[Broadcasting Commission Work Plan] Promoting Separate Disclosure System to Prevent "Hogang" Consumer Exploitation

2021 Broadcasting and Communications Commission Work Plan

[Asia Economy Reporter Cha Min-young] From now on, the subsidies provided by mobile phone manufacturers and telecommunications companies for devices will be disclosed in detail. For example, if a smartphone is priced at 1,000,000 KRW with the manufacturer covering 200,000 KRW and the carrier covering 100,000 KRW in subsidies, previously only the total subsidy of 300,000 KRW was announced, but now there will be an obligation to transparently disclose each individual subsidy.

The '2021 Work Plan' announced by the Korea Communications Commission on the 20th includes user protection policies such as the separated disclosure system. The Commission plans to promptly implement the system once the amendment to the 'Device Distribution Structure Improvement Act (Device Distribution Act),' which was separately proposed by Assembly members Jo Seung-rae, Jeon Hye-sook, and Kim Seung-won of the Democratic Party, is passed. Currently, the bill is pending in the 21st National Assembly.

This policy was prepared with the purpose of improving the mobile phone device subsidy system to enhance transparency in the retail price, thereby resolving public inconvenience. The reason is that the lack of transparency in subsidies has led to device retail prices being excessively inflated to 'bubble' levels. Additionally, the distribution agency practice requiring consumers to pay penalties including manufacturer subsidies when terminating contracts with carriers early will also be reformed.

Measures considering industry difficulties have also been prepared. This includes plans to increase subsidies by expanding the range of additional subsidies provided by distribution stores. When consumers purchase mobile phone devices, the total subsidy amount is expected to increase somewhat by adding the additional subsidies provided by distribution stores on top of the publicly announced subsidies. To reduce the actual burden on smartphone buyers, the government also decided to raise the allowed proportion of additional subsidies, which was previously limited to within 15% of the existing publicly announced subsidies.

However, some concerns have been raised that excessive market transparency could weaken competition among the three currently oligopolistic carriers and reduce the competitiveness of mobile phone manufacturers in the global market. Kim Chang-ryong, a standing commissioner of the Korea Communications Commission, drew a line by saying, "(Regarding the introduction of the separated disclosure system) we conducted a virtual simulation concerning claims that manufacturers would be negatively impacted, but no such data emerged," and added, "Not all information will be disclosed."