Mobile carriers react to mobile distribution law abolition

[Photo by Yonhap]

The South Korean government announced the abolition of the law introduced to regulate mobile phone distribution practices on Monday, as President Yoon Suk Yeol called for effective measures to reduce mobile device prices before the changes in law take place and urged the industry to take actions.

The mobile phone distribution law took effect in October 2014, which aimed to stabilize the device market. But after the law’s enforcement, there were complaints that telecom carriers reduced their marketing spending, leading to network contraction and increased financial burden on consumers.

The direct impact of the abolishment primarily is the removal of restrictions on device subsidy payments. for example, the maximum support for the soon-to-be-released Galaxy S24 series’ Ultra model under the current law is around 240,000 won ($179.10). Although the device’s price exceeds 1.8 million won, consumers can only receive subsidies up to 276,000 won, including an additional 15 percent support. With the abolition of the law, there will be no limits on such subsidy payments, allowing consumers to purchase flagship devices at a more affordable cost. Additionally, if measures are taken to reduce device costs, as urged by Yoon, the industry estimates that consumers could benefit by more than 300,000 won.

Although the law will be abolished, the government plans to maintain the discount options for telecom subscriptions referenced in the law by transferring it to another law regulating telecommunications businesses. This ensures that all consumers can benefit from a reduction in telecom costs, including those who do not benefit from device subsidies.

But critics say that the effects of abolishing the law may not be significant, given that the law has been somewhat ineffective in curbing the clandestine practice of providing illegal subsidies. There are also concerns that the cost burden handed down to consumers, which the law initially aimed to prevent, may resurface. Accordingly, the government is exploring measures to abolish the obligation to disclose subsidies to keep the telecommunications market transparent.

“Excessive competition among carriers and any discriminatory acts against consumers can still be regulated under the telecommunications business law. The government will strengthen market oversight and safeguard consumers from potential unfair practices,” the Korea Communications Commission Vice Chairman Lee Sang-in said.

“Given Yoon’s strong statements, we will negotiate with manufacturers to increase support as much as possible, starting the application to the Galaxy S24 series,” an unnamed official from a telecom carrier said, adding that it intends to consider expanding subsidies for affordable devices as well.