By Lee Min-hyung
With the 20th National Assembly starting its four-year term last week, expectations are rising that a controversial subsidy cap regulation may be revised.
The government imposed the Mobile Device Distribution Improvement act in 2014 by setting an upper limit of handset subsidies, in its bid to stop unfair and excessive subsidies offered by mobile carriers.
Since the regulation was enacted, the Ministry of Science, ICT and Future Planning (MSIP) has stressed that the regulation played a crucial role in stabilizing the telecom market, as the subsidy cap curbs excessive paybacks from mobile carriers.
However, customers has kept raising their voice against the law, as they can benefit from only a small sum of subsidies, regulated by the government, when buying new handsets.
Upon such complaints, the MSIP remained firm that this is a sign of normalizing abnormal telecom retail structures, with Minister Choi Yang-hee emphasizing it won’t revise the core structures of the regulation.
Amid rising concerns, Rep. Shim Jae-chul of ruling Saenuri Party pledged to push for revising the subsidy cap regulation during the 20th National Assembly. He sought to revise the bill in the 19th-term Assembly, but this ended up in failure.
"The subsidy cap regulation has done more harm than good so far," Shim said last week in a press release. "The government's excessive intervention into markets ends up limiting free market competition, hurting customers' benefits. The artificial subsidy cap should be abolished immediately."
He said the regulation only helped mobile carriers ― SK Telecom, KT and LG Uplus ― reap profits, as it saved them marketing costs.
The remark reflects that the carriers had offered excessive subsidies to entice more customers before the regulation took into effect, making them spend more marketing costs to steal customers from rival companies.
"Only mobile carriers have taken advantage of the regulation. That’s why we have to push for amending the policy as soon as possible," he said.
In particular, KT posted an earnings surprise during the first quarter this year by reporting 385.1 billion won in operating profit, up 22.8 percent from the previous year. At that time, KT claimed the regulation was not the sole profit booster. The company said the growth came largely from other sectors including its wireless and media business.
LG Uplus also posted 170.5 billion won in operation profit during the same period, up 10.3 percent from a year earlier.
Following the earnings report, critics and market analysts argued that the profit growth was partly driven by the subsidy cap regulation, as it reduced heated competition among carriers. They said this has left carriers reduce market costs.
Expectations are that the revised bill will likely to pass at the 20th National Assembly, as Woo Sang-ho, floor leader of the main opposition Minjoo Party of Korea (MPK), is also on par with Shim’s stance.
Woo has been a key figure from the opposition circle, who pushed for revising the regulation since it took effect in October, 2014.