South Korea: A Nation of Digital Guinea Pigs

It's a hotbed of such experiments as a cash-free city

At first glance, Seongnam seems like any middle-class Seoul suburb: a mix of high-rise apartment blocks, restaurants, and malls. But Seongnam's humdrum exterior masks serious technological ambitions. Over the next three years, municipal officials plan to transform the town of 930,000 into the world's first digital city. That means using multiple broadband connections to do away with some really worn-out analog concepts--like cash and credit cards. When you think of it, says Deputy City Director Jung Chang Sop, cash is just a "hassle." So in March Seongnam will start equipping citizens with digital cell phones that, in effect, pay for purchases at every store in the city.

Cash-free Seongnam is just one of many on-the-ground tests being launched in South Korea, a nation with a collective mania for things digital. More than half of Korea's 15 million households have broadband service, while more than 60% of Koreans carry cell phones. Korea's telcos are already trying out third-generation mobile handsets, designed to handle high-speed wireless transmission of video, data, and voice. In the securities markets, about 70% of all share trades are done online.

The country is now so wired that Korean companies can use entire urban populations as guinea pigs for their latest digital contraptions. That's important for local firms that want to export their knowhow abroad. But Laboratory Korea is key for foreigners too. "We have a guy posted there all the time on the lookout for deals," says Brian Baglow, an executive at online games company Digital Bridges Ltd. in Scotland. "We're very, very focused on Korea because it has such an advanced user base."

These advanced users are up to a lot. Take the Seongnam phone foray. Some Scandinavian communities use cell phones as payment tools, but the Seongnam experiment, launched by Harex InfoTech, the credit card unit of Kookmin Bank, the nation's largest, and LG TeleCom, is one of the first to rely on infrared technology. Consumers will pay for purchases by entering a personal identification number on their phone, then shooting an infrared ray from their handsets to a tiny infrared board located by a store's cashier. The ray will transmit credit-card information to the store, and the user will be billed. Similar transactions can happen at bus stops, vending machines--wherever that infrared patch can be posted to relay the digital billing data. "We may even let handset holders exchange name cards by pointing their phones at each other," says Harex director Kang Bong Heui.

Seongnam isn't the only city with digital dreams. KT, Korea's largest phone company, has set up antennas at 42 crowded spots around the country to provide wireless broadband connections to anyone whose notebook or personal digital assistants is equipped with a local area network card. Users move into any area where a LAN is functioning--a subway station, a restaurant, an airport--and they have an instant, always-on Net connection. The system is easy to install, does not chew up a lot of spectrum, and is much cheaper than a traditional cell-phone network. By the end of the year, such antennas will be available at 10,000 places around the country. "KT is emerging as a pacesetter," says John Yang, CEO of Lucent Technologies Korea.

Meanwhile, with a full-scale introduction of 3G likely in Korea by April, Samsung is launching a line of multifunction gadgets to navigate the high-speed wireless Web. "Superior infrastructure enables us to roll out leading-edge products," says Phillip Chung, a Samsung vice-president. This month, for example, the company began selling the Nexio, one of the most powerful Net-enabled handhelds going. It combines Microsoft's Office and wireless Web-browsing functions with an MP3 player, telephony, voice-recording, and digital-camera capabilities. By summer, Samsung will introduce Nexio in the U.S. with an $800 price tag. Digital at home, digital abroad: Korea's online experiment roars ahead.

By Moon Ihlwan in Seongnam

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