[2021 National Audit] Telecom Companies Bowing Their Heads Before the 'Science and ICT Committee'... 5G and Budget Phones Under Fire (Comprehensive)

Kang Jong-ryeol, Vice President of SKT Infrastructure, is taking the oath as a witness at the comprehensive audit of the Ministry of Science and ICT held by the National Assembly's Science, Technology, Information and Broadcasting and Communications Committee on the 20th. Photo by Yoon Dong-ju doso7@

[Asia Economy reporters Seulgina Jo and Eunmo Koo] At the National Assembly Science, Technology, Information and Broadcasting and Communications Committee (STIBC) audit held on the 20th, lawmakers from both ruling and opposition parties criticized the still expensive 5G fees and quality, even as commercialization enters its third year.

With network executives from the three major mobile carriers, a regular feature at STIBC audits, appearing as witnesses, key IT issues such as the status of 5G 28GHz base station deployment, illegal subsidies for mobile phones, and the concentration of the three carriers in the MVNO (Mobile Virtual Network Operator) market were also discussed. While the three carriers promised efforts to improve 5G quality, their positions diverged on whether to withdraw from the MVNO market.

◆Entering the third year of commercialization, 5G controversy continues despite approaching 20 million subscribers

On this day, lawmakers from both sides agreed on the need for improvements in 5G services, which are on the verge of reaching 20 million subscribers. Despite being in the third year of commercialization, complaints about 5G quality persist, leading to the start of lawsuits, and expensive fee plans were also criticized. The delay in nationwide network deployment resulting in many shadow areas was pointed out. Lawmaker Yang Jeongsuk of the STIBC mentioned the gap in 5G base stations in rural and fishing villages, stating, "There are 2,788 5G base stations installed in 70 basic local governments, which is fewer than the 2,821 installed in Gangnam. Is the installation difference based on the value of wealth or economic feasibility?"

The three carriers bowed their heads. Kang Jongryeol, head of SK Telecom's ICT Infrastructure Center, who appeared as a corporate witness, responded, "There are many areas where the three companies are working together to improve 5G quality. We will join forces with the government to make efforts to improve quality." Lee Cheolgyu, head of KT's Network Division, also said, "We apologize that the quality has not met expectations. Although we are building faster than originally planned, we will make further efforts."

Regarding criticism of expensive 5G fee plans, Kang said, "We are considering various fee plans so that they can be selectively applied according to consumer demands." KT and LG Uplus also expressed their intention to carefully review and reflect on gaps in fee plan tiers. In response to repeated questions about illegal subsidies for mobile phones, which arise every time a new smartphone is released, the three carriers answered, "We will strictly comply with the legal guidelines presented by the government and strengthen education and monitoring to prevent distribution channel violations."

◆Three carriers say "Difficult to achieve 5G 28GHz deployment target within the year"

During the audit, questions were also raised about the deployment status of the 5G 28GHz base stations, known as "real 5G." Minister of Science and ICT, Im Hyesook, reaffirmed her stance not to postpone the mandatory deployment deadline for 5G 28GHz base stations, while the three carriers stated that it is realistically difficult to meet the deployment target within this year.

When Park Seongjung, a member of the People Power Party, asked the three carriers whether they could meet the 28GHz base station deployment target allocated for this year, Kang Jongryeol, head of SK Telecom's ICT Infrastructure Center, replied, "It is difficult." Kwon Junhyuk, head of LG Uplus's Network Division, also answered, "It is realistically difficult." According to the Ministry of Science and ICT's mandatory 5G network deployment policy, the three carriers must deploy 45,000 5G base stations in the 28GHz band by the end of this year. However, as of the end of August, the number of 28GHz 5G base stations deployed by the three carriers was only 161, resulting in a compliance rate of 0.3%.

On August 11, officials from the People's Solidarity for Participatory Democracy in Jongno-gu, Seoul, held a press conference to announce cases of damage caused by 'Unresponsive 5G' and to urge measures to address the issue. Photo by Jinhyung Kang aymsdream@

Independent lawmaker Yang Jeongsuk also asked about plans and measures to achieve the target within the year, stating, "If the 28GHz base station deployment is not fulfilled within the period, 620 billion KRW will not be refunded according to the Radio Waves Act, and if this investment amount is confiscated, it could constitute criminal liability for breach of duty to shareholders."

In response, Kang said, "By the end of the year, we are forming a dedicated internal team to expand usage to B2B related areas regarding 28GHz base station deployment," adding, "Realistically, by the end of the year, we will expand the government-led subway Wi-Fi backhaul (connection network) reinforcement and continuously ongoing B2B business sites." Kwon said, "Regarding 5G 28GHz base station deployment, the three carriers are likely in similar situations," and added, "We will try our best to find business models in the B2B sector and refer to government ideas." Lee Cheolgyu of KT's Network Division said, "I have a similar view."

The 28GHz band has a short radio wave reach, requiring many base stations to be installed. Due to low concrete penetration, its usability in urban areas is also limited. The carriers argue for B2B uses such as smart factories and smart farms within industrial complexes instead of nationwide deployment, but the B2B business model is still considered immature.

