On Oct. 1, South Korea will enforce a revised law governing the sales and subsidies of mobile devices such as smartphones in an effort to eradicate long-standing malpractices by telecommunications operators.
Consumers will no longer be discriminated against on the basis of age, place of residence or monthly subscription plan when using their existing mobile phones, buying a new phone or switching their mobile carriers.
Everyone, regardless of their class and status, will be entitled to a subsidy set by the country’s communications regulators of no more than 300,000 won ($285) for phone purchases, and discounts on their phone bills in accordance with monthly plans.
Telecom operators will be banned from posting exaggerated advertisements saying that phones are free with the aim of signing up customers for high subscription rates. Mobile carriers and their retail representatives will be barred from using opaque subscription information and irregular pricing.
The enforcement of this law has long been overdue.
 |
Seoul citizens pass telecom retailers advertising mobile phones and services in line with a revised law banning discriminatory subsidy plans. (Yonhap) |
The competition among SK Telecom, KT and LG Uplus, the country’s three mobile telecom giants, has gotten so dirty and out of hand that they have stopped considering what is best for their customers.
Selling the same smartphones at different prices with different subsidies was commonly practiced by the three mobile carriers, which only seemed to care about grabbing customers from each other.
Consumers who were “hooked” by what appeared to be almost free smartphones later found that they were required to sign up for high subscription rates and unwanted services for a specific period as part of the conditions.
Given that phone subsidies and discounts had not been disclosed either by smartphone manufacturers, retailers or telecom companies, many consumers ended up paying for what were effectively markups.
Previous regulations were unable to stop the industry from misbehaving, despite the application of business suspensions. Telecom companies and manufacturers kept trying to hook customers in the saturated market with services and phones that only looked good on the surface.
This left Korean consumers with the highest telecom bills of any OECD country, the Korea Communications Commission said. Korea’s telecom spending accounts for about 7 percent of the total, three times higher than the OECD average, according to Statistics Korea and the Bank of Korea.
But the revised law is incomplete because it excludes the requirement of a full disclosure of subsidies given out by phone manufacturers.
This was taken out at the last minute by the Regulatory Reform Committee of Cheong Wa Dae with the approval of the Ministry of Strategy and Finance and the Ministry of Trade, Industry and Energy, as Samsung Electronics said it could affect its global operations should the company reveal its subsidy plans, which it said were “trade secrets.”
Without this clause, the law still leaves room for the industry to use this loophole to its advantage and lure consumers to phones and services that have opaque pricing schemes.
By Park Hyong-ki (
hkp@heraldcorp.com)
