FTC imposes hefty fines on big 3 for dodgy 5G claims

Industry

Published: 24 May. 2023, 19:07

FTC imposes hefty fines on big 3 for dodgy 5G claims

A screen shows advertisements by mobile carriers on 5G network. Fair Trade Commission Chairman Han Ki-jeong announces the penalty on SK Telecom, KT and LG U+ on their misleading advertisements on the speed of the network. [NEWS1]

The financial watchdog imposed a combined 33.6-billion-won ($25.5 million) penalty and corrective orders on the country’s three largest telecom operators Wednesday for their misleading advertisements regarding 5G network speeds.

The Fair Trade Commission (FTC) imposed the penalty on SK Telecom, KT and LG U+ for misleading and exaggerating the performance of their 5G networks by claiming speeds only achievable under very limited conditions. The regulator also criticized the companies for claiming faster speeds than their rivals without providing verified test results.

SK Telecom accounts for 47.8 percent of 5G users, followed by KT with 30 percent and LG U+ with 21.5 percent. SK Telecom was fined 16.83 billion won, KT 13.93 billion won and LG U+ 2.85 billion won.

“The speed of 5G service is an important factor when customers choose their provider,” the FTC said in a statement. Misleading advertisements could thus “harm fair transactions by hindering rational choices by consumers.”

The mobile carriers took advantage of the public's limited understanding of 5G networks in their aggressive marketing of the service, the FTC added.

The penalty is the second largest fine imposed by the FTC for advertising after its 37.3 billion won fine in 2017 on three automakers, including Audi Volkswagen, for providing incorrect information on car emissions.

The mobile carriers provided speeds between 656 and 801 megabits per second (Mbps) for their 5G networks when they aired their problematic ads, which misleadingly advertised speeds of 20 gigabits per second (Gbps).

This means the actual speeds were just three or four percent of what was advertised.

For instance, for almost two years, SK Telecom advertised through YouTube and other channels that a 2 gigabyte (GB) film could be downloaded in 0.8 seconds using the 20 Gbps speed of the 5G network, comparing it with the 16 seconds required for 4G networks.

“They advertised as if the actual speed of their 5G service was faster than 2Gbps,” the FTC said.

“We’ve eradicated the repeated practice of unfair advertisements in the telecommunications market, where information asymmetry between businesses and consumers is large, in times of technology transition.”

SK Telecom said the FTC’s decision is “regrettable.” KT and LG U+ said they plan to discuss countermeasures following a deeper understanding of the verdict.

Of a total of 78.09 million mobile phone subscriptions, there were 29.60 million 5G network subscribers in March.

Korea was the first country to roll out commercial 5G networks in April 2019.

BY JIN MIN-JI [jin.minji@joongang.co.kr]