Gov’t plan for 20,000 won phone deal stirs fury

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Gov’t plan for 20,000 won phone deal stirs fury

Is a cheap cell phone plan worth market manipulation?

The government is stirring up controversy with its plan to design a 20,000 won ($18.71) basic mobile plan and force telecom operators to introduce it.

The Regulatory Reform Committee, overseen by President Moon Jae-in, on Friday passed a proposal that will allow the government to set details of mobile subscription plans.

This will allow the government to set the monthly subscription cost, amount of data and duration of voice and video calls every two years and to have a dominant player launch the plans. The committee specifically came up with a 20,000 won-a-month “general plan” that will provide 1 gigabyte of data and 200 minutes of voice calls, and picked SK Telecom to launch the package.

The Ministry of Science and ICT is set to hand over the proposal to the National Assembly as part of an amendment to the Telecommunications Business Act next month at the earliest. Lawmakers are expected to vote on the proposal in the latter half of this year.

If the amendment passes and SK Telecom launches the new plan, the other two smaller mobile carriers - KT and LG U+ - will inevitably follow suit.

The general subscription plan is part of Moon’s campaign pledge to help households pay less for telecommunication services. He came up with the proposal as an alternative to his original plan to scrap basic subscription fees, which faced severe opposition from mobile carriers.

“The general plan will greatly reduce households’ telecom expenditures and remove the distinction between low- and high-cost mobile plans,” said Jeon Sung-bae, director of telecommunication policy at the Ministry of Science and ICT.

“Only expensive plans provide various consumer benefits, meaning not all consumers can enjoy their rights,” said Kim Yeon-hwa, head of the Korea National Council of Consumer Organizations and a member of the Regulatory Reform Committee.

Moon’s pledge to cut the prices of cell phone plans have been carried out step by step this far into his administration. The government moved up the ceiling on maximum monthly discounts on phone bills to 25 percent from 20 percent in September last year, and mobile carriers began offering discounts of up to 11,000 won on senior citizens’ cell phone plans in April.

However, Kim Do-hoon, a professor at Kyung Hee University School of Management, said that the general plan was just a populist initiative.

“When the government creates a general plan when there are alternatives, consumers will be dealt a blow in the long term,” he said.

To set the general plan, a committee consisting of civic groups will meet every two years to discuss the details of mobile plans, and the science minister will make the final decision.

Given the ripple effect that the government-set mobile plan will likely have across the telecom industry, the regulatory change amounts to government intervention in the market.

Lee Sang-heon, the head of the corporate relations policy bureau at SK Telecom, said that he agreed that the amount of data provided in low-cost plans is insufficient. However, he said that the government deciding mobile plans “goes against the principle of a market economy.”

The government has faced criticism for its changing policies on reducing telecom fees.

The National Planning Advisory Committee, Moon’s de facto transition team, said last year that the plan could cut 2.2 trillion won in yearly spending on cell phone plans, and telecom operators would face a big blow to their revenue. The Ministry of Science on Friday said revenue loss for mobile firms would be 781.2 billion won, just one-third of the committee’s earlier projection.

The government also changed its forecast on whether the new plan would affect other plans. Last year, the Science Ministry said the general plan will let all consumers enjoy reduced phone bills. The ministry said on Friday that mobile operators will have autonomy over other mobile plans after receiving criticism for its intervention in the market.

Dozens of smaller budget mobile operators that rent wireless networks from the three major carriers also fear the new mobile plans will hurt them.

“The general plan will officially allow bigger telecom operators to trespass in the realm of low-cost mobile operators,” said Park Hyo-jin, the managing director of Sejong Telecom, who attended the Regulatory Reform Committee meeting on Friday. “We [budget mobile operators] urge the government to come up with measures for us, such as giving us an exemption on monthly radio spectrum fees for good.”

To help out budget operators, which take up a little over 11 percent of the entire telecom market, the government gave them an exemption on radio spectrum costs for the past six years. The discount was set to end this September, but the discount operators demand it be continued indefinitely.

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