By Kim Yoo-chul
Staff Reporter
The head of South Korea's telecommunications regulator reiterated the government's stance for a significant cut in mobile voice rates, intensifying his agency's uneasy relationship with wireless carriers.
SK Telecom, KT and LG Telecom, the country's three mobile-phone operators, have been claiming that a rate cut would cause irrevocable damages to their businesses.
However, the Korea Communications Commission (KCC) has been insisting on a shaving of consumer rates, with recent reports confirming that Koreans are paying more for their wireless services than those of other nations with similar wireless penetration rates.
KCC officials have been telling The Korea Times that they have been discussing a number of policies intended to force the telecommunications companies to offer cheaper services, with some of the measures scheduled to be put into effect as early as October.
"We will keep an earlier promise pledged by the South Korean president Lee Myung-bak to cut mobile rates by 20 percent by the latter half of 2010," KCC Chairman Choi See-joong told lawmakers in a meeting of the National Assembly's cultural and telecommunications committee, last week.
"We will be able to provide more detailed answers over the plans for rate cuts around the Chuseok holidays starting from Oct. 2. We are talking with the market experts and companies to come up with reasonable measures."
Choi's words came just weeks after he said that the KCC is considering a variety of ways to force rate cuts, including banning handset subsidies in exchange for cheaper rates, expanding pre-paid plans and introducing mobile virtual network operators (MVNOs), where non-telecommunications companies could borrow the networks of mobile phone carriers to provide their own wireless services.
Choi claimed that the mobile carriers are spending "excessively" on marketing costs, and rationalizing the level of spending will help them make up for losses in user revenue.
The marketing expenses by the mobile operators rose 28 percent last year, according to government figures.
In the second quarter alone, SK Telecom, KT and LG Telecom combined to spend 2 trillion won on their promotional efforts, which was a record high, according to data provided by the companies.
The three carriers spend around 30 percent of their annual budgets on marketing, which include handset subsidies.
"Although marketing costs by local telecom companies were higher than those in developed countries, the qualities of telecom services didn't see a significant improvement as the operators had been working with a saturated market," a KCC official told the newspaper.
Spokesmen of SK Telecom, KT and LG Telecom weren't available for comments. But company officials say they've been engaged in "detailed internal talks" for new mobile billing systems.
"It is needed for South Korea to make its own mobile billing guidelines such as the 'Korea Index' in order to narrow differences between general consumers and mobile carriers," Choi added.
Based on the mobile rates charged by the top carrier among selected Organization for Economic Cooperation and Development (OECD) member countries plus Hong Kong and Singapore, SK Telecom was the third most expensive behind Japan's NTT DoCoMo and the Netherlands' KPN Mobile.
This was followed by an OECD report in August that claimed Korea's phone rates were higher than the average for OECD countries. According to the data, the average Korean spends $343.3 per year on voice calling and messaging, compared to the OECD average of $335.7.