[Open Forum] Mobile Subsidy Regulation Act: Who Does It Serve?

Even 10 years after the Mobile Device Distribution Improvement Act was enacted, doubts about its effectiveness and validity continue to be raised. Although it was introduced under the banner of addressing information asymmetry and excessive competition, consumers are suffering one after another. Now, a decade after its enactment, public opinion calling for the repeal of the law has emerged as a major issue.

Problems arise because information cannot be distributed transparently due to information asymmetry among consumers. Some people, while evading government crackdowns, are able to purchase devices cheaply through subsidies, whereas others end up paying the list price or even more.

This raises doubts about whether the law truly exists for consumers. Consumers are effectively forced to pay high prices across the board. Before the law was enacted, even if not everyone was treated equally, devices could generally be purchased at much lower prices. Because telecommunications companies competed on price, consumers were able to access the lowest possible prices.

As telecommunications fees and handset prices have risen, consumers have lost the option to purchase cheaper and better-quality products. In the case of major devices such as Samsung’s Galaxy and Apple’s iPhone, the prices consumers actually face now exceed 1 million to 1.5 million won, showing an overwhelming increase. This also runs counter to the free market economy.

Telecommunications companies no longer need to spend money on marketing, and their operating profits have increased substantially. The contradiction is that although the marketing costs previously built into telecommunications fees have disappeared, none of the benefit has been passed on to consumers.

The law is also causing major social repercussions. It suppresses competition among telecommunications companies and thus leads to consumer harm. Given the nature of mobile carriers, price competition over service plans is difficult, which is why they had turned to competing through handset subsidies. Government regulation made subsidy competition impossible, eliminating even the carriers’ only meaningful form of competition. If the law were repealed and meaningful competition among carriers resumed, consumers could benefit along with broader economic development.

In its distorted form, the law has produced the worst possible outcome: it has stripped companies of any incentive to lower their core prices and achieve technological innovation through competition. This bad law, which serves only a handful of companies while turning its back on consumers, remains in force even after 10 years. Contrary to its original purpose of promoting competition and easing information asymmetry, the law has lost its meaning. The government’s mandatory subsidy cap has distorted the market, and the resulting harm has fallen squarely on consumers.

As smartphone prices have surged recently, many argue that revising the law is the only way to lower the prices consumers actually feel. If subsidy competition resumes, consumers will be able to reduce the burden of buying smartphones. Since this regulation has long been the subject of persistent doubts, one can only hope that the currently proposed revision or repeal of the law will come to pass.

Irin

Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 단통법, 누구를 위한 법인가?

Author: Rin Lee

Date: 2023-09-01

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25998