The Price of Connection
The 100,000-won subscription fee for SPEED 010 was so substantial that the 12,000-won base rate and the 10-won-per-10-seconds voice call charge barely registered in Yoo Jae-won's eyes.
“Ugh! Chairman Yoo, about that…”
Jung Min-ho, head of planning at TG Mobile, had been watching Yoo Jae-won's reactions like a hawk throughout the presentation. He immediately launched into an explanation.
“Subscription fees are standard charges that telecom companies impose on new subscribers.”
Jung insisted the amount had been derived through highly scientific methods. The logic behind the “scientific” calculation was simple: the fee was set to recover the costs of acquiring land and installing multiple relay stations to expand coverage. The 100,000-won figure was based on projected subscriber numbers. If they attracted 500,000 new subscribers each year, they would recoup their investment after roughly eight years.
“You’re projecting only 500,000 new subscribers next year?”
Yoo Jae-won found the number completely arbitrary. TG Mobile’s planning team claimed it came from scientific market research, but to him it looked like pure guesswork. The survey had first estimated how many economically active Koreans needed mobile phones, then narrowed it down to those willing to join TG Mobile. The resulting figures—200,000 in 1995, 400,000 in 1996, then 440,000—were simply averaged to produce the 500,000 estimate, which in turn justified the 100,000-won fee.
The projected subscriber numbers were fundamentally wrong.
“We’ll see one million subscribers in ’95 alone, and over three million in ’96—combined across TG Mobile and the other two carriers.”
“Pardon? What do you mean?”
“Those are the subscriber projections from the ID Group.”
Yoo Jae-won spoke of “projections,” but he was actually citing figures recorded in his news library from his previous life. Lee Yong-kwon and the TG Mobile team had assumed mobile service would remain limited to specific professions. That assumption was mistaken from the start. Mobile phones were destined to become a mass-market product that ordinary people would buy even if it strained their budgets. Sales professionals often carried two or more handsets.
“If we follow your logic, Chairman, that would mean virtually the entire economically active population will have mobile service by the late 1990s.”
“Exactly. By the end of the decade, I expect students will be carrying them as well.”
Jung Min-ho looked stunned, but Yoo Jae-won remained unfazed. In reality, students carrying mobile phones had become commonplace by the late 1990s. Even during the IMF crisis, subscriber numbers had continued to rise rather than fall. Korean culture placed enormous value on staying connected with one’s social group. Once mobile phones became essential for socializing with friends, subscriber growth would far exceed TG Mobile’s internal estimates.
“If we really expect one million subscribers next year, the fee could drop to one-fifth—20,000 won. Actually, it would be better to eliminate the subscription fee altogether rather than charge such a paltry amount.”
“Gasp! That’s…”
Jung could not finish his sentence. If subscriber numbers matched Yoo Jae-won’s forecast, the fee could indeed be reduced—or even removed—while still recovering the investment quickly. Yet forgoing hundreds of billions in revenue was not a decision Jung could make on his own.
“Jae-won, that’s going to be difficult.”
Lee Yong-kwon had to step in. He had always followed Yoo Jae-won’s advice on TG Group operations, but not this time. The company had already spent enormous sums building infrastructure, and TG Mobile’s remaining cash reserves were nearly exhausted. Any major marketing campaign or nationwide network expansion would require borrowing or generating new revenue. While their finances were better than those of Shinsegi Telecom, the situation remained tight with the third operator, SK Group, preparing an aggressive marketing push.
Collecting service fees was also cumbersome. Automatic transfers were not yet widespread, so most payments came through giro slips or dealer collection points. The cost of outsourced collection was significant, and the risk of delinquent accounts was high.
“The key advantage of the subscription fee is that we receive cash upfront at the time of joining,” Lee Yong-kwon explained. “We’ve made provisions for customers who find it burdensome—either by adding it to the first month’s bill or allowing three installments—but receiving the money first is the core point.”
“Hmm. I see.”
Yoo Jae-won nodded, though he was not entirely convinced the fee was necessary.
“Let’s do this. If TG Mobile’s subscriber numbers surge next year and reach the figures I mentioned, we’ll eliminate the subscription fee at that point.”
“Hmm…”
The gap between TG Group’s internal data and Yoo Jae-won’s numbers was substantial, leaving Lee Yong-kwon momentarily speechless. Yet Yoo Jae-won had never been wrong about his forecasts. If next year’s subscriber count truly reached one million, the subscription fee would indeed lose its justification. Lee Yong-kwon was confident TG Mobile could capture at least 50 percent market share. That would mean 500,000 subscribers next year and two million the year after—numbers that would snowball while each customer paid monthly fees in cash, generating enormous surplus funds.
Watching Lee Yong-kwon wrestle with the decision, Yoo Jae-won once again felt the fundamental difference in priorities between a mobile operator and an internet company. For his own mobile ventures, higher user numbers were essential. That required easy sign-ups and affordable rates. A 100,000-won subscription fee would be a heavy burden for most consumers at current price levels.
Fortunately, data charges had been set very low, exactly as Yoo Jae-won had insisted. Even the basic plan included 100 MB of data, and once that was exhausted, the rate was only 1 won per KB. Accidentally using an extra megabyte would cost just 1,000 won. Of course, with 2G phones still lacking LCD screens, true mobile internet remained a distant dream. At best, users with laptops could tether their phones for mobile internet access. Compared to his previous life, however, the difference was overwhelming. By laying the foundation for affordable mobile internet access now, the synergy would be explosive once large-screen smartphones became mainstream.
