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This article aims to analyze the phenomenon of consumers transitioning from one generation of mobile communication technology to the next, focusing on the South Korean market. It will provide a brief overview of each generation of communication technology and examine consumer behaviors and telecom companies' responses during the transitions from 3G to 4G-LTE and from 4G-LTE to 5G.

Evolution of Mobile Communication Technologies

1G (First Generation) transmitted voice using analog signals, while 2G (Second Generation) converted analog voice signals into digital signals, allowing for digital voice data transmission. The term 3G (Third Generation) refers to the technology enabling the transmission of digital signals, which includes voice, text, video calls, and internet services. In South Korea, SK Telecom began deploying 3G in 2000, and it became widely used by 2011 with the proliferation of smartphones.

4G, and specifically 4G-LTE (Long Term Evolution), offers faster data transmission and multimedia services compared to 3G. 4G-LTE, the most advanced form of 4G technology, provides high data transfer speeds, low latency, and efficient frequency usage. SK Telecom commercialized 4G-LTE in Seoul in July 2011, leading to a natural adoption by consumers due to the surge in mobile data demand.

5G, the latest technology commercialized since 2018, features ultra-high-speed data, ultra-low latency, massive connectivity, and high efficiency. Ultra-low latency means minimal delay in data transmission, which is crucial for real-time remote control of robots and machines, real-time responses from autonomous driving sensors, and reducing latency in augmented reality services to enhance immersion. Massive connectivity allows for the simultaneous connection of numerous devices, making it suitable for controlling various IoT devices. Essentially, 5G serves as the foundational technology for new, yet-to-be-commercialized innovations. However, unlike the seamless transition from 3G to 4G driven by smartphone adoption, the consumer shift from 4G to 5G has been slower. The growth rate of 5G subscribers in 2023 declined compared to 2022, while 4G-LTE subscribers continued to increase, with a rise of 40,565 in December 2023 compared to November, marking a nine-month growth trend.

Factors Influencing Consumer Transition

Consumers generally expect lower prices or improved performance when transitioning from an older generation product to a new one. While 4G was essential for smartphones, 5G is designed for emerging technologies. As smartphones remain the central communication device for most people, the performance of existing LTE technology suffices for their needs. Moreover, there are few widely adopted devices that necessitate 5G, reducing consumer incentive to adopt the more expensive technology.

Building new infrastructure for next-generation communication services requires significant investment, and maintaining older networks also incurs substantial costs for telecom companies. Therefore, telecom companies encourage consumers to switch to new communication technologies by providing transition pathways. Telecom providers often minimize costs by ceasing the sale and support of older generation products post-launch of new ones, although regulatory obligations prevent them from abruptly discontinuing services. For example, SK Telecom spent around 100 billion KRW annually to maintain its 2G network, which still served about 1% of its total subscribers in 2020, but could not shut it down due to service obligations.

To minimize such costs, telecom companies have historically offered subsidies and trade-in programs to facilitate transitions to new communication technologies. During the early 2000s, when transitioning from 3G to 4G, mobile phone dealers often provided substantial subsidies, allowing consumers to purchase phones almost for free if they subscribed to specific 4G-LTE plans, accelerating the transition. Similar incentives were offered for the transition from 4G to 5G. However, the higher cost of 5G, regulatory changes affecting subsidies, and the emergence of budget telecom services have not driven as significant a shift as seen with 3G to 4G. Additionally, the slow deployment of 5G infrastructure has hindered the realization of its theoretical speed advantage, leaving 5G speeds far below the promised 20-fold improvement over 4G.

Current Status and Future Outlook

While 5G is the most widely utilized communication service today, it has not completely replaced 4G. Consumers, anticipating future innovations in Korea, might be waiting for an even more advanced 6G technology, potentially leapfrogging 5G.

Sources

1. Jinkyu Myung, Asia Economy, February 2019, "[From 1G to 6G] 3G and 4G... The Dawn of the Smartphone Era #2," Asia Economy
2. Junho Park, Electronic Times, March 2024, "[Data News] 5G Subscriber Growth Rate 16.9%... Growth Halved," Electronic Times
3. Seongwoon Yang, Headline Jeju, December 2011, "4G LTE Smartphone Market Subsidy Competition Overheats..." Headline Jeju
4. Gyepung Lee, The Korea Economic Daily, January 2024, "Will LTE Subscribers Recover to 50 Million... Telecom Companies' Profitability in Crisis," The Korea Economic Daily
5. Naeun Kim, E-Today, December 2023, "Cross Enrollment for 5G and LTE Plans Now Possible with KT," E-Today