‘The Mobile Communications Terminal Distribution Structure Improvement Act’ the main culprit of the increase in terminal prices, is on the operating table

‘Dantong Act’ stands at a crossroads of extinction after 10 years
Contrary to its intended purpose, it has become a means of preserving profits for telecommunication companies
However, even if the abolition is confirmed, it will take a considerable amount of time to become a reality

The Mobile Communications Terminal Distribution Structure Improvement Act (Dantong Act), introduced in 2014, is at a crossroads after 10 years. In order to reduce household communication costs, various measures are being considered, including the abolition of the Telecommunications Act. The ruling party judged that the Mobile Communications Act would reduce market competition and lead to expensive handset prices. However, there are many counter-arguments that the positive functions of stabilizing the market and preventing user discrimination should also be considered. As even President Yoon Seok-yeol has ordered a complete review of the short-term communication law system, attention is being paid to whether there will be a change in the trend of the telecommunications market that has lasted for 10 years.

President’s Office orders review of abolition of the Dantong Act

According to the government and industry on the 16th, the President’s Office recently ordered the Ministry of Science and ICT and the Korea Communications Commission, the ministries in charge of the Mobile Communications Act, to completely review the system, including the abolition of the Mobile Phone Act. Amid the trend of reducing household telecommunication fees, the ruling party is seen as fiddling with the card of abolishing the short communication law to appease public sentiment ahead of next year’s general election.

The core of the Dantong Act is the regulation that the subsidy determined for each smartphone should not be discriminated against based on time and location, and that smartphones should be sold equally to all consumers as announced. The ruling party believed that these regulations were ultimately preventing the price of expensive handsets from being reduced. For this reason, the government and related industries have brought the improvement of the single communication law system to the table several times, but no significant conclusion has been reached. The Ministry of Science and ICT formed the Telecommunication Competition Promotion Task Force last year and collected opinions on ways to improve the telecommunication law, but did not make a final decision.

On the other hand, there are voices saying that the positive function of Dantong Act cannot be ignored. The explanation is that the minimum safety measures may disappear, as happened in the past with problems such as charging exorbitant prices to the elderly, who are vulnerable to purchase information. The fact that service competition has increased instead of overheated marketing competition among mobile telecommunication companies is also considered a positive change. Some say that rather than complete abolition, improvements to the current system are needed to complement it. A representative plan is to increase the additional subsidy, which is currently 15% of the publicly announced subsidy, to 30%.

“The Mobile Phone Act actually encourages increased handset prices and the spread of illegal subsidies” 

The Dantong Act, which came into effect on October 1, 2014, was introduced to prevent discrimination between users, market turbulence, and user deception. The main point is to ensure that consumers receive the same device subsidy when purchasing a mobile phone device. Afterwards, the law was revised to increase the optional contract discount rate from 20% to 25% of the existing communication fee. 

Initially, the government expected that once the Mobile Communications Act was implemented, the three mobile communication companies would reduce the cost of subsidy competition and instead put it into rates, lowering communication costs. But the results were different from expectations. Since it had to be sold at the same price to all consumers, it prevented market competition and actually encouraged the rise in mobile phone prices. As a result, there was constant criticism that it not only showed limitations in achieving a fair and transparent distribution order, but also reduced the overall public welfare by hindering the rights and interests of many customers.

Issues of effectiveness are also raised, including criticism of illegal subsidies still being made at so-called ‘holy ground’ stores (a slang term for stores that pay subsidies above the publicly announced subsidy amount to avoid the Dantong Act). There is criticism that illegal subsidies are spread secretly, increasing discrimination in the market. Information about sacred sites is spread mainly through online communities, and the reality is that when you visit a store through this, strange scenes appear, such as exchanging price information using a calculator in preparation for crackdowns. Last year, the Korea Communications Commission decided to impose a fine of 110.4 million won and order corrective action on 30 mobile phone stores that violated the Mobile Communications Act.

It is also important to note that the benefits to consumers have decreased as telecommunications companies have been passively spending marketing costs since the enforcement of the Mobile Communications Act. It is pointed out that the Dantong Act has enabled telecommunication companies to reduce marketing costs and the profits for companies have also increased. In fact, it is known that the three telecommunications companies, including SK Telecom, KT, and LG U+, have exceeded 4 trillion won in operating profit for three consecutive years, including last year.

However, even if the government confirms its plan to abolish the Single Tong Act, it is expected to take quite some time before it becomes a reality as it is a matter of legal revision. Currently, the bill to abolish the Short-Term Communication Act proposed by People Power Party lawmaker Kim Young-sik has not passed the National Assembly’s threshold and is drifting. If it does not pass the plenary session by the general election, the bill will be automatically repealed. Therefore, it is inevitable that it will take time to discuss new composition, bill proposals, and standing committees after the general election. Some have raised the possibility that measures such as amendments to the enforcement ordinance or measures may be pursued.