The regulator’s far-reaching strategy seeks to revitalise competition, while improving consumer choice and better aligning mobile data allowances with actual consumption
A country in which prices remain high, while consumer choice is limited
On 8 November 2023, South Korea’s Ministry of Science and ICT (MSIT) announced a wide range of measures that aim to “ease the burden of communications costs”. Through discussions with operators, device manufacturers and other government ministries, the MSIT has already twice lowered telecoms tariffs and introduced specific plans for the youth and senior segments of the market. However, the regulator considers that the cost of 5G services remains high and that there are few options available for mobile data allowances below 30GB per month and for low- and mid-priced handsets, which account for approximately 22% of a household’s total monthly bill.
Consumers will be able to sign up to 4G tariffs with a 5G phone bought from a mobile operator
The headline measure announced by the MSIT is to remove restrictions on the type of plan a consumer can sign up to. From 2020, 5G-capable handsets purchased independently of South Korea’s three mobile operators (KT, LG Uplus and SKT) can be used with a – typically cheaper – 4G tariff. However, this is not currently the case when a device is bought through an operator. As the MSIT pursues formal revisions to the Telecommunications Business Act, operators have agreed to voluntarily adjust their terms so consumers can sign up to a lower-cost 4G plan with their 5G smartphone. This change will be implemented sequentially, beginning this month with SKT. Operators have also agreed, from Q1 2024, to reduce their cheapest 5G tariffs from upwards of KRW40,000 (£24.80) per month today to around KRW30,000 (£18.60) – a 25%+ reduction, adjusting data allowances accordingly. The MSIT will continue to push for operators to launch additional sub-30GB 5G plans, which it considers would more closely align data allowances with actual consumption.
Additional support for young people
To reduce costs for young people, the MSIT has announced that options for a combination of cheaper 5G plans and low- to mid-priced handsets will be expanded. For tariffs in the KRW30,000-40,000 range (£18.60-£24.80) with lower data volumes (i.e. less than 30GB), data allowances for young people will be up to twice as high as the rest of the market, with additional benefits, including a discount on roaming fees and subscription services, and coffee and cinema vouchers. In addition, the MSIT states that the Government has discussed with domestic smartphone manufacturers a plan to increase the availability of low- to mid-range devices. As a result, up to four new handsets are set to launch over the next year costing between KRW300,000 (£186) and KRW800,000 (£496). The regulator also intends to extend by one year the ‘selective contract discount system’ that provides a two-year discount of 25% on telecoms charges to users not in receipt of a handset subsidy via an operator. Approximately 26m people stand to benefit from the move, which the MSIT considers will reduce the burden of cancelling a contract, driving switching in the market.
Wider reforms to address the oligopolistic nature of the market
The MSIT’s boost to the contract discount scheme reflects recent similar efforts to stimulate competition in the fixed broadband market. Here, the regulator has required operators to lower the fees faced by consumers for cancelling a broadband service, reducing the average early termination charge by 40%. To further drive competition and tackle the “entrenched oligopoly” in the sector, the MSIT will support the entry of new operators by:
Reallocating 28GHz spectrum, for which prices and rollout obligations will likely be reduced compared to when the band was originally awarded to the three incumbents;
Expanding access to the “essential facilities” of existing operators and permitting roaming on rivals’ networks during the infrastructure rollout phase; and
Reducing the investment burden, including through tax credits and public financing worth up to KRW400bn (£247m).
Finally, to support the ability of budget operators to exert effective competitive pressure, the MSIT will permanently establish the mandatory wholesale service provider regime (which requires operators to offer wholesale access to MVNOs, but had been subject to a sunset clause), expand discounts for bulk pre-purchases of data and limit the market shares of the subsidiaries of KT, LG Uplus and SKT.
