By Cho Jin-seo
Staff Reporter
The transition team of President-elect Lee Myung-bak has confirmed that it will force the country's three mobile service operators to lower their basic subscription fees, instead guaranteeing exclusive positions in the market.
The plan will force the firms to cut or abolish the registration fee (30,000 to 55,000 won) and the monthly basic fee (around 15,000 won), while not allowing new players to enter the mobile service industry. The decision is in line with the ``I scratch your back, you scratch mine'' relationship that has lasted between the Ministry of Information and Communication and the three telecom firms ― SK Telecom, KTF and LG Telecom ― over the past 10 years.
``What consumers want is what the transition team wants. The change in mobile phone fees should be large enough to be felt by consumers,'' the member of the team told The Korea Times on condition of anonymity. ``The firms may try to confuse consumers by introducing complicated options, and we don't like that. There are already more than 200 price options and it is impossible to analyze the cost structure of each scheme. So we will make them amend their basic fees instead.''
He also said that the three firms will each submit such plans to the Ministry of Information and Communication, which will in turn report to the transition team later this month.
``The telecom firms have made profits under the protection of the government, so it is time for them to show their sincerity,'' he said. ``But we don't plan to bring a major shakeup to the industry.''
During his campaign, the President-elect pledged that he would lower the telecommunication expense of Korean households by 20 to 30 percent. But there have been big debates on how the plan would be implemented. Some say that the mobile phone charges should be left to the balance of supply and demand in the market. Others say that the government should play a more active role because thus deregulation may help the three firms further manipulate the situation.
The three firms, on the surface at least, have opposed direct interventions from the government in setting their phone charges. But on the other hand, they have enjoyed such a close relationship with the bureaucrats, who have given them protection from new entrants. In 2006, the three firms had 3.6 trillion won in operating profit on 21 trillion won in sales ― a relatively high profit rate in the global standard.
SK Telecom, the largest player that monopolizes the most efficient frequency band of 800 megahertz in Korea, has carefully maintained its market share at between 50 and 52 percent by increasing or decreasing the amount of rebate on new handset purchases. Less popular firms KTF and LG Telecom have shared the other half by setting their phone charge slightly cheaper than SK Telecom's. On top of the firms, the Ministry of Information and Communication has overall control with its power to disallow SK Telecom's price policies.
Even consumer groups are divided on how to improve the situation. The YMCA Citizens' Mediation Center calls for the abolition of the basic subscription fee, and urges the government to let the telecom firms decide their own price levels. On the contrary, the Green Consumer Network says that the government may have to maintain the price authorization system, but in a more transparent and fair way.
``Under the current system, the ministry is actually encouraging collusion between the three firms,'' said Chun Eung-hwi, director of board of the Green Consumer Network. ``The government should block the firms from raising phone charges, but it should not ban them from lowering the charges even if it can make smaller firms go bankrupt. The market needs some healthy tension,'' he said.
indizio@koreatimes.co.kr