Ahead of the general election, the repeal of the Device Classification Act (Dantong Act) suddenly emerged as a key ‘people’s livelihood task’ for the Yoon Seok-yeol government. On the 22nd, Yoon Seok-yeol’s government announced the repeal of the Single Tong Act as a deregulation policy for the people’s livelihood. Kim Hong-il, Chairman of the Korea Communications Commission, said on the 25th, “Our core goal is to become a government that acts to solve people’s livelihood problems,” and “We announced a policy to repeal the Terminal Distribution Act to encourage the purchase of terminals at low prices.” The repeal of the Dantong Act is a matter of law reform.
Looking at the government announcement, the Mobile Phones Act can be summed up as ‘a bad law that prevents people from buying mobile phones at low prices.’ If there is no short-term service law, cell phone prices will automatically decrease and consumer benefits will appear to increase.
▲ A telecommunications agency in Seoul. ⓒ Youth News
If this was a problem to consider so simple, questions remain. Why did the Park Geun-hye administration introduce the Single Tong Act? Why did the Moon Jae-in administration not abolish the Dantong Act created by the Park Geun-hye administration?
The Smartphone Act, introduced in 2014, is based on two systems: transparently disclosing the price of mobile phones and setting a maximum limit on the subsidy, which is the amount of the discount provided when buying a smartphone. Through this, the purpose was to ‘resolve discrimination on the basis of users’ and ‘reduce communication fees’.
Consumer discrimination has been resolved to some extent. Even before the introduction of the Mobile Phones Act, mobile phone prices varied widely. According to the Korea Communications Commission, between December 25, 2012 and January 7, 2013, 39% of consumers received subsidies of less than 100,000 won from a telecommunications company, and 22.9% of consumers received subsidies of more than 500,000 won. Although it is the same product, the price varies from about 400,000 to 500,000 won. Costs that one did not pay had to be paid by someone else, and as marketing costs grew abnormally, these also fell on the consumer.
The problem is that after the introduction of the Mobile Communications Act, telecommunications companies saved marketing costs but did not pay enough subsidies even within the legal limit. In the fourth quarter of 2014, when the Mobile Communications Act was introduced, the average subscriber revenue (ARPU) of the three telecommunications companies increased by 25% compared to the first quarter of 2012, and the operating profit of the three telecommunications companies continued to soar after that. However, there was even ridicule that it was ‘law’ for ‘Tong’ gentlemen.
▲ Mobile communication shop in Seoul. ⓒ Youth News
However, Park Geun-hye’s government did not repeal the Dantong Act, and Moon Jae-in’s government also maintained the Dantong Act. This is because, although the effect of ‘reducing communication costs’ is very small, it is meaningful in terms of ‘resolving consumer discrimination.’ Both governments complement their policies by focusing on encouraging reductions in communication costs.
A representative example is the adjustment of the discount rate (selective contract discount) corresponding to the subsidy. Park Geun-hye’s government amended the notice the year after the introduction of the Short Term Communications Act and the discount rate increased significantly from 12% to 20%. A selective contract discount is a concept where consumers who have not received a subsidy or consumers whose contract period has expired get a discount of the same amount as the subsidy. The effect of raising the discount rate was to force telecommunications companies to pay more subsidies. Then, in September 2017, the Moon Jae-in administration raised the discount rate to 25% as part of a policy to reduce home communication costs amid opposition from telecommunications companies.
This does not mean that the ‘Dantong Law’ is a good law. The criticism that it is very unusual and excessive regulation is valid as the government intervenes directly even in the amount of the subsidy. However, it is also true that products such as mobile phones that can be bought at very different prices depending on the user are very rare, and the market has become turbulent due to excessive competition between subsidized telecommunications companies.
Therefore, in order to repeal the ‘Short Telecommunications Act’, it is essential to review whether household communication costs in general can be reduced after the repeal. Measures should also be introduced on how consumer discrimination can be resolved and how market turbulence can be prevented.
However, the government does not provide a clear explanation. Reporters asked about this issue during a government briefing on the 22nd, but Vice Chairman Lee Sang-in of the Korea Communications Commission said only, “We expect that if free competition for subsidies occurs, we will can buy terminals at low prices. ,” but did not mention any specific measures. If this is a bad law that can easily be repealed, why did the administration of Park Geun-hye and Plaid y Saenuri create and maintain this law?
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