Introduction of 5G Mid-Tier Plans... Telecom Industry Under Pressure

Average Monthly Usage is 31GB
No 20~100GB Data Plans Available

[Asia Economy Reporter Lim Hye-seon] The Presidential Transition Committee's announcement to introduce a mid-tier 5G mobile plan has sent shockwaves through the telecommunications industry. With massive investments continuing in building a nationwide 5G network, there are concerns that additional pressure to lower communication fees could hurt profitability.

Considering Introduction of 10~100GB Plans

According to the Presidential Transition Committee on the 29th, the government plans to introduce mid-tier 5G plans within this year to expand smartphone users' options for selecting plans. The policy aims to diversify 5G plans based on average 5G data usage and broaden users' service choices. Currently, telecom companies offer 5G plans divided into those under 15GB and those over 100GB. An analysis by the Korea Consumer Federation of 93 5G plans from the three major telecom companies and Mobile Virtual Network Operators (MVNOs) showed that monthly data offerings were either below 20GB or exceeded 100GB. The average monthly data usage per consumer was 31.1GB. Since there are no plans between 20GB and 100GB, users are forced to subscribe to more expensive plans than their actual data usage, prompting calls to introduce plans that better match average data consumption.

The mid-tier plans are likely to be priced around 55,000 to 69,000 KRW. Nam Ki-tae, a member of the Science, Technology, and Education Subcommittee of the Transition Committee, said, "Although we have secured world-class network competitiveness, the limited choice of 5G services does not meet public expectations," adding, "The 5G mid-tier plans will be decided through consultations with the Ministry of Science and ICT, the three major telecom companies, and other relevant parties."

Telecom Industry: "The Time for Price Cuts Has Come"

The telecom industry, feeling the heat, is on high alert. The introduction of mid-tier plans could ignite a chain reaction leading to reduced communication fees. If mid-tier plans between 20GB and 100GB are finely segmented, it could effectively result in lower communication costs. Additionally, users currently on high-priced plans above 80,000 KRW may shift to mid-tier plans, naturally decreasing the Average Revenue Per User (ARPU).

Lowering communication fees has been a recurring policy with every change of administration. During the Lee Myung-bak administration, family discounts and prepaid plan reductions were introduced; under Park Geun-hye, discounts on selective contract plans were implemented; and the Moon Jae-in administration promoted MVNO development policies. President-elect Yoon Suk-yeol emphasized 'digital infrastructure advancement' to secure 'digital economic hegemony' rather than 'household communication fee reductions,' leading the telecom industry to quietly observe. Now, with concerns that "what was inevitable has come," the industry is busily preparing countermeasures. A telecom industry official said, "If network construction is complete and some investment recovery has been achieved, there is room to endure policies lowering communication fees, but currently, it is a difficult situation," expressing, "Investment will inevitably shrink to preserve profitability."

There are also calls to closely examine the average data traffic of 5G subscribers. Another telecom industry official explained, "Heavy users consuming over 50GB account for about 10-15%," adding, "They raise the average to 26GB, but the normal distribution is different."

Meanwhile, the Transition Committee announced plans not only to introduce mid-tier plans but also to build differentiated 5G networks. They intend to secure 5G coverage even in rural fishing villages and double the allocation of 5G frequencies. By expanding regional and building-based I-eum 5G, they aim to support companies in innovating based on 5G. They will also promote the 'Open RAN' ecosystem, which enables interoperability of base station equipment from different manufacturers.