SEOUL, May 8 (Korea Bizwire) – A bill to improve the transparency of the mobile handset retail market has passed the April provisional session of the National Assembly. It is expected the law will go into effect by early October this year. Since May last year when the bill was introduced in the first place, it has gone through many twists and turns.
Once Samsung Electronics faced off with the Ministry of Science, ICT, and Future Planning over the proposed law, as it may potentially turn the telecom industry upside down. One clear advantage would be it is consumers who will benefit most from the change, at the expense of handset manufacturers, mobile telecom service operators, and retailers.
According to the new law, mobile subscribers will no longer have to cancel their phone numbers or sign up for an expensive calling plan when purchasing a new smartphone device. They will no more have to shop around different retailers for best deals, as provision three of the law will prohibit differential subsidy payments.
Up until now, telecom service providers have given more subsidies to new subscribers and number portability users than those simply changing their devices. They have also relied on a practice of giving different subsidies depending on regions in which phones are sold better than others.
That doesn’t mean all consumers everywhere will get the same amount of handset subsidies; neither does it mean the subsidies will disappear. It just implies that the practice of subsidy payments will become more transparent.
According to provision three of the new law, telecom service operators and retail stores will have to disclose exact subsidy payment records to the public by handset type. Under these publicly announced standards, the telecom operators and retailers must provide subsidies within a 15-percent margin.
For example, the lowest possible price for the consumer to buy an 800,000-won smartphone when the standard subsidies are 270,000 won is 490,000 won after getting an additional 15-percent discount (40,500 won). The highest possible price, on the other hand, would be 630,000 won without any discount other than the 270,000-won subsidies.
As for guidelines on subsidies, the Korea Communications Commission will be in charge. But such guidelines would be in effect for the next three years after which all subsidy payments will be determined by market forces (provision 4-2). Anyone who wishes to get a monthly fee discount instead of the handset subsidies can do so, according to provision 6. This is applicable to those customers who purchase lower-priced handsets. Under the new scheme, there will be fewer occasions of customers being duped by retail merchants.
Other notable changes include establishment of retail stores dealing with all three telecom service providers, with a certain power granted to service operators to accept or reject the retail store’s choice (provision 8). Under the new law, handset manufacturers can no longer put undue pressure on service providers by controlling their supply of handsets. Allowing subsidy payments only to retail outlets under the manufacturer’s direct management will also be banned (provision 9-2).
There is even a provision that can punish business operators who sell stolen handsets overseas (provision 10). Under the new law, the government will be able to penalize even phone manufacturers as well as service operators, which was why Samsung was vehemently opposed to the bill.
An official with the Ministry of Science, ICT, and Future Planning said, “Once the new mobile handset law goes into effect, the retail market will be more transparent and there will be no more problem of discriminatory subsidies. Instead of competing over how much subsidies they provide, the operators will compete based on service quality and phone calling rates.”
Written by Sean Chung (email@example.com)