Gov't pushes to cut telecom fees by W4.6 trillion

Companies will file administrative suit

By Yoon Sung-won

The government will increase the monthly telecom fee discount rate to 25 percent from 20 percent to reduce household telecom expenses by 4.6 trillion won a year.

Those who sign up for a one-year or two-year service subscription contract with a mobile carrier can choose either the monthly rate cut or a one-time subsidy on a new handset purchase.

According to the State Affairs Planning Advisory Committee and the ruling Democratic Party of Korea, Thursday, the government will also mandate an extra 11,000 won ($9.64) discount on monthly telecom expenses for the elderly and those in the low-income group.

It will also establish more free Wi-Fi access points at schools, public organization buildings and on public transportation.

The presidential advisory panel and the ruling party expect that the plan will produce an aggregate 4.6 trillion won reduction in annual household telecom expenses.

The abolition of the basic telecom fee worth 11,000 won, which was one of President Moon Jae-in’s key campaign pledges, was excluded from the plan in the face of strong opposition from telecom companies.

Regarding this, Lee Gae-ho, chairman of the economic committee under the advisory committee, said, “We will get telecom businesses and consumer groups to continue their talks.”

Kim Tae-nyun, the deputy head of the committee, said, “The goal of abolishing the basic telecom fee was to lessen household telecom expenses. Our plan has the same effect, while we will continue to seek improvements in other areas.”

The government plans to introduce measures that will immediately lessen the household telecom burden.

The advisory committee and the ruling party said the increase of the discount rate on the monthly fee will be introduced in September. They estimate that the measure will encourage more consumers to opt for this rather than the handset subsidy.

Companies up in arms

This plan, however, is expected to draw opposition from telecom companies as it will undermine their profitability.

Company officials from the three carriers are saying that they plan to initiate administrative lawsuits to stop the government from enforcing the “artificial” rate cuts.

They claim the policy is an intervention into private companies’ management.

Lee said the companies will be able to withstand the 5 percentage point increase in the discount rate.

“The Ministry of Science, ICT and Future Planning is sufficiently acknowledging the detailed composition of the telecom fees of each mobile carrier,” he said. “They can bear the 5 percentage point increase. We have devised the plan in consideration of their capabilities to invest in their preparations for fifth-generation networks.”

The government also announced a measure for budget mobile carriers, which are expected to suffer a heavier blow after the telecom fee cuts. As budget mobile carriers lease network infrastructure from SK Telecom, KT and LG Uplus, the government plans to reduce lease rates in August.

Targeting the consumer burden of purchasing new handsets, the government will revise the telecom act to scrap the upper limit of subsidies that telecom companies and handset makers can provide. It will also seek to get telecom companies and handset makers to separately notify their customers on how much the subsidies are to ensure market transparency.