'Academic Forum on Improving the Distribution Structure of the Mobile Communication Market'
Divergent Views on Introducing Subsidy Differentiation and Incentive Regulations
[Asia Economy Reporter Han Jinju] Discussions on improving the much-debated and problematic Device Distribution Structure Improvement Act (DanTongBeop) have begun. Proposals include providing differentiated public subsidies based on subscriber types and raising the limits on additional subsidies. There is also a proposal to introduce regulations on incentives paid by mobile carriers to dealerships. However, opinions differ among the mobile telecommunications industry, distribution networks, and consumer groups, making actual implementation challenging.
On the 10th, an academic forum titled "Academic Forum for Improving the Distribution Structure of the Mobile Telecommunications Market," hosted by Sogang University ICT Law and Economics Research Institute, Sogang University Law Research Institute, and the Korea Information and Communication Policy Society, was held at the Bankers Association in Jung-gu, Seoul.
Main Points of the DanTongBeop Improvement Plan: Subsidy Deregulation and Introduction of Incentive Regulations
Enacted in 2014, the DanTongBeop aimed to curb excessive subsidy competition and reduce household telecommunications expenses but has been criticized for failing to satisfy mobile carriers, dealerships, and consumers alike. It was established to address issues such as subsidy benefits being concentrated among certain users and inducement to subscribe to high-priced plans based on subsidy payments, which worsened with the start of LTE services and intensified subscriber acquisition competition among carriers. The current DanTongBeop stipulates ▲ prohibition of subsidy discrimination by subscription type ▲ disclosure of subsidy payment conditions ▲ prohibition of paying more than 15% of the public subsidy ▲ prohibition of forced subscription to plans or additional services linked to subsidies.
Despite the enforcement of DanTongBeop, user discrimination and illegal subsidies have not disappeared but have become more covert. There are also criticisms that carriers are encouraging competition through incentives instead of public subsidies. In response, the Korea Communications Commission formed the "Mobile Device Distribution Structure Improvement Council," comprising stakeholders from carriers, distribution networks, consumer groups, and academia, to discuss improvement measures for DanTongBeop.
The core of the improvement plan discussed by the council is 'subsidy deregulation' and 'introduction of incentive regulations.' The DanTongBeop improvement plan presented by Yeom Suhyun, a research fellow at the Korea Information Society Development Institute (KISDI), includes ▲ allowing reasonable differentiation of public subsidies based on subscription types (number portability, device change, etc.) ▲ raising the limit on additional subsidies (X% of public subsidies) ▲ shortening the mandatory public disclosure period (from 7 days to 3-4 days) ▲ designating public disclosure days ▲ improving the penalty system.
Additionally, the plan includes an 'incentive linkage system' that abolishes additional subsidy regulations and allows voluntary payments, and a 'reasonable differentiation system for incentives' that enables rational differentiation of incentives by distribution channels (wholesale, retail, online, corporate) or dealership units. To prevent the concentration of activation volumes in dealerships offering high incentives, measures such as 'prohibition of re-entrustment between dealerships' and establishing a 'prior consent system' where dealerships only transact with sales points that have obtained prior approval are also included.
Stakeholders have differing views on the improvement plan. Distribution networks and consumer groups support subsidy differentiation, expansion of additional subsidies, penalty system improvements, and incentive regulations, while most carriers oppose them. Carriers agree on establishing the prior consent system.
"Concerns Over User Discrimination Intensifying if Subsidy Regulations Are Lifted" vs. "Incentive Regulations Needed to Prevent User Discrimination"
Experts pointed out that lifting subsidy regulations could actually promote user discrimination and cause confusion. Professor Lee Bong-ui of Seoul National University said, "The problem started with carriers competing through incentives instead of public subsidies, which intensified user discrimination. However, if additional subsidies by dealerships and sales points are abolished, incentives will concentrate on high-priced plans, worsening user-level discrimination. The concept of reasonable differentiation among distribution channels and dealerships is arbitrary, and if the differentiation range narrows, competition at the wholesale level becomes difficult. Especially, incentive regulations cannot be seen as promoting competition or benefiting users."
Professor Shin Min-su of Hanyang University explained, "If public subsidies are differentiated, existing subscribers may be left out, and discrimination based on consumer status could intensify by focusing only on subscribers whose contract periods end. Expanding additional subsidies could polarize dealerships and sales points and risk capturing the distribution network. To avoid negative effects, adjusting incentive guidelines to prevent inducement of additional subsidies could be considered."
Professor Hong Myung-su of Myongji University said, "Incentives exist in other industries with dealership structures and are self-help measures by economic agents to solve dealership issues. Post-regulations on incentives exist under the Fair Trade Act and the Dealership Act, so pre-regulatory design considering these is necessary. Incentives are not directly related to user benefit infringement, and regulations are premised on illegal acts at the distribution stage, so attempts to strengthen incentive regulations require cautious approaches."
It was also pointed out that violations occurring at dealerships, such as illegal subsidies or user discrimination, are largely due to lack of supervision, and it is difficult to outright condemn sales points for providing illegal subsidies as a survival strategy. Lawyer Jang Jun-young of Sejong Law Firm stated, "Carriers contract directly with dealerships, and dealerships re-entrust sales points, limiting carriers' ability to supervise illegal or improper acts. Under DanTongBeop, fines and criminal penalties focus on carriers as supervisors, and in an environment with dealership-sales point re-entrustment structures, discussions on ultimate responsibility attribution are necessary."
On the other hand, consumer groups and distribution networks argue that since incentives, which are not subject to public disclosure, allow carriers or sales points to discriminate against users, introducing incentive regulations is necessary. Lee Jong-cheon, director of the National Mobile Telecommunications Distribution Association, said, "While public subsidies are maintained for an average of about 152 days, incentives change more than eight times a day on average, turning DanTongBeop into a spot incentive competition to avoid public subsidy competition. We need to supplement with an incentive linkage system and shift from retail to wholesale regulation to promote market competition through incentives."
Professor Hwang Dong-hyun of Hansung University (Chairman of the Telecommunications Committee of the Consumer Sovereignty Citizens' Meeting) said, "To strengthen dealership supervision, user discrimination must be resolved by prohibiting re-entrustment between dealerships, and universal user benefits should be provided through incentive regulations. Regulations on incentives paid differentially to some distribution channels such as wholesale or online should also be implemented, and in the mid-to-long term, the introduction of a complete self-supply system and separate disclosure system is necessary."
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