South Korea set for more mobile competition

The Korea Communications Commission this week published its goals for 2024, one of which will reduce the cost of mobile phones. We already knew that the abolition of the Mobile Device Distribution Improvement Act was on the cards, reports to that effect having emerged earlier this year, but the KCC has now made it official.

The decade-old act was conceived as a way of promoting healthy competition in the Korean mobile market. It essentially prevents cut-throat competition by barring operators from applying hefty discounts to the price of handsets, keeping an element of price stability. In theory it is also a potentially useful thing for equipment makers – let us not forget that Samsung is a Korean company – since it helps them maintain their prices too.

But on the flip side, it has also made it difficult for many consumers to afford high-end devices, hitting those same kit makers. And it has kept prices for mobile services in general pretty high.

In a statement the KCC said that abolishing the law would promote competition and reduce costs for consumers. It made it clear that it will tackle any violations of the law change from telcos, MVNOs or retail outlets.

The timing of the change is no coincidence. South Koreans go to the polls in a fortnight and the government is making a big effort to win over voters by pushing down mobile prices.

The Yoon Suk Yeol administration has been putting pressure on the big three telcos – SK Telecom, KT and LG Uplus – to offer lower price plans and improve offers for socially vulnerable groups, the Korea Times reported. As a result, users have been permitted to sign up to cheaper LTE services since the start or the year and a low-cost 5G offer, which will come in at around 30,000 won (US$22), is due for release soon, the paper said.

In addition, the state-run KCC last week asked operators and key equipment makers – the paper namechecked Samsung and Apple – to increase subsidies for customers who switch operator when buying a new phone. The three operators have since revealed they will offer incentives ranging from KRW30,000 to KRW330,000 (almost $250). The move was again designed to cut household spending on mobile services and also to revitalise competition in the market.

Korea is set for additional mobile competition with the arrival of new network operator, Stage X, which picked up 28 GHz spectrum formerly belonging to the established telcos earlier this year. It plans to launch services nationwide in the first half of 2025, according to the Korean Herald.

If the government is successful in bringing down prices, Stage X will launch into a very different market than the one it is doubtless closely watching today.

But there is some doubt over how things will pan out. The Korea Times report quotes an unnamed industry official as saying that further efforts to cut costs could impact on telcos' ability to invest, the implication being that there will come a point at which the operators will push back.

"The telecommunications business essentially requires a lot of capital investment, such as network equipment investments. While it is natural to align with government policies, support for measures that can invest more in the transition to the AI era, preparation for the upcoming 6G network and new businesses, such as air mobility and self-driving cars, are also needed," the official said.

For now, it seems consumers can look forward to getting their hands on new, top-end phones and a lower cost of service. But a period of intense price pressure may never ensue.