Requests for policy revision were also raised to the Ministry of Science and ICT, the responsible department. Lawmaker Park said, "The 3.5GHz band was deployed 2.6 times more than the original target, yet the quality is poor," and argued, "Since the three carriers deployed 2.6 times more, the penalty for failing to meet the 28GHz base station deployment is unfair. It would be better to return the allocation fee and invest it in 3.5GHz."

However, Minister Im maintained her stance against policy revision. She said, "It is a promise to the public," and "Abandoning 28GHz would be a step backward for future technology development and service advancement. I believe the policy should not be changed." Earlier, during the audit on the 1st, she also showed reluctance to policy change, stating, "We will continue to encourage carriers to install all promised wireless stations."

◆MVNO market dominated by three carriers' subsidiaries... Divergent views on withdrawal demands

The MVNO market, where the dominance of the three carriers' subsidiaries is becoming prominent, was also a major audit issue. Contrary to the original intention of promoting market competition, the three carriers have effectively shifted the battleground to MVNOs through their subsidiaries.

Kim Youngsik of the People Power Party said, "The three carriers' subsidiaries have increased their dominance in the MVNO market," and suggested, "We should consider ways to appropriately allocate the market share between the three carriers and small businesses." Kim pointed out, "The subsidiaries of the three carriers recruit subscribers with giveaways and promotions that small businesses cannot match due to their huge capital, causing difficulties for small businesses," and called for "appropriate regulation."

Currently, 19 companies, including subsidiaries of the three carriers, operate in the MVNO market. However, as of March, 45.7% (2.77 million) of the 6.06 million MVNO subscribers for mobile phone services belong to subsidiaries affiliated with the three carriers. This is a double-digit increase from about 37% at the end of 2019.

In response, Minister Im Hyesook said, "I agree with the intention to promote fair competition," and added, "Since there is a concern about infringing on the benefits of users already subscribed to the three carriers' MVNO subsidiaries, we will review this comprehensively."

There were also calls to gradually withdraw the three carriers' affiliated MVNO companies. Woo Sangho of the Democratic Party said, "We tried to implement a competitive fee system through MVNOs, but the reality is that the three carriers occupy a significant portion of the MVNO market," and "To create a proper competitive system, the three carriers' MVNOs should be phased out."

The three carriers' responses to these demands were mixed. SK Telecom stated it would follow government and National Assembly policies, while KT and LG Uplus emphasized coexistence with small businesses and showed willingness to continue their business. Minister Im responded to withdrawal demands by saying, "There is a risk of infringing on the rights of consumers currently using the service," and "It should be considered carefully."

◆Im Hyesook: "Netflix's free-riding on network fees is a valid criticism"... Shows strong willingness to cooperate on related legislation

Minister Im also expressed a strong stance to actively respond to the controversy over overseas operators who generate huge profits worldwide by leveraging K-content such as "Squid Game" but do not properly pay network usage fees domestically, known as free-riding on network fees. This issue is expected to accelerate legislative discussions following President Moon Jae-in's recent order to "look into the reasonable imposition of network usage fees."

The controversy over overseas CPs' free-riding on network fees is not new. Although they earn huge profits based on domestic infrastructure, they do not pay network usage fees, which has been repeatedly raised in the National Assembly. This contrasts sharply with domestic content providers (CPs) such as Naver and Kakao, who pay hundreds of billions of KRW annually in network usage fees to Internet Service Providers (ISPs), cooperating in stable network management and expansion.

Minister Im said, "There is also a discrimination issue against domestic CPs," and added, "The current issue raised is a valid criticism." Furthermore, when lawmaker Kim Youngsik asked for cooperation in passing the amendment to the Telecommunications Business Act, which mandates large CPs to pay network usage fees, she said, "We will actively cooperate." Netflix, currently refusing to pay network fees domestically and involved in legal disputes, is confirmed to pay network usage fees to overseas ISPs such as Comcast, Verizon, and AT&T.

◆"Big Tech should contribute socially" Platform criticism also poured in

Additionally, during the audit, there were calls for big tech companies such as Google YouTube, Naver, and Kakao, which generate massive traffic, to contribute to the public's telecommunications welfare.

Lee Yongbin, a member of the Democratic Party's Euljiro Committee responsible for telecommunications fees, said, "Discussions on Big Tech's social contributions are active in countries like the U.S.," and added, "In Korea, Big Tech should also contribute to the public's telecommunications welfare." He particularly mentioned the 'Data Welfare Expansion Act,' which he previously proposed to mandate contributions to telecommunications welfare funds by value-added telecommunications service providers and device manufacturers, emphasizing the need to expand telecommunications welfare.

He raised his voice, saying, "Recently, telecommunications fees are essentially data usage fees," stressing the social responsibility of platform operators including Naver and Kakao. The current fee reduction system is structured so that telecom companies like SK Telecom, KT, and LG Uplus bear all the reduction amounts and operational responsibilities.

Lawmaker Park Seongjung also proposed "establishing a telecommunications welfare fund operated by the state." Park emphasized, "Diversification beyond telecommunications to various related services is necessary," and stressed, "A fund should be established including platform operators like YouTube that generate large traffic, along with KT, LG Uplus, SK Telecom, Naver, and Kakao, and the state should take the lead in overall reform of the system."

However, Minister Im responded, "Because this involves strong regulation on companies, we need to consider legal validity, impact on consumer welfare, and effects on operators before reviewing."