Companies chided for not complying with telecom Act
Minister Choi Yang-hee, second on the left, speaks with senior executives of mobile carriers and handset makers in a hurriedly-arranged breakfast meeting in the JW Marriott Seoul, Friday. KCC Chairman Kim Sung-joon, first on the left, also attended the meeting. / Yonhap
By Kim Yoo-chul
The nation’s telecom regulator has called for mobile carriers and handset makers to strictly follow new subsidy regulations which went into effect on Oct. 1.
They called a meeting with senior executives of SK Telecom, KT, LG Uplus, Samsung Electronics, and LG Electronics at the JW Marriott Seoul, Friday, to pressure them into supporting the government’s drive to bring down telecom charges and handset prices.
Choi Yang-hee, head of the Ministry of Science, ICT and Future Planning (MSIP) and Choi Sung-joon, head of the Korea Communications Commission (KCC) presided over the meeting.
The hurriedly-arranged gathering comes amid a growing public backlash against the new subsidy rules in the Mobile Device Distribution Improvement (MDDI) Act. The Act is aimed at stopping Korea's hyper-competitive telecom companies from poaching each other's customers with fat handset subsidies.
But the act has dramatically reduced purchases of new handsets by customers due to the cap on subsidies.
Handset producers and mobile carriers are unable to carry out promotional campaigns to attract new customers due to the subsidy cap.
"The act is designed to benefit not only handset manufacturers and mobile carriers but customers as well," Minister Choi said at the meeting. He warned that the government will take tougher steps if the companies do not comply with it.
"The government urges the industries to collaborate. If you seek your own interests, then it will apply exceptional measures," Choi stressed, although he did not specify the details.
KCC Chairman Choi also blamed mobile carriers and handset manufacturers for the negative side-effects of the act.
"Consumers are reluctant to buy new phones and also we admit that dealerships are facing trouble. It's true that companies should go forward for profit. But I can say without consumer trust, then it will hurt you, eventually," he said.
The Act calls for carriers to offer handset subsidies not beyond 350,000 won and the limit will be reviewed every six months. If a carrier is found to have breached the limit, it will be fined up to 3 percent of its annual sales.
Dealerships breaching the regulation also face fines, with small distribution stores facing penalties of up to 10 million won, and bigger ones up to 50 million won.
Uneasiness
Lawmakers from the main opposition and ruling Saenuri Party have criticized the effectiveness of the regulation, saying the cap limits consumer choice and hurts the related industries.
"This is really nonsense. Telecom regulators should take a full responsibility about the current confusion in the market. Again, the cct is against the free market economy," said an executive at LG Uplus.
Samsung Electronics Chief Financial Officer Lee Sang-hoon, KT Vice President Nam Kyu-taek, SK Telecom CEO Ha Sung-min, LG Uplus CEO Lee Sang-chul and LG Electronics President Park Jong-seok attended the meeting.
"There is not much difference on suggested retail prices of handsets that have been sold inside and outside Korea," said Samsung’s Lee after the meeting.
"I think the main focus of the talks is how to provide more benefit to consumers," he said.
SK Telecom CEO Ha Sung-min said, "Let's wait and see what will happen." LG Uplus CEO Lee said; "The act is mixed with a lot of misunderstanding."
The two regulators are also pressing handset producers to lower the suggested retail prices on handsets.
The sale of Samsung and LG mobile devices have been more than halved since the regulation went effect.
One official said the MSIP is mulling revising the regulation to counter growing public criticism.