Fines by South Korea’s regulator on mobile operators for giving new customers illegal subsidies are deemed unlikely to curb the widespread practice.
Last week the country’s three major operators were each fined KRW800 million ($717,000) for not reducing their subsidy levels to comply with a new regulation — the Mobile Device Distribution Improvement Act which went into effect on 1 October — that sets the subsidy ceiling at KRW300,000 ($280).
A study by a brokerage firm found that the fines were insufficient to deter operators since their profits from new customers attracted by high subsidies were sufficient to offset any penalties imposed by the Korea Communications Commission (KCC).
JoongAng Daily cited an analyst at IBK Investment and Securities as saying that KRW800 million is not a burden for the operators. A more effective penalty would be criminal charges against operators’ executives, which the government is now considering.
For the first time, the KCC has gone after smartphone retailers, imposing a fine of KRW1-1.5 million each on 22 stores found to be giving illegal subsidies on iPhones, the Daily said.
KCC has said the goal of the subsidy cap is to lower operators’ marketing expenses so they can pass on the savings to their customers or offer larger monthly data bundles.
But since the new bill went into effect, consumers have complained to the KCC that the regulation allows operators to pressure them into moving to more expensive monthly plans. Many feel the regulation benefits only the mobile operators.