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North Korea: Witness to Transformation

New Research on Cell Phone Use in North Korea

by | March 7th, 2014 | 07:09 am
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Voice of America staff reporter Yonho Kim’s “Cell Phones in North Korea” (download .pdf here) is one of the most up-to-date and comprehensive reports available on North Korea’s plunge into the telecom age. Yesterday, the US-Korea Institute at SAIS hosted Mr. Kim, along with panelists Alexandre Mansourov (US-Korea Institute) and Sascha Meinrath (New America Foundation) to present the findings of his work and mull over implications for the future.

The 50+ page document is drawn chiefly from interviews with North Korean defectors and South Korean experts conducted July-October 2013. Additionally, Kim draws from the growing body of academic research on North Korean telecoms, including Scott Bruce, Marc Noland, and others. From this foundation, the report weaves together market trends, customer demographics, user behavior, and a host of economic, political, and social consequences from the rapid growth of cell phones in North Korea. A few of the findings highlighted roughly tracks the narrative:

  • Cell phone ownership and use has seen explosive growth in the last few years. Koryolink’s oft-cited figure of 2 million subscribers as of May 2013–if taken at face value which the report warns we probably shouldn’t– would mean one out of every ten North Koreans (minus soldiers and children) now own cell phones. Moreover, ownership has pushed well beyond the realms of the Pyongyang elite: as early as 2010, Koryolink began concerted efforts to offer products and services targeted at lower-end subscriber segments outside the capital.
  • Even so, many still face barriers to cell phone access. Originally, the regulatory hoops one had to jump through to secure a cell phone restricted many from ownership. However, Kim reports that creative circumvention and the increased use of illegal phones have led authorities to substantially deregulate the process. Instead, ownership is now largely contingent on one’s ability to afford the exorbitantly-priced handset, which can run up to $700 US for a touch screen model. According to the UN (buyer beware) per capita GDP was $583 in 2012.
  • Cell phones are a new reason for keeping up with the Kims’. Handset ownership is increasingly seen as an important status symbol, with even the non-wealthy committing excessive assets so that they can flaunt their own cellular bling. Phones are also a fashion accessory for the younger generation, as well as a tool to gain fellowship and prestige in society.
  • Cell phones are transforming the market economy. A mobile phone is now vital for business transactions, both across the Chinese border and between provinces. With a cell phone, traders have unprecedented access to market information and prices, which is smoothing out geographical variations and making arbitrage more difficult. Moreover, cell phones are increasingly used as a private money transfer medium (especially for international remittances) in an environment where citizens still deeply distrust the banking system.
  • Everyone’s a winner? Kids love ‘em, businessmen can’t live without them, and the state appears to be embracing the market’s growth too. As I pointed out in a previous post, Koryolink is a Forex vacuum for the state, selling handsets and service plans to the population at huge mark-ups, and either incentivizing or requiring citizens to pay with foreign currency. And we must not forget Orascom, the 75% holder in Koryolink. Reportedly, North Korea is by far their most profitable region in terms of EBITDA margin. Now, if only they could repatriate their profits.

These findings appear indicative of a social transformation with major implications, but as Mr. Kim and other panelists make clear in the presentation and following discussion (below), a “Korean Spring” does not necessarily follow. The state’s observed confidence in allowing cell phone use to flourish is a telling sign. One defector interviewed observed that a person would never say anything sensitive over the phone: one would always assume you are being monitored (whether this is technically feasible or not), and besides, you would never want to waste expensive minutes. And while it may be safe to say the state cannot pull back now without significant repercussions, whether or not North Korea is on the verge of a true “telecommunications revolution” is rightly treated with some skepticism.

“Cell Phones in North Korea” is certainly not without its constraints, leaving many questions and a hunger for more hard data. Nonetheless, the report is still a lot to process as a deep dive into a dynamic market largely shrouded from the outside world’s view.