Expensive Affordable Phone Mid-Tier Plans Due to 5G Wholesale Prices
"Should Be Reduced to LTE Levels"
[Asia Economy Reporter Oh Su-yeon] The government launched a 5G mid-tier plan last year to reduce household communication costs, but the market response has been lukewarm due to the high price relative to the data provided. Amid calls from politicians and consumers for a reasonable 5G mid-tier plan, MVNOs are emerging as a solution.
The three major telecom companies launched 5G mid-tier plans in August last year, offering 24-31GB of data per month at prices ranging from 50,000 to 60,000 KRW. As of the end of October, about two months after the launch, subscribers accounted for just over 1% of all 5G subscribers. With criticism that consumer demand is not being met, the government is pushing to diversify mid-tier plans to include 40-100GB options.
Within the industry, conflicts surrounding the 5G mid-tier plans are being compared to those over the universal plan in the past. In 2018, the Ministry of Science and ICT promoted the launch of a universal plan to reduce household communication costs, offering 1GB of data for around 20,000 KRW per month. The three major telecom companies reluctantly introduced similar plans, but consumer response was lukewarm.
At that time, MVNOs were credited with leading the actual reduction in communication costs. The MVNO industry expanded consumer benefits by launching plans cheaper than the universal plan, such as monthly plans in the 10,000 KRW range or unlimited plans at about half the price of the three major carriers. Recently, a so-called "honey combo" has become popular among people in their 20s and 30s, where they buy unlocked devices and use MVNO plans. This approach avoids using telecom carrier stores and saves as much as possible on communication costs by purchasing smartphones directly and using affordable MVNO plans. There is hope that MVNOs can also lead to reduced household communication costs in the 5G market, as they did with LTE.
However, realizing this hope at present is difficult because 5G MVNO plans are expensive. This is due to the high wholesale prices for 5G. According to the Ministry of Science and ICT's "Wireless Communication Service Statistics," as of December last year, MVNOs held a 25.2% share of the LTE market but only 0.6% of the 5G market.
Starting with SKT, KT and LG Uplus have also begun offering wholesale 5G mid-tier plans. However, the wholesale price is high at 60% of the base fee. For example, SKT's "5G Basic Plus" (59,000 KRW, 24GB + 1Mbps speed control) has a wholesale price for MVNOs of 35,400 KRW. MVNO operators resell this plan to consumers at prices ranging from the high 30,000s to mid-40,000s KRW per month. If subscribing to the same spec online plan directly from SKT, the monthly fee is 42,000 KRW. Moreover, when combining three lines, the price drops to 36,000 KRW. This makes competition difficult.
There are opinions that the wholesale price for 5G mid-tier plans should be lowered to enable competitive plans. This would contribute to reducing household communication costs and strengthen the MVNO market by increasing postpaid subscribers rather than cheap IoT lines.
An MVNO industry official said, "For 5G mid-tier MVNO plans to be effective, the wholesale price must be lowered to at least the LTE level (40.5% to 53% of the carrier's retail price), forming a price range in the high 20,000s to low 30,000s KRW per month. Since most MVNO subscriptions are online, carriers should provide wholesale access to their online-only plans to enhance competitiveness."
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