Will Mobile Telephony Charges Go Down?
By Kim Tae-gyu
Staff Reporter
Nowadays, society appears to be united in anger that the country's more than 41 million mobile phone subscribers have been massively overcharged.
From civic group activists to politicians and ordinary citizens, a campaign has swept nationwide to cut back on the rates of mobile telephony.
Vowing to take all measures possible, they are urging the nation's three wireless operators _ SK Telecom, KTF and LG Telecom _ to slash charges.
In response, the industry is flatly opposed to the proposal while claiming that mobile rates are relatively low compared to other countries.
They even contend hefty bills are because of end customers, who spend a lot of time on the phone, not because of mobile rates.
It remains to be seen which side will win out in the end but people will be able to get some glimpse of the future by checking the veracity of the two opposing camps' rationales.
Four-Headed Monster?
Midway through last month, the Seoul YMCA held a news conference at its head office and contended the three wireless operators were squeezing customers with unfair rates.
They took issue with the basic fees, subscription fees and costs of text messages and caller identification (CID) services.
Dubbing them the ``four monsters of cellular phones,'' the Seoul YMCA said the fees are prohibitively high for the average household here to shoulder every month.
``Korean homes spend about 7 percent of their income on telecom services, up to 3.5 times more than the average of the Organization for Economic Cooperation and Development (OECD) member countries,'' said Kim Hee-kyung who leads the campaign at the Seoul YMCA.
``Among telecom expenditures, mobile phone rates explain a significant chunk _ about 60 percent. People should join together to reduce the burden,'' Kim said.
More specifically, Kim insisted that CID and subscription fees should be free while basic fees and text message charges must be more than halved.
``Mobile carriers have the financial leeway to cut rates because they have raked in profits by overcharging customers,'' Kim said.
``Look at their high profit margins and extravagant marketing costs over the past several years. Those figures amply demonstrate how carriers overcharge,'' she said.
SK Telecom, KTF and LG Telecom combined to chalk up an operating profit ratio of around 15 percent in 2006, far higher than the average 5.2 percent of all local businesses.
They netted more than 2 trillion won in profit for last year alone.
Based on such exceptional bottom lines, the three mobile carriers spent 4.1 trillion won on marketing last year, much more than 3.12 trillion won for investment.
Rep. Kim Hee-jung of the main opposition Grand National Party concurs with the Seoul YMCA.
``The three carriers' marketing costs rose 25 percent year-on-year in 2006 while the investment inched up a mere 13 percent during the same period,'' Kim said.
``In this climate, operators have not brought down mobile charges since 2004. The prices of text messages has also remained unchanged over the past eight years,'' the first-term lawmaker said.
Green Consumer Network, a civic group, lashes out at the Ministry of Information and Communication for having failed to slice mobile rates.
``SK Telecom, KTF and LG Telecom already chalked up revenues big enough to cover their investment,'' a Green Consumer Network activist Chun Eung-hwi said.
``Now it is high time for the government to butt in to prompt our telephone companies to substantially discount charges,'' Chun said.
All-Out Opposition
Understandably, the offensive against hefty mobile bills resonate with people who in many cases spend more than $100 every month on cell phone use of their own and their family members.
However, the industry is diametrically opposed to such rationales that cell phone rates are too high with business bellwether SK Telecom leading the way.
``Since 1984, we reduced basic fees seven times and telephony charges six times while cutting CID rates, that are free at the moment, twice,'' SK Telecom spokeswoman Kim Hye-jin said.
``Beginning this year, we reduced charges for wireless Internet by 30 percent,'' she added.
Starting last January, market leader SK Telecom provided free CID services while KTF and LG Telecom still charge for it.
Kim said Korea's mobile rates are not high when compared to overseas operators.
``The OECD reports that an average Korean pays $421.6 a year in cell phone bills, roughly 75 percent of the organization's median of $556.4,'' Kim said.
``According to Merrill Lynch, Korea was only the 29th most expensive country in wireless telephony prices among 49 nations surveyed as of the end of last year. The belief that our mobile rates are expensive is fantasy with hardly any basis in reality,'' she said.
KTF said proper revenues are necessary in the mobile industry as players have to shell out big bucks to establish facilities and maintain them.
``The mobile industry is about large-scale investment. Although we racked up big profits, they have gone to investment on networks and facilities,'' a KTF spokesman said.
``Should we cut mobile rates as some claim, the investment will be sliced as much. The results will be not good for anyone, even for the end users eventually,'' he said.
Some even argue the cutting-mobile-price campaign has been initiated by politicians, who want to buy votes in the lead-up to the presidential election that falls on Dec. 19.
It is not certain whether or not mobile companies will succumb to demands made by customers but one thing seems to be sure _ the government is reluctant to step in.
``Overall mobile prices have been decreasing thus far and telecom-related spending has also headed south,'' said Jang Seok-young, a director at the Information Ministry.
``We think it is improper for the government to butt into this case,'' he said.
