SKT, KT, LG set to raise mobile rates

A man passes by a telecommunication store. SKT, KT, LG U+ are expected to raise mobile plan rates as the National Assembly abolished the mobile phone service authorization act on May 20. Yonhap

By Kim Hyun-bin

Controversy is on the rise over the government's decision to abolish the terms and conditions of the Mobile Phone Service Authorization Act, which regulates mobile carriers from unilaterally raising prices.

One of President Moon Jae-in's key presidential pledges in 2017 was to reduce telecom plan prices, but many claim the government is moving in the opposite direction from the initiative as the terms and conditions of the act, which stood as a safeguard to prevent telecom companies' unilateral price hikes, was abolished by the National Assembly, May 20.

The authorization act made it mandatory for SK Telecom, KT and LG U+ to gain government approval before launching new telecommunications plans.

For example, if SKT wanted to launch a new rate plan, it needed to submit a provision to related government entities and through a maximum two months inspection approval could be given. But since this has been abolished, telecom companies will be free to decide rate plans on their own as long as they report 15 days prior to their introduction.

SKT, KT and LG U+ have welcomed the move claiming it will allow them to introduce more diverse mobile plans, which in turn will benefit customers, however, consumers and civic groups are skeptical as telecom companies will be free to form pacts to raise prices and increase their profitability.

The telecommunication market is dominated by SKT, KT and LGU+ accounting for over 90 percent of the market, while budget carriers hold the remaining 10 percent.

Due to these circumstances, criticism is on the rise that the three majors will form a pact to decrease competition and raise prices.

For years, telecom companies have been urging the government to abolish the act, claiming it prevented them from engaging in free competition. Now the regulation has been removed, the telecom companies need only to inform government entities, including the Ministry of Science and ICT and Ministry of Economy and Finance, 15 days prior to scheduled price changes.

“There has not been a case where telecom companies reduced prices although they did not need authorization, all they needed to do was to report the price reduction to the related entities,” Ahn Jin-gul, head of the People's Livelihood Economy Research Institute said. “It is a lie to say that the terms and conditions of the Mobile Phone Service Authorization Act hindered their competition.”

Many experts point out that it is impossible to conduct a proper review of proposed rate plans in just 15 days, as this is insufficient time to crosscheck with related government departments or hold an outside advisory on the issue, which will allow telecom companies to hike prices without restrictions.

“Looking at the market structure and outcome, it is difficult to say there has been active competition among the telecom companies,” the Korea Information Society Development Institute said.

However, the Ministry of Science and ICT says there are safety measures in place if telecom companies conduct excessive price hikes.

“The new system allows revoking the proposal within the stated (15 day) term,” Science and ICT Minister Choi Ki-young, said.

More smartphone users look set to switch over to 5G networks as most newly released smartphones will support 5G. gettyimagesbank

Mobile rates surge

For the last decade, telecom prices have surged rapidly. Since 2010, when smartphones started to be widely used, the minimum rate plans were 34,000 won and unlimited data started off at 54,000 won a month.

However, after the introduction of 5G the rates have surged to a minimum 55,000 won with unlimited plans ranging from 85,000 won to 89,000 won. The minimum rate plan has surged 64 percent and unlimited plans, 61 percent, in 10 years, which is significantly higher considering the Consumer Price Index (CPI) rose by only 15.2 percent in the same period. If mobile rates rose similar to that of the CPI, the minimum would stand now at 39,168 won and an unlimited plan would be 63,359 won.

Telecom companies argue that the increase in prices is for better quality networks and more optional services. It claims the prices include unlimited text messaging and call plans. Even though this sounds intriguing, companies have drastically increased the cost for data use.

“From 3G to 5G the quality of the networks has been significantly enhanced, also there are more additional services subscribers can choose from,” a telecom official said.

Rates are higher in Korea

The mobile carriers have begun operating expensive 5G services and the average price is expected to surge once more subscribers' switchover to 5G as data costs are higher than that of LTE and 4G services.

There are numerous international studies comparing mobile service rates, but the outcomes are quite different as it is difficult to fully input each country's distinctive factors that decide market conditions.

In 2018, Japan's Ministry of Internal Affairs and Communications released research data comparing the mobile plan rates of six countries ― the U.S., England, Germany, France, Japan and Korea ― which showed Korea ranked second highest among the group.

In the same year, Finland's consulting firm Rewheel researched the data prices of 41 countries, with Korea taking second highest place in most categories.

However, the OECD came out with a different result, from research conducted on 34 members' average mobile rates. Korea ranked much lower at 19th place, coming close to the median among the member countries.