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S. Korea: Measures to Separate Subsidies for Device, Service Plans Likely This Year
Source: http://www.koreaherald.com
Source Date: Thursday, July 06, 2017
Focus: Citizen Engagement, Institution and HR Management
Country: Korea (Republic of)
Created: Jul 07, 2017

Among measures being considered by the South Korean government to help reduce the burden of mobile costs on households, the separation of subsidy costs paid by mobile phone manufacturers and telecom companies and expansion of the “blacklist system” on all mobile phones are highly likely to be implemented this year. 

The two measures were mentioned during the confirmation hearing of Yoo Young-min, the nominee for minister of science, ICT and future planning earlier this week, with the candidate showing firm determination to push measures to cut overall mobile costs for Koreans. 

As part of the efforts, the State Affairs Planning Advisory Committee announced last month a package of measures to cut a total of 4.63 trillion won ($4.06 billion) worth of mobile costs, including shaving off the 11,000 won base rate per month for senior citizens aged 65 or above and expanding the current optional 20 percent discount for monthly bills to 25 percent for purchasers of new phones. 

In addition to the plan to cut mobile bills, the government is considering overhauling the current subsidy system and expanding the blacklist system. 
In Korea, most phone purchases are made at mobile carriers’ shops, which usually result in complicated calculations of how much should be paid for devices and calling plans. Device manufacturers and telecom firms often co-develop calling plans specialized for some new phones. 

The blacklist system allows people to buy devices at electronics shops on their own and subscribe to plans that they want. It was introduced in 2012, but it is not in full operation.

Under the current subsidy law for mobile devices, enacted in 2014, phone manufacturers and telecom companies are allowed to subsidize purchase prices by up to 330,000 won. But the law does not obligate them to reveal the exact details of the subsidy.

Upon every debate to cut mobile costs in the past, disclosing subsidy payments by each phone maker and telecom firm was raised, but both parties strongly opposed the plan because the disclosure was expected to directly hit their sales and profits. 

However, LG Electronics last month suggested the Korea Communications Commission legalize the disclosure, starting talks about revamping the current subsidy system. 

Samsung Electronics, the world’s largest smartphone provider, has long been opposed to the issue, but seemingly changed its official stance Wednesday. 

“Samsung was concerned about price competitiveness in overseas markets, since more than 95 percent of our businesses are operated overseas,” said Kim Jin-hae, a senior vice president at Samsung Electronics. “But if the government implements the policy, we would have to follow.” 

It was the first official remark by a Samsung official about the issue. 

Expanding the blacklist system is also under serious consideration by the minister nominee. 

“Separating phone purchases from subscription to mobile services may cause inconvenience for some consumers, but if the system helps cut overall mobile costs, it should be considered as a measure,” Yoo said. 

Meanwhile, telecom companies that claimed they were forced by the government to cut the prices of their mobile plans are welcoming both measures. 

“Telcos led by SK Telecom are advocating the blacklist system, because it will be much easier for them to avoid further pressure to cut their prices,” said Kim Hong-sik, an analyst at Hana Financial Investment. 

But the upcoming regulatory moves by the government are expected to further worsen the prospects of profits for the mobile network business of the country’s three mobile carriers, SKT, KT and LG Uplus. 

For the first six months of this year, they showed a combined 6.8 percent drop in new subscriptions compared to the same period last year, according to data from the Korea Telecommunications Operators Association.
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