In this blog, we will discuss the Korean government policy on private 5G and KT's private 5G network strategy (3 business models) in response to this policy.

 

Advantages of building a private 5G network using private 5G frequencies Private 5G spectrum policy and regulation of the Korean government (MSIT) KT's strategy for entering the private 5G market: 3 business models  Provide SI services to enterprises that want to build their own private 5G  network  Provide cloud 5G core subscription services to enterprises that want to build their own private 5G network Selling private 5G network solutions to 5G specialized network operators​ Summary

 

 

On October 28, 2021, the South Korean government (Ministry of Science and ICT: MSIT) started offering private 5G frequencies (100MHz@4.7GHz, 600MHz@28GHz) in an effort to deploy private 5G, a crucial infrastructure for enterprises' digital transformation, across a variety of industries in South Korea. 

 

With the availability of these private 5G frequencies, enterprises in Korea can now deploy private 5G networks independently from the public 5G networks of mobile operators.

 

As of June 7, 2023, private 5G frequencies have been assigned to 36 locations in 21 companies. See the list of operators and enterprises to which the MSIT has assigned private 5G frequencies.

 

Advantages of building a private 5G network using private 5G frequencies

(compared to building a private 5G network using public 5G networks)

 

An enterprise private 5G network can also be built with a fraction of the MNO's public 5G network capacity (network slicing). In this case, the uplink and downlink capacity is shared with public 5G traffic, which means that the quality of private 5G network traffic may be affected by public 5G network traffic (smartphones).

 

On the other hand, a private 5G network built using private 5G frequencies (4.7 GHz, 28 GHz) is independent of the MNO's public 5G network (public 5G frequency: 3.5 GHz). Therefore, a single enterprise can exclusively use 5G's high-capacity up and down links independent of public 5G network traffic.

 

In addition, the MNO's public 5G network is designed for downlink applications like video streaming and games, so the downlink capacity is set to be high. However, in the enterprise private network environment, there are many camera uplink applications like remote monitoring, remote driving, and AI vision, so the uplink capacity must be high.

 

In the public 5G network used by all citizens, the ratio of uplink and downlink capacity cannot be adjusted for a specific company. On the other hand, the private network using private 5G frequencies are used by a single company alone, so the uplink and downlink ratio can be changed as desired by the company.

 

	5G Network
	Public 5G Network	Private 5G Network
User	Consumer	Enterprise
Device	Phone	Phone, Robot, Camera, Sensor, etc.
Network   Deployment	deploy public 5G networks   using public 5G frequency	deploy private 5G networks   reusing public 5G network   resource (network equipment,   frequency)   : Network Slicing	deploy private 5G networks    using private 5G frequencies
5G   Frequency	MNO's Licensed/Public 5G    Frequency     [3.5GHz, in Korea]	MNO's Licensed/Public 5G   Frequency     [3.5GHz, in Korea]	Private 5G Frequency     [4.7GHz, 28GHz, in Korea]

 

In the following sections, the private 5G network will be explained only in the context of private networks established using private 5G frequencies (not MNO's network slicing).

 

 

Private 5G spectrum policy and regulation of the Korean government (MSIT)

 

This private 5G frequencies provided by the MSIT can be used in two ways.

• Private 5G Operator: an organization that wants to provide private 5G network services to enterprise customers must be approved by MSIT as a private 5G common carrier. The private 5G operator applies to MSIT for a private 5G frequency to be utilized at the customer's workplace and uses this frequency to provide enterprise customers with private 5G network services.
  • ​This case is referred to by the government as "private 5G frequency use type: Type 3 (frequency allocation)".
  • As of June 7, 2023, there are 11 private 5G operators in Korea. 
  • Private 5G operators build private 5G networks for enterprise customers and charge a fee for the service. Typically, 5G equipment is provided free of charge or at a minimal cost, and a monthly subscription fee is charged to keep upfront costs down.
• Enterprise DIY: Enterprises apply to MSIT for private 5G frequencies to use at their locations and use these frequencies to build their own private 5G networks.
  • ​​This case is referred to by the government as "private 5G frequency use type: Type 1 (frequency designation)".
  • As of June 7, 2023, 10 enterprises in Korea have built their own 5G networks
  • Typically, enterprises purchase 5G network equipment (base stations, cores, MECs) from SIs or vendors, and the equipment is the property of the company (purchase type).
  • Enterprises can only use the private 5G network for their own employees and not for other enterprises.

Figure 1. Private 5G Market Players in Korea

Private 5G Solution Provider, Private 5G Operator, and Enterprise

 

In Japan, which made private 5G (local 5G in Japanese) frequencies available to the market in 2019, two years earlier than Korea, MNOs such as NTT Docomo and KDDI are not allowed to become private 5G network operators.

 

In South Korea, as in Japan, MNOs (public 5G network operators: SK Telecom, KT, and LG U+) are not allowed to become private 5G operators. 

 

The Korean government (MSIT) prohibits MNOs from entering the market as private 5G operators due to monopoly concerns.

 

If MNOs are allowed to participate as private 5G operators, it is obvious that mobile operators who have already designed, built, and operated public 5G networks for several years will monopolize the private 5G network market, just as they monopolize the public 5G market today.

 

In this case, it is difficult to expect the expansion of the private 5G network market and ecosystem through competition in the B2B market with the emergence of various new private 5G operators expected by the government, and the government loses the justification for institutionalizing private 5G frequency.

 

Figure 2. Private 5G Regulation in Korea

In South Korea, mobile operators (MNOs: SK Telecom, KT, and LG U+) are not allowed to become private 5G operators. 

