[Q&A] Terminal Distribution Act Abolished on July 22... Device Subsidies Now Available Alongside Rate Discounts

The Cap on Additional Subsidies at Retailers Like "Seongji" Will Be Lifted

Starting from July 22, the Act on the Improvement of Distribution Structure of Mobile Communication Terminals (Terminal Distribution Act) will be abolished, and as a result, consumers are expected to receive higher subsidies when purchasing mobile phones. As the cap on additional subsidies provided by sellers will be removed, fierce competition to attract customers is anticipated. Previously, additional subsidies could only be given up to 15% of the official subsidy set by mobile carriers, but moving forward, consumers will be able to receive additional subsidies on top of rate discounts.

The following is a Q&A summarizing the major changes resulting from the abolition of the Terminal Distribution Act.

Yonhap News

- What will change after the abolition of the Terminal Distribution Act?

▲ The regulations on subsidies, such as the obligation of mobile carriers to officially announce subsidies and the cap on additional subsidies provided by mobile phone retailers, will be abolished. The "official subsidy" previously announced by mobile carriers will be renamed the "common subsidy," and the cap that limited additional subsidies from retailers to 15% of the official subsidy will be removed.

- Will consumers still be able to choose rate discounts when purchasing a mobile phone?

▲ Even after the abolition of the Terminal Distribution Act, users will still be able to select the rate discount benefit, previously known as the "optional contract." Under this option, they can receive a 25% discount on their mobile phone bill in exchange for using a carrier for a certain period.

- If I choose the rate discount option, can I still receive a device purchase subsidy?

▲ Even if you choose the rate discount option, you can still receive additional subsidies provided by mobile phone retailers. However, you cannot receive the common subsidy from the mobile carrier. Under the previous system, if you chose the rate discount, you were not eligible for either the official subsidy or the additional subsidy.

- Where can I check the amount of subsidies provided by mobile carriers?

▲ Although the obligation to officially announce subsidies has been abolished, the Korea Communications Commission and the three major carriers have agreed to continue providing information on the common subsidy through the carriers' websites. Information about additional subsidies offered by distribution channels such as retailers can be checked at each individual agency or store.

On the 7th, when the government approved the partial amendment of the Enforcement Decree of the Act on the Improvement of Distribution Structure of Mobile Communication Terminals (Terminal Distribution Act) at the Cabinet meeting, a banner related to mobile phone discounts was hung at a mobile phone store in Seoul. Photo by Kang Jinhyung aymsdream@

- Since the purchase price may vary greatly depending on one's ability to gather information about mobile phone sales, is there an alternative?

▲ The common subsidy provided by mobile carriers will be applied uniformly at all retailers, but there may be some differences in the additional subsidies offered by individual stores. Even after the abolition of the Terminal Distribution Act, discrimination based on factors such as place of residence, age, or physical condition is prohibited. The authorities plan to review effective measures to ensure that information on subsidies is accessible to everyone.

- What is the basis for determining discriminatory treatment between users regarding subsidies?

▲ If the subscription conditions?such as type of subscription (new subscription, number portability, device change), rate plan, and the device being purchased?are the same, it is desirable for users to receive the same level of subsidy. Matters necessary for determining discrimination will be further reviewed after monitoring market trends following the abolition of the Terminal Distribution Act.

- If retailers require consumers to subscribe to expensive rate plans or additional services as a condition for receiving extra subsidies, won't this maintain the consumer burden? Are there any countermeasures?

▲ Imposing such conditions can be regarded as an act that undermines user interests. Even under the revised Telecommunications Business Act, which will apply in place of the abolished Terminal Distribution Act, such practices are likely to be considered illegal. If they are determined to be illegal, appropriate action will be taken.

- If the total subsidies for purchasing a mobile phone exceed the manufacturer's suggested retail price, is it possible to receive a "payback," where part of the subsidy is returned in cash?

▲ Even if the combined amount of the common subsidy from the carrier and the additional subsidy from the retailer exceeds the manufacturer's suggested retail price, it is not necessarily considered illegal. If there are contract terms related to this, they must be clearly stated in the contract at the time of mobile phone activation, and users must be able to clearly understand this information.