Moon’s push for telecom market intervention faces hurdles

The Moon Jae-in government’s push to scrap base rates for mobile bills is under criticism, from both consumer activist groups and the telecommunications industry due to conflicts of interests.

Abolishment of the mobile tariffs was one of President Moon’s key pledges, which was supported by young and low-income voters who have been suffering high mobile costs. 

However, the Green Consumer Network in Korea said in a statement on Thursday that Moon’s committee on planning national affairs is scaling back from its initial plan and distorting the president’s pledge.

The consumer group argues Moon had vowed to cover all types of base fees charged on mobile bills for using the second generation, third generation and fourth generation networks.

Unlike the claim, Lee Kai-ho, head of the second division for economy at the State Affairs Planning Advisory Committee and Choi Min-hee, a committee member, stressed Moon’s pledge referred to the 2G and 3G network services only.

According to the GCN, Moon indicated in his campaign pledge book as “to eliminate 11,000 won worth of monthly base fees” regardless of the generation of mobile networks.

“Limiting the pledge to 2G and 3G services is not fulfilling what the president has promised,” the group said.

In the telecom market, Moon‘s pledge has been considered unfeasible, as the government has no legal right to regulate mobile carriers to remove the base fee in the first place.

The Ministry of Science, ICT and Future Planning, in charge of the mobile cost policy, is at odds with Moon’s committee. Choi from the committee chastised the ministry for not making appropriate measures to carry out the presidential pledge on Tuesday.

“Mobile bill plans are designed by telecom companies for their profitability according to market principles,” said a ministry official.

The country’s three mobile carriers -- SK Telecom, KT and LG Uplus -- do not welcome the Moon administration’s move.

“If all three firms are forced to scrap the base fee, the total loss is estimated to reach 7 trillion won ($6.2 billion),” said an official at one of the mobile carriers on the condition of anonymity. “Since each mobile carrier is offering consumers a variety of mobile plans tailored to age groups, soldiers and low-income earners, it is very difficult for the companies to cut the fees further.”

According to the industry, if the base fees for 2G and 3G services are abolished, the three mobile carriers would lose about 1.19 trillion won.

The ongoing regulatory issue is affecting the Korean telecom industry as global investors view it with negative perspectives.

A report by Deutsche Bank recently cited “unpredictability of government regulation” as the primary reason why 42 percent of Korean telecom stocks are undervalued compared to their Asian peers.

Korea’s mobile costs ranked 25th among member countries of the Organization for Economic Cooperation and Development, noting that the costs are not considered high, the report said.

“If regulators find a way to implement outright tariff cuts, the initial impact would be negative for telecoms, and lead to a period in which investors should take safe haven,” said Dan Kong, one of the authors of the report.

By Song Su-hyun (song@heraldcrop.com)