The ADSL Revelation
Henry Samuel’s most devoted followers, the Esquires, spoke up. “Ah, where to begin. First, I suppose I should explain the technology called ADSL. To do that properly, I’ll have to mention a drinking session I had with a friend who works at Bellcore.”
At the mention of Bellcore, a flood of information surfaced in Yoo Jae-won’s mind. In the early twentieth century, there had been a colossal telecommunications giant called AT&T that supplied telegraph and telephone services across the United States. Once AT&T achieved monopoly status, it began to exhibit various abuses, prompting the U.S. government to take decisive action: forced corporate breakup. The once-monolithic AT&T was split into seven companies. Bellcore was the research and development firm spun off from AT&T. Its full name was Bell Communications Research, and as the name suggested, it developed various telecommunications technologies while holding a vast portfolio of completed patents. ADSL itself was one of Bellcore’s creations. Completed in 1988, it had originally been developed to commercialize video-on-demand (VOD) services. However, numerous obstacles arose, and VOD commercialization made little progress. The most critical factor for VOD was not transmission speed but a powerful film library capable of attracting potential users. Yet the major film companies that possessed such libraries showed no interest whatsoever in adopting ADSL.
Henry Samuel had learned of this during a drinking session with his Bellcore friend, who had lamented that he and his team had worked tirelessly on ADSL only to realize there was nowhere to apply it and that it might have to be scrapped. The fact that even Henry Samuel—who had graduated from an information and communications program and now served as president of NextCom, a company providing PC communications and internet services—had only learned of ADSL at that moment made it clear that Bellcore’s VOD venture had failed spectacularly.
While listening to his friend’s complaints, Henry Samuel had conceived a new application for ADSL. The technology possessed sufficient bandwidth to transmit VOD files reliably. Moreover, it was easy to install using existing telephone lines. A filter was needed to prevent interference between the telephone and the ADSL device, but that was hardly complicated. The only drawback was that the distance between the DSLAM device connecting the ADSL terminal to the server was limited to a five-kilometer radius. Considering the typical size of a city, however, this was not a serious issue.
Henry Samuel’s idea was not to use ADSL for transmitting VOD, but rather to deploy it as dedicated internet lines. Demand for the internet was steadily growing. Few universities now operated without their own websites, and graphic design programs and digital cameras were beginning to appear, moving online content beyond mere text. NextCom had kept pace by enabling easy image file uploads and completing an editor that allowed images and text to be edited together on the web. In addition, they had installed extra storage space on the mainframe and expanded auxiliary servers to accommodate larger user posts. As the financial backer, Yoo Jae-won’s pockets were deeper than anyone’s, so expanding servers posed no burden. In fact, submitting a development plan of just three or four A4 pages was enough to secure hundreds of thousands of dollars in funding.
Yet user complaints persisted. The biggest grievance was, predictably, transmission speed. More than half of NextCom’s users still connected via modem, while ISDN users accounted for less than a quarter. Even ISDN subscribers complained about slow speeds. Meanwhile, leasing a dedicated data line costing thousands of dollars per month was simply out of reach for ordinary users.
“The transmission speed issue isn’t NextCom’s problem—it’s the communication lines users are relying on, isn’t it?”
“Yes, Mr. Chairman. But complaining to the telephone company has never solved anything. That’s why frustrated users are exploding on NextCom’s bulletin boards.”
Henry Samuel answered Yoo Jae-won’s question succinctly. Jae-won nodded in understanding. Korea had faced the same situation. In the late 1990s, when internet outages occurred, repairs had never arrived promptly.
“If you look at the telecommunications technology forums, plenty of people say they’d pay a hundred dollars a month if NextCom directly provided dedicated lines. So I led the technical team and developed a high-speed data modem using ADSL technology.”
It was exactly the kind of thinking and action one expected from a Silicon Valley warrior. The mere fact that he had believed those forum posts already set him apart from ordinary people. Though Jae-won had not seen the posts himself, the tone suggested they were exaggerated complaints meant to highlight how terrible existing carriers were, not genuine offers to pay a hundred dollars. Yet Henry Samuel had taken them at face value and developed the technology.
As he spoke, Henry Samuel proudly presented the shopping bag he had carried into Jae-won’s office. The Best Buy logo was clearly visible, so Jae-won had assumed he had bought some new gadget. He was wrong. Inside the bag was a long rectangular plastic box—twenty centimeters wide, four centimeters tall, and twenty-five centimeters long. The front featured several green and red LEDs, while the back had three ports: a telephone jack, an Ethernet port, and a 12V adapter socket.
