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Without extra connection costs, networks can provide discounts

Why are phone firms cutting prices?

Dec 04,2007
Mobile phone operators in Korea were under pressure from the government and civic groups to reduce their
If you use a cell phone, you’ve probably heard of a newly launched plan by mobile phone operators.
The new service offers a discount when subscribers make calls to other users of the same network.
SK Telecom, Korea’s No. 1 mobile phone operator, was the first to introduce the service to local mobile phone users on Oct. 17. KTF and LG followed suit and recently launched similar services.
To get the discount, subscribers must pay between 1,000 won and 2,500 won on top of their basic rate.
Why are mobile phone operators offering this discount?
To answer that question, it’s necessary to understand how mobile telecom companies bill their users.
In Korea, you only get charged for making a call, while in the United States and China, both callers and receivers have to pay.
Local mobile phone operators charge a basic rate of 10,000 won or 20,000 won per subscriber and additional fees are added, depending on how long the caller talks.
An SK Telecom subscriber pays 20 won per 10 seconds; KTF and LG Telecom users pay 18 won for the same length of time.
Whomever you talk to, the phone bill is supposed to be the same if you talk for the same time period.
But it changes when the person you are talking to belongs to a different mobile phone company than you.
For instance, if you are a subscriber of telecom company A, but your friend belongs to telecom company B, you have to use two networks when you talk, which results in a connection fee.
The Ministry of Information and Communication assigns connection fees to each mobile phone operator, based on how much money each company spent on establishing the networks.
Currently, it costs 39.6 won per minute when an SK Telecom subscriber calls someone who uses KTF.
But among subscribers of the same network, there are no connection fees, so mobile phone operators can give discounts on calls made within their network.
By providing a price cut, the mobile phone operators can attract potential customers who want to keep in touch with friends or family at a lower cost.
Mobile phone operators in the United States and Japan saw their subscribers increase after they introduced similar discounts.
With these benefits, however, mobile phone users should check for catches in the new discount system.
For example, according to local mobile phone operators, phone users can only get the discount if they talk to another person on the same network for more than 200 minutes.
For that reason, cell phone users should monitor how long they talk with other users of the same network before they join the new plan.
Korea’s teenagers will also benefit from this kind of service starting next year, as mobile phone operators decided to expand the price cut to young mobile phone users.
Companies make limited plans available for teens, who are less able to pay big phone bills.
Parents also seek to limit their teens’ phone use to avoid exorbitant bills at the end of the month. Internet and game services accessible through mobile phones and popular among teens can cause costs to quickly add up.
But by paying an additional 1,000 won above the basic rate, teenage SK Telecom users will be able to get 50 percent price cuts starting in January 2008.
LG Telecom is also planning to introduce a similar plan by the end of February.
As mobile phone operators start to launch the new plans, landline phone companies have joined the competition.
Landline phone operators are trying to win customer hearts with less expensive phone plans.
LG Dacom announced a new service that allows unlimited free talking time between its subscribers on Nov. 27.
KT, the country’s top landline and broadband operator, also came up with a similar service.
For an extra 39 won, its customers can talk over the phone for as long as they want.
The nation’s mobile phone operators were already under pressure from the central government and civic organizations to lower wireless fees. With the new price cut service, SK Telecom also decided to lower its text message fee from 30 won to 20 won per text starting next year.
Spurred by SK, KTF and LG Telecom are expected to lower their text messaging prices, too.
In Korea, 43 million people are mobile phone subscribers and there are 23 million landline service subscribers.


By Kim Won-bae JoongAng Ilbo [so@joongang.co.kr]



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