Gov’t to vet bundled subscriptions

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Gov’t to vet bundled subscriptions

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Telecommunication companies are once again under pressure by the state regulator, which intends to taking action against what it considers excessive discounts on subscription plans that bundle TV, home internet or mobile services.

The Ministry of Science, ICT and Future Planning and the Korea Communications Commission (KCC) are planning to form a task force to inspect the integrated offerings, saying that the heavy promotions might hamper fair competition.

The possibility of a new policing effort, however, sparked skepticism. The government’s earlier intervention in the telecom sector, via the Mobile Device Distribution Improvement Act, often shifted the financial burden to the public while failing to actually exterminate unfair promotions.

The three major carriers - SK Telecom, KT and LG U+ - have relentlessly promoted their integrated packages that combine cellular and Internet services because the integrated products keep customers loyal while reducing marketing expenses.

The regulators warned that the combined services might contain misleading advertisements and discriminate against other subscribers by providing promotions or steep discounts to only a certain group of clients.

The KCC said that it will work toward amending relevant laws to regulate the telecom companies involved in what it sees as unfair business practices.

The authorities already formed a task force to come up with new regulatory plans within the first half of this year.

The move is reminiscent of the Mobile Device Distribution Improvement Act introduced last fall that capped the amount of subsidies carriers can provide at 300,000 won ($265). The new law sent the cost of smartphone bills shooting up.

Telecom companies are divided over the regulators’ move.

SK Telecom, the dominant bundled service provider, is opposed to the move while LG U+ stands with the authorities.

SK Telecom offers packages that include combinations of TV, Internet and wireless services in cooperation with its subsidiary SK Broadband.

The telecommunication company is the No. 1 player both in the mobile carrier and home internet service markets.

“SK Telecom tries to dominate the market by churning out bundled offerings,” said a source at LG U+ who asked for anonymity.

“We can’t engage in fair competition even in the fixed-line sector because of SK Telecom,” the source said.

SK Telecom and Broadband currently has 40.2 percent of the combined-service market. KT, the second-largest carrier, has 38.5 percent. LG U+ came in third with only 20.7 percent of the market.

SK Telecom’s decision to acquire the entire stake in SK Broadband hinted at its willingness to further integrate cellular and fixed-line services at home, leaving competitors nervous.

SK Telecom said that the bundled offerings benefit many users.

“It’s important to increase options and benefits for consumers,” said a representative of SK Telecom.

“The government should make efforts to create a business-friendly environment that ensures fair competition rather than toughening regulations.”

With the bundled products, users can save an average of 29,000 won per month, according to Korea Information Society Development Institute.

Some lawmakers also voiced concerns about the potential intervention.

“The state intervention in the bundled service can generate side effects as seen in the Mobile Device Distribution Improvement Act,” said Rep. Yoo Seung-hee of the opposition New Politics Alliance for Democracy.

BY PARK EUN-JEE, PARK SU-RYON [park.eunjee@joongang.co.kr]

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