[2020 National Audit] From 5G Quality and Fees to Google Commission Abuse... Today's Key Issues in the Science and ICT Committee Audit (Summary)

[Asia Economy Reporter Seulgina Jo] The first national audit of the 21st National Assembly's Science, Technology, Information and Communications Committee (STICC), starting on the 7th, is expected to put all major ICT issues on the table, from 5G quality and pricing problems to the Device Distribution Improvement Act (Device Distribution Act) and Google's app commission abuse controversy.

◆Google's 30% Commission Enforcement, Will the National Assembly Intervene?

The biggest focus of this year's audit is the controversy over the commission fees of Google, the 'app market giant' with a 70% domestic market share. Especially since Google officially confirmed the enforcement of its app commission policy at the end of September ahead of the audit, it is expected that STICC members will raise related inquiries one after another. Jo Seung-rae of the Democratic Party and Park Sung-joong of the People Power Party, the STICC floor leaders, recently pointed out unfair practices by app market operators as the most closely watched issue. Related bills have already been continuously proposed.

Earlier, Google announced that starting next year, app developers listed on Google Play will be required to use Google's payment method (in-app payment) when selling content or items, and Google will take a 30% commission in the process. Unlike the Apple App Store, which had applied the commission policy only to games, this expands the policy to all content and apps.

As a result, the burden on app developers will increase, and it is feared that consumers will inevitably face direct price hikes on content. The industry is protesting that the 'app market giants,' which are practically monopolies, forcing such payment methods is itself a violation of the law.

However, it is uncertain whether the National Assembly can put a brake on Google's commission policy.

Nancy Mable Walker, CEO of Google Korea, who was included in the list of witnesses for the national audit, had previously submitted a letter of absence. Instead, it was expected that John Lee, who oversees advertising sales and marketing in Korea, would attend, but concerns arose that he, who is neither a CEO nor a registered director, would find it difficult to provide responsible answers. John Lee appeared several times at the 20th National Assembly's audit but consistently responded with "It is under the headquarters' jurisdiction, so I don't know," causing controversy. The National Assembly is also considering a video audit with CEO Nancy Mable Walker, but this is also expected to be difficult.

To apply the Fair Trade Act to Google, an equity controversy with Apple, which already imposes a 30% commission on all apps, is inevitable. Apple has enforced in-app payments since 2011 but has not faced special regulations. Rather, there are concerns that regulating global IT companies in this process could escalate into trade issues between countries. Both Google and Apple apply the same global policy regarding commissions.

◆5G Quality and Pricing Controversies Also on the Table... Discussions on Abolishing the Device Distribution Act Intensify

In the telecommunications sector, the main issues are 5G, which has been commercialized for over a year and a half, and the Device Distribution Act, which marks its 6th anniversary this month. For this year's audit, Yoo Sang-young, SK Telecom MNO Business Head, Kang Guk-hyun, KT Customer Division Head, and Hwang Hyun-sik, LG Uplus CEO, are scheduled to attend from the three major mobile carriers. Despite a year and a half since commercialization in April last year, quality controversies surrounding 5G continue, and illegal subsidies are also increasing in the market.

STICC members have been releasing data criticizing expensive 5G plans and poor coverage even before the audit began. According to the 'Quarterly 5G Wireless Station Status' data submitted by the Ministry of Science and ICT to Democratic Party member Byun Jae-il, the number of wireless stations built by the three mobile carriers in the first half of this year was 21,562, only 43.7% compared to the same period last year. Kim Young-sik of the People Power Party stated that the investment in 5G base stations by the three carriers shows severe regional disparities, with differences even between Gangnam and Gangbuk areas within Seoul.

The pricing controversy is intensifying. Especially, as the National Assembly claims that the average revenue per subscriber for domestic mobile carriers is about 140% higher than the cost, the carriers have strongly refuted this, escalating the dispute.

Democratic Party member Woo Sang-ho previously stated, "The average revenue per subscriber that carriers receive is about 140% higher than the supply cost," and "They are profiteering from 5G and LTE users." According to Woo, as of January last year, the average monthly revenue per user (ARPU) for all 4G LTE plans over the past three years was 50,784 won, and the estimated ARPU including 5G fees was 51,137 won. Based on this, he claimed, "Domestic carriers provide LTE and 5G services in the mid-30,000 won range while earning 14,000 to 16,000 won in revenue per consumer," calling it "excessive profiteering."

On the other hand, carriers argue that the cost of communication used as the basis for the claim was underestimated, and the revenue cited is an estimated figure, not actual profit, thus differing from the facts. They point out errors in the cited figures themselves. A carrier official explained, "The supply cost cited by Woo Sang-ho's office is a general cost concept based on all mobile subscribers," and "The approximately 51,000 won revenue figure is an estimated amount from approval and reporting documents, not actual profit." Discounts such as selective contract discounts, official subsidy discounts, and family bundle discounts were not reflected, causing an optical illusion.

The Device Distribution Act, which has been nicknamed the 'Non-Communication Act' since its implementation, is also expected to be scrutinized in the audit. Enacted in October 2014, the act has been criticized for blocking competition among operators and restricting market autonomy and consumer choice, contrary to its purpose. Following the 20th National Assembly, where as many as 26 amendment bills were proposed, legislative competition is intensifying in the 21st National Assembly as well. Kim Young-sik of the People Power Party proposed a bill for complete abolition last month, while Jo Seung-rae proposed an amendment to induce a reduction in device prices through a separate disclosure system. Democratic Party member Jeon Hye-sook's amendment focuses on reforming the separate disclosure system and penalty system.

Other major issues include the reassignment fee calculation for the three mobile carriers' frequencies, Seoul's public Wi-Fi, and the so-called Netflix Act, which requires global content providers like Netflix to ensure network quality. However, Reginald Shaun Thompson, CEO of Netflix Services Korea, who was selected as a witness for the Communications Commission audit on the 8th, also submitted a letter of absence, making his attendance uncertain. Along with Google's app commission abuse, the absence of global company representatives emerging as recent major issues raises concerns that this year's audit may be half-hearted.

Currently, People Power Party members of the STICC are also demanding the attendance of the heads of Korea's two major portals, Naver and Kakao, making their attendance another point of interest.