“It’s a prototype high-speed data modem,” Henry Samuel said, launching into an enthusiastic explanation. He had modified ADSL technology to transmit IP packets and successfully achieved 250 kilobytes per second to a computer five kilometers away. Closer distances yielded even higher speeds, reaching up to one megabyte per second. Jae-won’s mouth fell open and stayed that way. The ISDN dual-channel connection he currently used for its “fast” speed managed only twelve kilobytes per second. Henry Samuel’s prototype ADSL modem was twenty times faster. Despite the five-kilometer radius limitation, ADSL’s greatest advantage was that it could be installed anywhere there was a telephone line.
“Upload speeds aren’t particularly impressive, though. We’ve set them at roughly one-eighth of the download speed.”
Still, that was hardly a problem. This was not yet an era of active peer-to-peer data exchange; it was still a time when server operators primarily supplied content. User-to-user sharing was mostly limited to music and adult videos. But with neither MP3 codecs nor video compression codecs available yet, there was little to share. At most, people exchanged cracked games and images—activities already thriving through underground channels.
“Have you obtained the ADSL license from Bellcore?” Jae-won asked, regaining his composure and cutting to the core issue.
“Not yet.”
The word “yet” made Jae-won’s pulse quicken. ADSL would eventually be superseded once fiber reached homes, but for more than a decade it would be a dominant technology—the very foundation of the internet industry. Of course ADSL had always been part of Jae-won’s plans, though he had intended to begin three years later, around the winter of 1994, once computer performance, adoption rates, and software capabilities had matured. But if Henry Samuel had already produced a working ADSL modem, even at a basic level, there was no reason to delay.
“My friend at Bellcore mentioned they might be willing to sell the technology itself rather than just license it. If we cover their development costs, the management would be satisfied.”
“Is that so?”
This was excellent news. Jae-won immediately sent an ID Talk message to Alan, the head of the legal team, instructing him to begin acquisition negotiations with Bellcore for the ADSL technology. He also attached the technical documentation Henry Samuel had prepared while building the prototype.
“By the way, what did you mean when you said we need to enter the cable TV market?”
“Transmitting video or IP packets over two copper wires is essentially the same thing. We can also integrate cable TV set-top box functionality. Since demand for cable TV currently exceeds internet demand, supplying cable internet alongside it seems like a sound strategy.”
It was a valid point. The cable TV business would also grow into a massive industry. It paired well with internet service provision, though it required enormous upfront capital. Running cables to every household meant significant labor costs. Upgrading aging lines was another expense. To provide quality content, they would need to establish their own broadcast stations. Securing broadcasting rights for Major League Baseball, the Premier League, and similar leagues would demand even greater sums. A quick calculation suggested initial costs in the hundreds of billions of won, with long-term investment reaching the trillions. Not bad at all. Rather than feeling daunted, Jae-won found himself intrigued. The earlier they entered such a business, the greater the advantage. Broadcasting rights for the Premier League, NFL, and NBA were still relatively inexpensive compared to twenty-first-century prices.
At this rate, NextCom would eventually grow large enough to require division into separate portal, search engine, and cable business units.
“After weighing everything, the cheapest place to launch an ISP business turned out to be Korea.”
Henry Samuel suddenly mentioned Korea.
“You already own shares in a Korean company called DACOM, don’t you, Mr. Chairman?”
Come to think of it, there were the DACOM shares he had acquired through a forced purchase. Though the transaction had been coercive in form, Jae-won had bought them with a smile. For an internet conglomerate like ID Group, the fiber-optic cables DACOM was laying were an invaluable asset. The DACOM stake held by ID Investment had been transferred to NextCom, and Henry Samuel had clearly recognized its potential.
“Korea is enviably building a nationwide fiber-optic network as part of its information superhighway project. Using those cables, we can secure ample bandwidth between servers. Connecting DSLAMs to users won’t be difficult either. Moreover, given Korea’s population density—concentrated in major cities—it’s the ideal environment for deploying ADSL technology.”
He was absolutely right. Korea’s early lead in internet connection speeds had been possible precisely because of the country’s geography. With more than half the land mountainous, people clustered in cities. The extreme population density in the Seoul metropolitan area was among the highest in the world—perfect conditions for ADSL, where distance between DSLAM and modem was critical.
“Understood. Let’s establish a cable division within NextCom and move forward. We’ll begin in both Korea and California.”
“An excellent decision!” Henry Samuel beamed. Not only had his months of work on the new product been validated, but a new business division had been approved on the spot. And they would launch not only in Korea but immediately in California as well—far greater gains than he had anticipated.
