South Korea’s Ministry of Science, ICT and Future Planning claimed that a new bill aimed at increasing the transparency of handset subsidies has benefited consumers as they have shifted to lower-cost plans since the regulation was introduced three months ago.
The ministry said that the number of smartphone users subscribing to plans costing more than KRW60,000 ($54) a month has dropped from 40 per cent of the total to just 15 per cent after the bill — the Mobile Device Distribution Improvement Act — went into effect on 1 October, JoongAng Daily said. Now 85 per cent of smartphone subscribers have mid-range or low-cost plans (below KRW60,000).
The act was intended to significantly reduce the subsidies operators can offer. But it allows larger subsidies for more costly monthly plans and sets the subsidy ceiling at KRW300,000 ($280).
The average number of users signing up for smartphone plans also has increased, from about 37,000 per day in October to over 60,000 per day last month, the ministry reported.
But not all consumers are happy. The Korea Communications Commission was forced to call an emergency press conference in early October after receiving complaints that the bill allowed operators to pressure them into moving to more expensive monthly plans. JoongAng reported that consumers are still complaining that they don’t benefit from the new measures.
Some say they have moved to lower-cost plans because of the lower subsidies on high-end plans. In addition, there are reports that some operators are still offering higher subsidies to attract customers to premium plans.
In late November the country’s three major operators were each fined KRW800 million ($717,000) for not reducing their subsidy levels to comply with the regulation. But a brokerage firm said that the fines by the KCC would likely be insufficient to curb the practice since the profits from new customers attracted by the subsidies would offset any penalties.
Fitch Ratings has said the new regulation should help operators reduce their marketing expenses and allow them to concentrate more on customer retention.