Budget Phones Hit Hard by '30,000 KRW 5G Plans'... "Network Usage Fees Are Even Higher"

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Mobile carriers SKT, KT, and LG U+’s launch of 5G plans priced in the 30,000 KRW range has MVNO operators on high alert. The MVNO industry has been capturing a portion of the mobile market by leveraging low-cost plans, but if the carriers introduce 5G services at prices around 30,000 KRW, concerns about potential damage arise. The government believes that MVNO operators can design even lower-priced plans. However, operators counter that since the fees for using the 5G networks built by the carriers are inherently high, it is practically difficult to introduce low-cost plans. There are worries that the government’s push for 5G plans in the 30,000 KRW range, aimed at stabilizing prices, could even disrupt the mobile industry ecosystem.

According to industry sources on the 7th, the three carriers must introduce 5G plans priced in the 30,000 KRW range for the lowest tier within the first quarter of this year. Currently, the lowest-tier 5G plans from the three carriers are priced in the mid-to-high 40,000 KRW range. The Ministry of Science and ICT announced the 30,000 KRW 5G plan policy last November as part of measures to ease the burden of communication costs amid prolonged high inflation and growing difficulties for the public.

If carriers launch low-cost plans, the fallout will affect the MVNO industry. MVNO operators have grown by competing on lower prices, but their offerings are not significantly different from those of the carriers. A carrier official said, "In some cases, there may be no difference between certain plans and MVNO plans."

According to the Korea Telecommunications Operators Association (KTOA), the number of users who ported their numbers to MVNO operators (including internal moves) steadily increased from 865,696 in 2019 to 1,976,792 in 2022. According to an MVNO subscription site, plans range not only in the 3,900 KRW range but also in the 20,000 to 30,000 KRW range. If the government pressures carriers to introduce low-cost plans, the departure of MVNO users will become inevitable.

An MVNO industry representative said, "The government’s pressure on private companies is causing side effects," adding, "If low-cost plans come out, the MVNO industry will lose that segment of the market."

Carriers themselves are also expressing dissatisfaction with the 30,000 KRW 5G plans. They argue that after investing trillions of won in development, being forced to sell at low prices regardless of market conditions goes against market principles. There are concerns that if the area occupied by MVNOs is shaken, the mobile pricing ecosystem could collapse.

The government, which has pressured the introduction of low-cost plans, maintains that MVNO operators can create even cheaper plans. Lee Jeong-soon, Director of the Telecommunications Usage System Division at the Ministry of Science and ICT, said, "Even if the plan types are similar to those of mobile carriers, MVNO plans are generally 30-40% cheaper, and there are separate policies to ensure MVNOs maintain price competitiveness in similar tiers, so it does not seem to be mutually infringing."

However, the MVNO industry refutes this as unrealistic. One official pointed out, "In the case of 5G plans, wholesale fees for network usage are much higher than for LTE, so even if plans are created, it is difficult for operators to absorb these costs and enter the market."

Experts say the government needs to fundamentally reconsider policies that intervene in pricing. Shin Min-soo, a professor at Hanyang University’s Business School, said, "For the telecommunications industry to thrive, the market pie needs to grow, but if that pie is divided into smaller pieces, it could actually hinder industry activation."

Kim Yong-hee, a specialist at OpenRoute, advised, "If the target price for plans is fixed, carriers may not recover their 5G investments to a certain extent, resulting in plans that consumers do not prefer. We need to consider ways to encourage market competition by allowing the entry of a fourth carrier, foreign mobile operators, or full MVNOs (MVNO operators with their own infrastructure)."