As an added option, there was also an unlimited plan. For 60,000 won a month, customers could enjoy unlimited voice and data (text messages excluded). Unlimited texting risked spam, so messages were charged at 30 won each.
“Ah, well then. Let’s continue.”
The presentation resumed after the brief interruption over the subscription fee. Jung Min-ho proceeded with extreme caution. Having already stepped on a landmine with the fee, he had no choice but to be careful. Fortunately, there were no other points that drew Yoo Jae-won’s criticism, and the presentation concluded smoothly.
“You’re going to be impressed,” Lee Yong-kwon said confidently.
Yoo Jae-won’s next stop was a tour of TG Group’s new factory. The old facility in Yongsan could no longer handle the exploding order volume, so TG had built a new plant in the Bucheon industrial complex near Gimpo Airport. Proximity to the airport was the primary reason for choosing Bucheon—major components for computers were small, high-value items best shipped by air, and having the airport next door allowed immediate receipt. The site had also been selected with the future Incheon International Airport on Yeongjong Island in mind, ensuring the location would remain viable even if flight routes changed.
Another major advantage was automation. With annual production exceeding ten million units, automation was essential. Semi-assembled boards from Taiwan could be customized with model-specific features, allowing flexible responses to demand. The same automated lines would later handle new products such as tablet PCs and the iWorks workstation with its four physical CPUs. From mounting resistors and IC chips to producing the micro-boards for Tiffany phones, the system offered remarkable versatility. Full automation was not yet possible, however, and several stages still required manual intervention.
“Wow, this is on a completely different level from the old Yongsan factory.”
After a modest welcoming ceremony, Yoo Jae-won entered the factory and felt a wave of nostalgia. He vividly remembered touring TG Computer’s assembly line in Yongsan a few years earlier. Motherboards and CPUs had been left in the middle of walkways, and every process had been manual. The walls showed exposed concrete, and dust had been everywhere. The new factory, by contrast, resembled a semiconductor cleanroom. White walls and proper air barriers kept outside air out, and employees wore clean uniforms with hair-covering caps. While the dust control was not quite at semiconductor standards, the environment was undeniably clean.
The automated sections were particularly fascinating. When a semi-assembled board was placed on the line, the machine precisely installed pre-loaded components, and soldering was fully automatic. Toxic fumes from soldering were completely contained. Boards that passed automated assembly then underwent 100-percent inspection before being mounted into cases. No one wanted the frustration of discovering a faulty expansion port or onboard LAN later, so every unit was checked thoroughly.
Boards that passed inspection moved to the case-assembly line. From this point, human workers took over. Robot technology had not yet advanced enough to handle the delicate task of securing boards inside cases and connecting various connectors. The workers at the benches moved with astonishing speed and precision, matching the pace of the robots. Having assembled similar models from the Egg 1 through the New Egg 2, their skill level was extraordinary. They attached boards to cases in the blink of an eye and connected connectors with remarkable speed and accuracy. Cable management followed Yoo Jae-won’s exact specifications, using cable ties for neat bundling.
Yoo Jae-won watched an entire New Egg 2 computer being completed. The process was flawless. Here was the reason the New Egg 2’s defect rate was far lower than that of other manufacturers.
Then a question occurred to him.
“How are external components such as cases and monitors procured and managed? Everything here seems to be just final assembly.”
“Ah, those are all Japanese-made and inspected in Busan.”
The cases for the Egg series—made from Trinitron monitors, polycarbonate, and aluminum alloy—were imported entirely from Japan through companies owned via the Shin-Nihon Investment Bank. Because of their bulk, they arrived by sea.
“Do you conduct thorough quality inspections?”
“Of course.”
“Including material composition analysis?”
“Material composition?”
Lee Yong-kwon’s tone suggested he wondered why they would need to test products from companies Yoo Jae-won himself owned. After all, Yoo Jae-won would never instruct suppliers to cut corners on alloy ratios.
“You must do it.”
While products from Yoo Jae-won’s own companies would be fine, sudden supply shortages might force them to source from other steelmakers. That could create problems. People often associated Japan with craftsmanship and reliability, yet history showed that some suppliers had falsified material data to inflate profits—scandals that later caused major issues.
“Surely they wouldn’t do that when Japanese craftsmanship is involved?”
“When money is on the line, they absolutely would. Just don’t mention it to anyone. We’ll simply conduct our own thorough inspections. We may need the data later.”
“Ah, understood.”
Lee Yong-kwon nodded at Yoo Jae-won’s assurance. Component quality analysis was already routine; adding one more layer of testing would not cause any problems.
The factory tour concluded smoothly. Yoo Jae-won was satisfied with the quality control and the workers’ expertise. He felt confident that mass production of iWorks and the Tiffany phone could be handled without issue at the new facility.
“Are you heading straight back to Seoul? Let’s have dinner together.”
Lee Yong-kwon, relieved by Yoo Jae-won’s positive feedback, was reluctant to part ways so soon.
“Ah, I have a dinner appointment with Assemblywoman Lee Seong-hee. I’ll contact you before I leave for the United States.”
Unfortunately, Yoo Jae-won already had prior plans. His dinner was with Lee Seong-hee, the National Unity Party lawmaker. The meeting had nothing to do with politics. Lee Seong-hee’s former career was as a singer, and the topic they would discuss tonight concerned popular music.