Gov’t wants new kind of penalty for subsidies

The Ministry of Science, ICT and Future Planning said yesterday it plans new kinds of penalties for mobile carriers who offer customers illegal subsidies on purchases of phones and service plans.

The Science Ministry and the Korea Communications Commission have been punishing the local mobile carriers - SK Telecom, KT and LG U+ - with business suspensions for certain periods of time.

But those punishments didn’t seem to curb the practice of over-aggressive subsidies and discouraged sales of mobile devices.

The ministry has decided to levy fines in the form of cuts in consumers’ service fees so that the average customer will benefit and the burden of high phone bills on households will be reduced.

“We figured that when we impose a business suspension on mobile carriers, damage is felt by third parties, such as phone manufacturers, retailers and consumers, and when we impose the traditional type of fine, it goes to the government, not to consumers,” said Choi Mun-kee, science minister.

“We plan was to come up with measures to cut the household burden of communication costs and stabilize the mobile phone market,” said a spokesman for the ministry.

However, in order to introduce the new system, the government has to revise the Telecommunications Business Act because there is no legal basis for ordering a reduction of phone bills for users through a fine.

That is likely to take time. A previous revision to the Mobile Device Distribution Act is still pending at the National Assembly.

“Usually it takes more than six months at the least to arrange a bill to amend the law,” said a spokesman for the ministry. “The ministry officials shared initial talks with representatives of mobile carriers, but we still need a legal review. We believe it will take a considerable amount of time to make a detailed bill.”

Along with the idea for a new penalty system, the ministry also ordered the carriers to continuously purchase certain volumes of mobile devices from manufacturers even during business suspension periods and to put priority on purchases from small manufacturers.

Furthermore, it decided to intervene to protect smartphone retailers during business suspension periods, saying the carriers should help them.

“In order to strengthen the distribution network, financial support for smartphone retailers is a must,” said a spokesman for SK Telecom. “We are discussing various kinds of financial support for retailers during the business suspension period.”

In a meeting with the heads of the mobile carriers on Friday, Science Minister Choi emphasized that if mobile carriers continued to disregard the government’s warning and persisted in the overheated competition in doling out subsidies on smartphone sales, the ministry would be force to impose even heavier penalties.

This would include a prison term of less than three years and a fine of less than 150 million won, he said.

He added that instead of pouring money into subsidies, the companies should be increasing their spending on improving their services.

BY kim jung-yoon [kjy@joongang.co.kr]