KCC warns against illegal subsidies for iPhone 5
By Kim Yoo-chul
The Korea Communications Commission (KCC), the nation’s top telecom regulator, said Monday that the government agency will punish SK Telecom and KT if they offer illegal subsidies to attract more iPhone 5 customers.
''The KCC will start a thorough investigation of the carriers from Dec. 7 ― the date Apple’s latest iPhone comes onto the market ― as we believes chances are high that the carriers will offer illegal subsidies to attract more customers. That’s against the law,’’ said an official from the agency.
Earlier the same day, the KCC summoned marketing executives of the companies and ordered them not to give excessive subsidies for the new Apple handsets, the official said.
Executives from the local carriers confirmed they were warned by the regulator but their representatives declined to confirm it citing the sensitivity of the issue.
The plan by the KCC comes after some local distributors and retailers have already begun providing big subsidies to customers pre-ordering with the condition to change carrier.
''We can’t help but to continue giving subsidies to attract more customers and to prevent our customers from flocking to KT,’’ said Baek Jong-min, a salesclerk at Yongsan Electronics Market in Seoul ― the biggest wholesale electronics market in Korea located near Yongsan Station.
''That’s why SK Telecom and KT are not too concerned about the possible penalties by the regulator. This is a bread-and-butter issue,’’ Baek stressed by telephone.
The suggested retail price of the 16GB iPhone 5 is 814,000 won. But customers who promise to change carrier can get the phone for about 400,000 won with the subsidies.
The two carriers received more than 200,000 pre-orders for the new handset in just two hours after they were made available on Nov. 30, according to KCC officials.
And the government agency expects pre-orders to exceed 700,000 by Dec. 7, reflecting a huge stand-by demand from customers whose two-year contracts for the iPhone 3GS, released in November 2009, have expired.
SK Telecom and KT ― the nation’s two official distributors of Apple mobile devices ― are widely expected to continue their illegal marketing activities to achieve this year’s smartphone sales goal and to increase average revenue per user (ARPU), a critical measurement to gauge the profitability of carriers.
''Because the iPhone 5 supports long-term evolution (LTE) mobile technology for the first time in Apple’s history, more iPhone 5 users mean more leverage in the race for LTE-enabled smartphones,’’ said an SK Telecom official, adding he believes his company will continue offering more subsidies than rival KT.
Separately, the KCC has been investigating reports of illegal marketing activities by the nation’s three carriers including the smallest LG Uplus since October.
It’s expected that the regulator will ban the carriers from signing up new customers for a week for violating rules related to handset subsidies, according to KCC officials.