Phone bills become all about data not calls, SMS

SK Telecom, Korea’s No. 1 carrier, came up with a billing system Tuesday that would charge customers based on their data use instead of calls and text messages. Market runner-up KT made the first such move two weeks ago, and was later joined by the smallest player in the market, LG U+.

While SK Telecom offered similar prices and packages as KT and LG U+, the major difference is that 3G users can also register for its plans. KT and LG U+ only offer the plans to LTE wireless service users.

In SK Telecom’s plans, phone calls are free between cellular phones and between cell phones and landline phones regardless of the monthly fee. SK Telecom’s plans will also offer unlimited conversations with friends or family overseas via mobile Skype, Viber or KakaoTalk’s Voice Talk as the plan completely lifts limits on mobile Voice over Internet Protocol, a wireless Internet calling service.

KT was the first among the three major mobile carriers to adopt the data-oriented plans. It said the new pricing is a response to changes in people’s use of their phones. Voice calls and text massages are less relevant than data, which runs social networking services (which now offer voice calls, too) as well as web browsing and consumption of media and entertainment content.

Within four days of KT’s launch, the number of subscribers to the service reached 100,000 - a clear indication that this is a new direction for the mobile industry. Most were existing KT customers.

The company also lured away 433 subscribers from rival companies between May 8 and 9, while SK Telecom lost some 600 customers during the same period. LG U+, the third-largest player, managed to gain 176 new customers over the two days.

At first glance, it appeared that the company created the data-based plan to cater to heavy data users.

But a closer look reveals that the new plan will actually better serve customers who rely more on calls than data. The larger number of customers depending on data are not big beneficiaries. The price for unlimited data or larger data ranges (4 GB to 6 GB) is either comparable or more expensive than existing plans.

For example, KT’s new service will offer 6 GB for 54,890 won ($49.9) when value-added taxes are included. Subscribers can get unlimited access to calls and text messages on the condition that the calls are made between smartphones and not to landlines.

But an existing plan provides 5 GB for 56,100 won, but a subscriber can use free calls with fixed-line phones.

“In its advertisements, KT said that it launched a 20,000 won-range plan that focuses on data,” said Kim Mi-rim, a 32-year-old woman who considered switching to the new plan.

“But when I looked into it, the 20,000 won plan only allows 300 MB,” she continued, “and when taxes are included it’s higher than 20,000 won. But if I move up to a larger data bracket, the savings were not that significant.”

With a monthly payment of 29,900 won ($27.39), users can use up to 300 MB of data. The limit rises to 1 GB for 34,900 won, while 39,900 won provides 2 GB.

For 49,900 won a month, up to 6 GB is available.

But the plans below 54,900 won offer 30 minutes of free calls between cell phones and landline phones.

Meanwhile, SK Telecom provides 300 MB for 29,900 won and 1.2 GB for 3,600 won. One can go with 2.2 GB for 42,000 won while 3.5 GB is available for 47,000 won.

Smartphone users have called for cheaper plans for data use as major carriers increased their base payments in the transition from 3G to LTE wireless connections.

According to a report by the Ministry of Science, ICT and Future Planning, data usage in Korea almost doubled between 2013 and 2014, while the time spent on calls edged up from 165 minutes in March 2013 to 190 minutes in the fourth quarter of 2014.

The composition of subscribers to the latest offerings testifies that the new service generally benefits people who mostly make phone calls and send text messages.

KT said that 50 percent of the subscribers are people in their 30s and 40s, who typically use less data than teens and 20-somethings.

The most popular price range was 29,900 won. Some 30 percent of subscribers selected that plan.

“People in their 40s chose this price range because they mostly use calls rather than data,” said a representative of KT.

The much-hyped plan also disappointed some users as it comes with restrictions that are hidden in the fine print of the contract.

In contrast to the promise of “unlimited” calling service, the plan bans users from calling more than 600 minutes a day, assuming that such use is “commercial.” Commercial use refers to calls and texts used by mobile spam schemes.

A subscriber is also not allowed to send more than 500 text messages a day or 150 texts per day more than 10 times a month.

The plans above 59,900 won promise “unlimited” data, but KT will throttle down speeds when a user reaches a maximum ceiling.

Still, KT and its competitors consider the pricing a meaningful step.

“The successful reaction from consumers proves that KT lives up to customers’ unmet needs,” said Kang Guk-hyun, director at KT’s marketing strategy division.

“We captured the evolution of cell phone usage and developed a data plan that includes new features to suit the changes.”

One new feature includes a rollover system that enables customers to carry unused data into the next month.

Customers can also use the next month’s data in advance.

LG U+ rolled out a similar data plan last week to cash in on the interest in data-oriented plans.

The plan offers a virtually identical price range as KT’s plan, although it doesn’t allow for free calls between cell phones and landline phones.

Users are also not allowed to roll over the previous or next month’s data.

Instead, the telecom company seeks to distinguish its service by offering its television service to those choosing the higher priced plans.

The company’s mobile Internet protocol television service, “U+HDTV,” will be available free of charge for plans costing over 49,900 won.

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