Competition cuts costs

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Competition cuts costs

KT announced a new wireless pricing system where customers will be charged based on their use of data with no extra charge for voice calls and text messaging. With a minimum charge of 20,000 won ($18.35) for data service, subscribers can have unlimited voice calls and texting.

For the first time ever, phone calls have become free in Korea. For 50,000 won, data access also becomes unlimited. KT estimated the new service charge system will save subscribers 3,590 won on their monthly phone bills. The other two major carriers - SK Telecom and LG U+ - plan to offer similar price options later in the month.

The new pricing system is expected to bring about sweeping changes in the landscape of the wireless industry. It could generate a rush of Internet-based free messaging and call services like KakaoTalk.

Current voice-based wireless pricing has reached its limits. People text or send messages via Internet social networking platforms instead of calling. A choice of monthly plans based on data use is a global trend. New wireless services based on cheaper smartphones or Google phones are posing a challenge to traditional wireless companies. Google has lowered phone bills to the 20,000 won range even without any discounts.

Competition is the best way to cut communications costs. Monthly communications bills average 160,000 won per household in Korea. Almost everyone in the country owns a wireless phone and yet the service charge is among the world’s highest. The attempted cut in wireless service charges by the previous government only intensified the race in handset subsidies that translated into a customer burden. The incumbent government introduced an act that set a limit on subsidies, but could not force service charges to go down.

The telecommunications market is changing fast. Content-based companies like KakaoTalk are leading the smartphone market, rather than the traditional wireless carriers. Intense competition via service quality and prices is inevitable.

Amid heavy competition and a widened market, what the government should and should not do has become clear. Instead of drawing up restrictions, it must promote fair competition. Once the market mechanism is at full work, it will find the reasonable pricing level. At the end of the day, that is what would best serve customers and the industry.

JoongAng Ilbo, May 9, Page 30

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