Purchased for Just $10... How Did the Galaxy S24 Become a Free Phone [New York Diary]

Recently, I decided to purchase Samsung Electronics' latest flagship smartphone, the 'Galaxy S24,' in the United States. Like in Korea, it is common in the U.S. to buy phones through mobile carriers. Although Verizon, one of the three major U.S. carriers, was the first that came to mind, I chose Spectrum, which offers relatively cheaper service fees. Given the worst inflation in 40 years and the current won-dollar exchange rate at 1,350 won, I thought that a low-cost regional MVNO (Mobile Virtual Network Operator) like Spectrum was the right choice.

On the 24th (local time), a Samsung Electronics 'Galaxy S24' advertisement appeared on the electronic billboard in Times Square, New York, USA. New York=Photo by Kwon Haeyoung

The decision was correct. I purchased the Galaxy S24 (128GB model), which retails for $800, for just $10. That’s about 13,500 won. When I returned my husband’s budget smartphone, the iPhone SE3, I received a discount of $790. Returning a used smartphone gives a basic discount of $700, with up to an additional $100 depending on the trade-in value. There was no mandatory contract period, and they even offered a free unlimited data plan worth $29.99 per month for one year. It reminded me of buying Samsung smartphones in Korea every 2 to 3 years for over 1 million won.

So how did the Galaxy S24 become a “free phone” in the U.S.? The answer is fierce competition. According to the Cellular Telecommunications Industry Association (CTIA), besides the so-called three major carriers?AT&T, Verizon, and T-Mobile?there are about 30 carriers with their own networks in the U.S. More than 50 MVNOs operate by leasing networks from these three major carriers. This structure inevitably leads to intense competition. As the telecom market growth stagnates, the survival competition among carriers becomes even fiercer. Unlike Korea, there are no regulations that publicly disclose smartphone subsidies or limit subsidy amounts. As a result, not only the Galaxy S24 but also the iPhone 15 can be used for free depending on the contract terms in the U.S.

The symbolic significance of the U.S. market in the global IT industry must also be considered. It is known that both Samsung and Apple spend huge subsidies to maintain their market shares in the U.S. The combination of fierce carrier competition and the U.S.’s status as the world’s largest market has made it possible to purchase the latest flagship smartphone for just $10.

On the other hand, in Korea, the government has even created laws to block carrier competition. This is the 'Dantong Law,' which the government recently decided to abolish. For 10 years, everyone in Korea has been buying smartphones at high prices due to the Dantong Law, introduced during the Park Geun-hye administration. The government that led the legislation expected that reduced subsidy competition among carriers would naturally lead to lower communication fees. However, after 10 years, the original purpose of the law has largely faded. While U.S. consumers can buy Samsung and Apple smartphones for free, Korean consumers spend much more money to purchase the same products. The effect of lower communication fees is also not felt. This is the result of forgetting that companies pursue profit.

In the early 2000s, five carriers competed for market share, but since then, three carriers have solidified an oligopoly for about 20 years. The Dantong Law has further reinforced this oligopoly enjoyed by the three carriers, which effectively operate as a 'natural monopoly.' Last year, the three carriers recorded operating profits in the 4 trillion won range for the third consecutive year. This is why, even if Korean consumers receive the maximum subsidies from carriers, it is impossible to purchase the latest flagship smartphones for $10 as in the U.S.