The Korea Communications Commission (KCC) has shaken up the country's mobile services which may go some way toward finally realizing the 20% reduction in mobile service costs promised by president Lee Myung-bak during his 2007 election campaign.
Government surveys at the time noted that mobile phone bills were the most expensive in OECD countries, accounting for 60% of Korean household communication costs and 6% of the cost of living. Unfortunately, Lee's initial plan to lower mobile tariffs by promoting increased competition through deregulation resulted in many discounting announcements, while tariff charges became more complex and mobile phone charges actually increased.
This year has seen growing consumer dissatisfaction and complaints. The government is capitalizing on this dissatisfaction, reinforced by the recent release of two critical surveys. An OECD report on mobile tariffs in August showed Korean prices were the highest among OECD countries and among the most expensive in the world.
An annual survey by the Korea Consumer Agency (KCA) showed that Koreans paid the most for voice services last year among 15 countries, including the US, the UK, France, Singapore and Hong Kong, with similar levels of mobile traffic. In addition, SK Telecom's tariffs were judged the third highest among major operators in the world.
The new KCC policy seeks to cut handset subsidies, reduce charges and expand prepaid services while also promoting the introduction of MVNOs through new legislation to introduce more competition. Discussions between the KCC and operators have already resulted in agreement to reduce handset subsidies from early September.
SK Telecom, KT and LG Telecom announced price cuts at the end of September. The KCC said the lower charges they would result in savings of 1.5 trillion won ($1.27 billion) by 2011 - about 7% to 8% of the nation's mobile phone bills. SK Telecom's major announcement promises cuts in tariffs totaling 1.07 trillion won by the end of 2010. From October it will cut prepaid usage charges by 22.5% and from November it will lower subscription fees by 28%, slash mobile internet tariffs and offer discounts for long-term subscribers.
From next March it will change the basic post-paid charge unit from 10 seconds to one second. Right now it is hard to find cheap subsidized handsets on sale in Korea and so new phones prices have been falling.
"There will be pressure on the handset vendors - that's where the pain will be," commented Nick Ingelbrecht, research director at Gartner. No doubt it won't be long before the industry will be talking of problems and screaming for a return to its old business ways. "Operators in Korea have a long history of working round the rules to maintain the status quo - you can issue lots of rules, but there are lots of ways of getting round them," noted Ingelbrecht.