Telecom firms divided over fare policy regulation

KT, LG Uplus in opposition to new rules

By Yoon Sung-won

As the government is expected to ease or abolish the regulation that intervenes in fare policies of leading telecom firms, the three local operators ― SK Telecom, KT and LG Uplus ― are divided into the pros and cons.

While SK Telecom supports the phase-out, KT and LG Uplus, the nation’s smallest telecom firm, oppose the abolition as it is likely to undergo more difficulty in competing with larger firms.

ICT Minister Choi Yang-hee said in an interpellation session at the National Assembly on Oct. 5 that the ministry will “look into the fare policy approval system is working properly,” igniting the debate over the possibility of regulation’s abolition.

LG Uplus strongly defended the need for the regulation. For the company which holds around 20 percent of market share here, the abolition of the regulation may undermine its competition to expand presence in the market, and thus negatively affect its profitability.

“A policy to accelerate competition in the market needs to be enhanced instead of abolishing the regulation to reduce the household telecom expenses,” LG Uplus said in a press release on Nov. 10.

It also argued that the abolition will result in more power for the leading company to maximize its profit.

A KDB Daewoo Securities Analyst Moon Jee-hyun said, “It seems that LG Uplus had to oppose the abolition to prevent potential negative impact to its operation and competition as a late mover in the market.”

The regulation was introduced in 1991 to obligate the leading local telecom firms to get governmental approval before launching new telecom payment plans. It aims at prohibiting the market leaders from excessively drastic raises or cuts of telecom fare, creating a relatively better condition for smaller firms to compete in the market by limiting the operation of the market leader.

The regulation was revised in 2010 to allow the market leader to report to the government instead of waiting for an approval when it plans a price cut.

Currently, SK Telecom holds more than half of the domestic wireless market share while KT has been the largest fixed-line operator with 42.4 percent share.

As the ministry is expected to decide upon the regulation’s abolition within weeks, it said, “The government is considering various options to improve the telecom fare policy regulation,” adding that it has not made the final decision as of yet. It also said it will collect extensive opinions about the regulation and thoroughly review the concerns and impacts that the regulation’s abolition may bring to the telecom market and to the customers’ benefit.

While the ministry has reportedly turned to the regulation’s revision from abolition more recently, opposition lawmakers and civil activists from the People’s Solidarity for Participatory Democracy argued in a seminar at the National Assembly on Monday that the existing regulation has only benefited market leaders, instead of encouraging a fair competition, and urged the government to take an action.