Korea moves to repeal device act amid market co...
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South Korea’s Device Distribution Improvement Act, long criticized for increasing household telecommunications costs, is on track to be repealed. The National Assembly’s Science, ICT, Broadcasting, and Communications Committee approved a bill to abolish the act on Tuesday, with the bill expected to pass the Legislative and Judiciary Committee and expected to be finalized as early as Thursday during a plenary session.
The repeal bill aims to eliminate the subsidy system for mobile devices and the cap on additional subsidies, while maintaining the selective contract discount system by transferring it to the Telecommunications Business Act. The bill seeks to enhance consumer welfare by restoring active subsidy competition among device retailers, however, critics argue that it contains provisions that may have the opposite effect. A key concern is a requirement for manufacturers to report their promotional incentive payments to the Ministry of Science and ICT and the Korea Communications Commission, which some see as a potential “poison pill.”
The ICT industry contends that requiring manufacturers to disclose such information constitutes an infringement on trade secrets. An industry insider said, “Unlike pharmaceuticals, where purchasing decisions are primarily made by medical doctors, most promotional incentives provided by manufacturers ultimately benefit consumers. Retailers use these incentives to lower prices and attract buyers. Being mandated to disclose the amounts paid to retailers adds an undue burden on manufacturers.”
There are also concerns about the potential for diminished global competitiveness of local manufacturers. If subsidies amount to 400,000 won $287, split evenly between manufacturers and telecom operators, for example, consumers might view the manufacturers’ share as inflated.
This perception could pressure manufacturers to lower retail prices in international markets, further eroding profitability. An ICT company official said, “The separate disclosure system introduced in 2014 to differentiate subsidies from telecom operators and manufacturers was scrapped in 2017. If manufacturers are required to report promotional incentives, they could reduce subsidies altogether, which could harm consumers.”
The likelihood of telecom operators engaging in aggressive subsidy competition also remains uncertain. This skepticism stems from the decision to retain the optional contract discount system, which allows consumers to save 25 percent on monthly service fees instead of receiving device subsidies. A telecommunications industry expert observed, “Unlike when the Device Distribution Improvement Act was enacted, the telecommunications market is currently saturated. With telecom operators increasingly focusing on new ventures like artificial intelligence, their willingness to heavily invest in subscriber acquisition remains unclear.”
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The repeal bill aims to eliminate the subsidy system for mobile devices and the cap on additional subsidies, while maintaining the selective contract discount system by transferring it to the Telecommunications Business Act. The bill seeks to enhance consumer welfare by restoring active subsidy competition among device retailers, however, critics argue that it contains provisions that may have the opposite effect. A key concern is a requirement for manufacturers to report their promotional incentive payments to the Ministry of Science and ICT and the Korea Communications Commission, which some see as a potential “poison pill.”
The ICT industry contends that requiring manufacturers to disclose such information constitutes an infringement on trade secrets. An industry insider said, “Unlike pharmaceuticals, where purchasing decisions are primarily made by medical doctors, most promotional incentives provided by manufacturers ultimately benefit consumers. Retailers use these incentives to lower prices and attract buyers. Being mandated to disclose the amounts paid to retailers adds an undue burden on manufacturers.”
There are also concerns about the potential for diminished global competitiveness of local manufacturers. If subsidies amount to 400,000 won $287, split evenly between manufacturers and telecom operators, for example, consumers might view the manufacturers’ share as inflated.
This perception could pressure manufacturers to lower retail prices in international markets, further eroding profitability. An ICT company official said, “The separate disclosure system introduced in 2014 to differentiate subsidies from telecom operators and manufacturers was scrapped in 2017. If manufacturers are required to report promotional incentives, they could reduce subsidies altogether, which could harm consumers.”
The likelihood of telecom operators engaging in aggressive subsidy competition also remains uncertain. This skepticism stems from the decision to retain the optional contract discount system, which allows consumers to save 25 percent on monthly service fees instead of receiving device subsidies. A telecommunications industry expert observed, “Unlike when the Device Distribution Improvement Act was enacted, the telecommunications market is currently saturated. With telecom operators increasingly focusing on new ventures like artificial intelligence, their willingness to heavily invest in subscriber acquisition remains unclear.”
▶ “수영장에 차 5대 금수저네”...가비 고향 LA 친척집 방문
▶ “사람 급해도 20대는 쓰지마세요”…한 자영업자 글에 공감 댓글 봇물
▶ 오늘의 운세 2024년 11월 27일 水음력 10월 27일
▶ 직원 1만1천명을 자른다고?…中 초저가 앞에 무너지는 이 기업
▶ [속보] 분당·일산·평촌 13곳 3만6천가구...1기 신도시 재건축 첫타자 선정
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