[Why&Next]New Smartphones Only Cheap for Those "In the Know"... Six Months After the Act's Repeal, Gaps Remain Unfilled

Only a Few Consumers Benefit from Information Asymmetry
Older Adults and Less-Informed Buyers Pay Higher Prices
"Supplementary Measures Needed to Reform Device Pricing and Distribution Structure"

Six months have passed since the abolition of the Mobile Device Distribution Improvement Act, but consumers have not felt a significant increase in benefits when purchasing mobile phones. Instead, there are growing concerns that the market has reverted to a system where only those "in the know" can buy at lower prices. High subsidies are concentrated among consumers who are aware of certain conditions or who switch carriers, while older adults and those with limited access to information are repeatedly forced to pay higher prices.

The repeal of the act was intended to remove the cap on subsidies and the mandatory disclosure requirement to stimulate competition. This was a response to mounting criticism that uniform regulations were actually stifling market vitality. The government explained that by abolishing the act and liberalizing subsidies, consumer burdens would be reduced.

However, the reality has been different. Practices such as inducing consumers to sign up for expensive plans in exchange for subsidies, incomplete information disclosure, and varying conditions depending on the store or timing continue to persist. According to a survey conducted by the Korea Consumer Federation last October with 1,000 adult consumers after the act's repeal, only 9.3% said they felt any change in benefits. Rather than a decrease in the cost of purchasing mobile phones, it has become a market where "it is harder to know who got a better deal," according to some evaluations.

Experts point to the way the post-repeal system was designed, rather than the repeal itself, as the root cause of the problem. The telecommunications distribution market is not a perfectly competitive market; competition occurs with sellers holding the information. In such cases, when regulation disappears, sales strategies based on information asymmetry take precedence over price competition.

An Jung-sang, adjunct professor at Chung-Ang University Graduate School of Communication, points out, "During the discussion of the act's repeal, key supplementary measures such as preventing user discrimination and improving device pricing structures were not designed together."

The domestic mobile device market is tightly intertwined between manufacturers and telecommunications carriers. When a new product is released, manufacturers do not directly engage in price competition; instead, sales occur through a combination of carrier subsidies and rate plans. Since manufacturers supply devices to carriers, and carriers sell them bundled with expensive plans and high subsidies, there is no incentive for phone prices to drop. While most phones overseas are sold unlocked, in Korea, the oligopoly of a few manufacturers makes price competition difficult. The entry of low-cost foreign phones is also limited by this structure.

As a follow-up to the act's repeal, the government is pushing to revise the Enforcement Decree and notifications of the Telecommunications Business Act. The proposed amendments prohibit providing different subsidies based on residence, age, or disability under the same subscription conditions. However, there are clear limits to what can be achieved through changes to the enforcement decree alone. Merely specifying subsidy conditions in contracts does little to improve consumer benefits, and as long as the device pricing and distribution structures remain unchanged, the root of the problem persists. There will be limited pressure to lower device prices and only a marginal effect on reducing actual household communication costs.

An industry insider emphasized, "To ensure that the abolition of the act is not just 'abolition for the sake of abolition,' fundamental measures are needed to break the close-knit structure between manufacturers and carriers. With the normalization of the Broadcasting, Media and Telecommunications Commission, it is urgent to prepare mid- to long-term measures along with the passage of the enforcement decree."