South Korea - policy reforms

Telecom Policy Faces Criticism

President-elect Lee Myung-bak's intention to ease regulations in the telecommunications industry is facing criticism even before he assumes his post.

Two prominent consumer right groups ― the YMCA Citizens' Mediation Center and the Green Consumer Network ― said on Friday that they approve Lee's inclination to cut mobile phone, telephone and broadband Internet fees, but do not agree on the method. After Lee was elected on Dec. 19, his policy makers have said the new government will allow telecom companies to freely decide their own price policies without permission from the government, expecting that this would stimulate competition to lower fees.

The Green Consumer Network said that simply abolishing the government authorization system could produce adverse effects, as big telecom firms can exploit the chance to enhance their dominant positions in the market and eventually raise fees.

``The idea of encouraging competition among telecom firms is right only in principle. It is unlikely that the companies will voluntarily lower fees in this market environment,'' the organization said in a statement. ``At this point, the best move would be to continue to operate the price authorization system in a more transparent and fair way.''

Lee, who won the election with the largest margin from the runner-up but also with the lowest turnout of voters in the history of the Republic of Korea, had said he would cut mobile phone charges by 20 to 30 percent once he became president.

Lee Dong-kwan, the spokesman of the transition team, even said the incoming government would lower mobile phone charges after consultation with the Roh Moo-hyun administration even before Lee's inauguration to help make the lives of working-class citizens better off.

``The living costs of working-class citizens are as high as 1.48 million won per month and energy and telecommunication fees such as mobile phones and household spending on private education make up a large portion of that.'' he said on Dec. 31.

This campaign pledge won general approval from consumer groups. But while Lee's aides said they would leave it to the companies, the consumer groups are demanding that the new government should enforce the cut in fixed costs such as the registration fee (40,000 won to 50,000 won) and monthly basic fee (10,000 won to 20,000 won).

As in many other countries, Korea's telecommunications market is strictly protected and guided by the government. In the case of the mobile service sector, three companies ― SK Telecom, KTF, LG Telecom ― are sharing the pie with the government blocking new entries. They also pay a large fee to the government every year for the use of radio frequencies.

The government has made it compulsory for KTF and LG Telecom to report the introduction of new price policies within a month. It also forces SK Telecom, the market leader, to get prior approval.

Consumer groups, however, say that the mobile market has been shaped rather by the amount of phone subsidies of each company. For example, SK Telecom has carefully maintained its market share between 50 and 52 percent for years by increasing or decreasing the amount of phone subsidies given to new customers, which is why SK Telecom will have little reason to lower its fees even if it is given the freedom to do so, the Green Consumer Network said.