A reckless ruling

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A reckless ruling

The three Korean wireless carriers, SK Telecom, KT and LG U+, have been ordered by the Supreme Court to open their accounting books.

The final ruling demands that they disclose financial statements from 2005 to 2011 when they provided 2G and 3G mobile technology. The ruling is the result of a 2011 lawsuit from the civic group People’s Solidarity for Participatory Democracy that challenged wireless carriers to disclose their service costs on the suspicion that they were overcharging users and making profits beyond their investment.

The highest court ruled that the need to resolve the public’s distrust of wireless fee pricing was more important than the value of confidentiality for corporate information. The wireless carriers are strongly protesting, claiming that Korea is the only place in the world where a private company is forced to disclose its cost guidelines. The disputed point is their cost to revenue ratio. The civilian activist group has been demanding a cut in wireless fees if the cost recovery rate reached the break-even point of 100 percent.

The industry argues that is unfair, as service operators profit years later after making huge investments in next-generation infrastructure. If cost recovery ratio becomes the basis for rate policy, rates would have to shoot up when operators launch new technology like 5G.

Costs often become an excuse to contain prices. Builders and oil refiners were pressured to disclose their costs when apartment and gasoline prices shot up. But forcing companies to disclose their production costs can dampen the spirit behind investment.

Companies’ competitiveness lies in their efforts to reduce costs through heightened productivity and technological advances. Costs are just one of many factors that define market prices. Although he administered a crackdown on real estate speculation, former President Roh Moo-hyun opposed disclosing the building cost for apartments in 2004, saying that it would go against market principles.

The Ministry of Science and ICT said it will comply with the court ruling and release the records from the wireless carriers. Although the final court ruling must be respected, the ministry must make sure its actions do not hurt entrepreneurship and the industry.

JoongAng Ilbo, April 13, Page 30
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