Korean operators are reluctant to invest heavily in W-CDMA. Pilot 3G services could be launched before or during the World Cup to grab headlines. But SK's warning last month that its 3G launch could be delayed until next year is a better indicator of the industry's attitude.

John Lipp, marketing director of Alcatel's mobile operations in Asia Pacific, says that although South Korea's existing 2.5G network is capable of carrying 3G-style services, it does not have as much capacity as a true 3G network.

"A large volume of data users cannot be carried by 2.5G technology very effectively, unless you have a very large number of base stations," he says.

As the 2.5G network becomes more congested, demand for faster 3G services will increase in South Korea. CDMA networks can be upgraded to W-CDMA, making the transition to 3G easier and less costly than in Europe, where networks have to be built from scratch.

"Korea is already 80 per cent of the way towards 3G," says Mr Reifman.

But whatever path South Korea chooses, and how ever long it takes to proceed down it, the country is likely to remain ahead of less nimble European and North American markets in wireless internet services.

Young, urbanised, well-educated and increasingly wealthy, South Korea's dynamic and energetic population has all the characteristics of an early adopter of technology. "The Korean people seem to adapt to new technology better than other people," comments Mr Reifman.

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