 

KT's strategy for entering the private 5G market (3 Business Models)
 

As mentioned above, MNOs cannot become private 5G operators and generate revenue by providing private 5G services directly to enterprise customers. However, MNOs are preparing various business models in anticipation of private 5G as the next new source of revenue in addition to B2C public 5G services (5G phones), and KT is the most active among the three MNOs. 

• KT's experience in building and operating private 5G networks

In 2022, KT built private 5G networks in four organizations: Bundang Seoul National University Hospital, Samsung Medical Center, Republic of Korea Navy, and Korea Aerospace Industries.

 

The private 5G networks at Bundang Seoul National University Hospital and Samsung Medical Center were built by KT's subsidiary KT MOS as a private 5G operator (Type 3: KT MOS applies for and is allocated private 5G frequencies by the Ministry of Science and ICT. KT MOS provides private 5G network services to enterprises), and KT performed the System Integration of private 5G network.

 

The Republic of Korea Navy and Korea Aerospace Industries built their own private 5G networks (Type 1: The two organizations applied for and received private 5G frequencies from the Ministry of Science and ICT), and KT performed the System Integration of private 5G network.

 

* System Integration: Design, equipment procurement/supply, construction, and operation of a customer's private 5G network.  

 

• KT's experience in verifying a cloud-based private 5G testbed

In October 2022, KT, in partnership with AWS and Nokia, built a private 5G testbed at KT Research and Development Center that provides a cloud-based private 5G core to enterprises. On this testbed, KT validated various solutions for services such as robotics, security, and remote monitoring.

 

• Although KT cannot become a private 5G operator, it is planning several business models to make money in the private 5G market based on the experience of building four locations and verifying the cloud-based private 5G testbed in 2022.

 

Let's take a look at 3 Business Models one by one.

 

 

Figure 3. KT's strategy for entering the private 5G market

KT plans to monetize private 5G by targeting large enterprises, SMEs, and private 5G operators.

 

① Provide SI services to enterprises that want to build their own private 5G network (Type 1): for large enterprises

 

This is a business in which KT provides SI services (system integration: 5G network design, equipment supply, construction, and operation) to companies that want to build their own private 5G networks, such as the Navy Headquarters and Korea Aerospace Industries.

 

In this case, the private 5G network is mostly built as an on-premise type, in which the 5G base station, 5G core, and MEC (enterprise application) are all installed at the enterprise site. Private 5G network equipment is purchased by an enterprise and becomes an enterprise asset. This business targets large enterprises with abundant capital.

⇒ In this case, KT raises SI service revenue from large enterprises.

 

② Provide cloud 5G core subscription services to enterprises that want to build their own private 5G network (Type 1): for SMEs

 

To accelerate the deployment of private 5G, KT announced its cloud-based private 5G network deployment strategy in cooperation with AWS and Nokia at the AWS Seoul Summit on May 3, 2023.

 

The key feature is that the 5G Core is hosted in AWS Seoul Region, which is a public cloud. 

Only the 5G RAN is deployed at the enterprise site, while the 5G Core is hosted in the cloud and shared by different enterprises (5G Core Sharing). 

 

Based on this, KT offers cloud 5G core subscription services to enterprises, particularly small and medium-sized firms, which want to establish their own 5G networks.

 

Because it is too expensive for small and medium-sized enterprises to purchase and build a full set of 5G, KT offers cloud 5G core as a service.

 

This means that enterprises do not need to buy 5G core, which is the most expensive 5G equipment.

 

Enterprises apply for and receive private 5G frequencies, build their own base stations (enterprise assets), and pay a subscription fee to access KT's cloud 5G core.

Figure 4. KT's AWS cloud-based private 5G network deployment in Korea

Source: Netmanias One-Shot, KT's AWS Cloud-based Private 5G network deployment in Korea, 2023.05.20

 

In this model, KT offers cloud 5G core as a service and receives service fees from enterprises.

However, isn't KT behaving as a private 5G operator in this case? Isn't it illegal for KT to behave as a private 5G operator because it is a mobile operator?

 

I contacted the Ministry of Science and ICT, the ministry in charge of private 5G networks. The answer from MSIT was, "It seems that it is possible for a private telecommunication facility installer to use a portion of a common carrier's (e.g., KT's) network for its own telecommunications".

 

In other words, KT cannot be assigned private 5G frequencies from MSIT and then provide private 5G services to enterprises while collecting service fees (Type 3).

However, KT may supply cloud 5G core services to enterprises (Type 1) that have been given private 5G frequencies by MSIT and are building their own private 5G networks.

 

⇒ In this case, KT raises revenue from cloud 5G core subscription fees from SMEs.

 

③ Selling private 5G network solutions to 5G specialized network operators (Type 3): for private 5G operators

 

As a private 5G solution provider, KT sells private 5G solutions (5G equipment, terminals, OSS systems, etc.) to new private 5G operators. 

 

⇒ In this case, KT earns revenue from the sale of solutions to new private 5G operators.

 

Summary   Despite the government's restrictions on KT becoming a private 5G operator and receiving private 5G spectrum to provide private 5G services to enterprises, we can see from the above that KT is working creatively to enter the private 5G market by developing alternative business models.   The cloud 5G core subscription services (② in Figure 3) will be an important breakthrough in the proliferation of private 5G networks since it will provide a cost-effective way for many small and medium-sized businesses who cannot afford to invest in pricey 5G equipment.    It is expected that KT will capture a significant portion of the private 5G network market pie in the future, and it is desirable that competition between MNOs, including KT, and new private 5G operators will promote the introduction of private 5G networks, resulting in a rapid digital transformation of the domestic industrial sector.   However, we believe that institutional safeguards are also required to prevent existing MNOs from dominating the private 5G market, allowing a new ecosystem of private 5G operators to emerge in the realm of private 5G networks.