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North Korea: Witness to Transformation

Cells phones and jamming failures: a combustible mix

by , ,Marcus Noland, and Jaesung Ryu | February 28th, 2012 | 07:00 am
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In his blog, North Korea Tech, Martyn Williams recently reported some interesting news on Koryolink, the joint venture between the Egyptian telecommunications chaebol Orascom (75%) and the government (25%) and North Korea’s only commercial 3G cell phone network. The company has recently signed up its 1 millionth subscriber.

Yonhap also provided some interesting news related to the telecommunications “industry” in North Korea, citing the Economist. Some tidbits:

  • We posted on reports of the company reaching 300,000 subscribers; according to the Economist, the jump to a million customers only took 18 months;
  • Average monthly charges are only $13.90;
  • Payment in hard currency is accepted and if you bring euros to the store customers  get  free off-peak calls; this vindicates our suspicion that there is a strong fiscal motive to the venture.
  • Martyn and Orascom’s 2011 Q3 earnings release tell us that there are at least 453 on-air base stations that cover Pyongyang, 14 other main cities and 86 smaller cities. Also, the network is accessible on more than 22 roads and highways. That means about 14% of North Korea’s landmass and 94% of the total North Korean population is covered by Koryolink, wider than we would have thought frankly.
  • With an earnings gross margin of 80%, the Economist notes that North Korea has become the most profitable market for Orascom. In last year’s third quarter, Koryolink earned about $33.2 million on a $ 41.5 million revenue base. Nothing like having 100% market share; we wonder what competition would yield.

The interesting questions are, of course, the political ones: the cat-and-mouse between technology and state control that is being played out in China as well. Orascom’s corporate slogan is “give the world a voice.” Well, sort of. DailyNK reports that people need to get approval from local security offices to sign up, no doubt providing ample personal details and raising the question of whether the whole exercise is really targeted at a fairly narrow elite.

There are some not-so-minor downsides to the service as well. No incoming or outgoing international calls and no internet access are to be expected. And it is not surprising that there are forbidden areas, and that usage is banned during important ceremonies. But according to a leaked “subscription form,” the phone is not to be used inside either and subscribers can only own one phone. The government has undoubtedly put technologies in place to monitor calls and texts. And even after you get to use a phone, you will be texted with daily propaganda from the government.

Orascom has had to deal with some fallout from its complicity in the government’s restrictions. When the Western press reported that cell phone use was banned during the period of mourning for Kim Jong-il (“In N. Korea, use a cellphone and die” was one headline), Orascom demurred arguing it was in the interest of both the firm and the state for usage to continue.

Martyn’s posting on Alexandre Mansourov’s paper from the Nautilus Institute nonetheless suggests that North Korea is on the cusp of digital transformation. For Mansourov, that transformation arises from the change of communication in North Korea from a panoptical total-control system to a more networked model in which voluntary compliance inevitably plays a role. As Koryolink rapidly expands it becomes harder for the government to monitor every communication.

But the real threat to regime stability is not that people will use their cell phones to pro-actively plot against the regime, but rather that once the prairie fire starts, the cell phone network will be a mechanism for spreading the news and undercutting the regime’s narrative. Orascom has some potentially instructive experience in this regard. During the popular revolt in Egypt, one of the government’s responses was to turn off the network, which probably had the counterproductive effect of instantly spreading outrage to previously non-mobilized segments of the population.

And while in certain regards, the regime appears to be taking a more relaxed approach toward communications, in others, the state betrays continuing insecurity. According to the Korean Herald, in January an anti-foreign media group (Unit 114) was created to eradicate the practice of retrofitting radios so that they can pick up non-state broadcasts. The group was also tasked wiith seizing contraband CDs and DVDs and otherwise stamping out channels of potentially destabilizing information.

This intensification of activity could be related to an apparently failing capacity to jam foreign radio broadcasts—even stations operated by the South Korean intelligence service and the Ministry of National Defense. One possible explanation: irregular supplies of electricity. We cannot attest to the specifics of Martyn Williams’ report (which includes the claim that the North Koreans are having trouble keeping their own foreign service on the air).  But we have had direct conversations with foreign residents of Pyongyang who attest to a deterioration in the country’s chronic electricity supply problems, even in the capital’s diplomatic compound. This would lend credence to the implied explanation.  (Parenthetically, the diplomats report that the water system is now failing as well.)

The portrait that emerges is of a regime that is fearful of its loss of informational control, but recognizes that it cannot postpone indefinitely the acquisition of the trappings of modernity for key constituencies—especially if it can get a cut of the action. It appears to be betting that its supporters will be satisfied with using the fruits of modern technology for apolitical purposes, which is probably a good bet. At least until it isn’t.  But Occam’s razor tells us that Koryolink is motivated in part by the desire to “hoover up the foreign exchange.” We just want 4G LTE.