Citizen Group Mongni... 30-Year-Old Fare System Abolition Drifts

Introduced to Prevent Monopoly by Top Operators in the 1990s
Effectively a 'Galapagos Regulation,' Calls for Abolition Persist
Telecom Rate Increases Can Be Blocked by Provisional Reporting System
Currently, Criticisms Prevail That It Hinders Market Competition and Encourages Collusion

[Asia Economy Reporter Koo Chae-eun] The abolition of the 30-year-old 'Galapagos regulation' of the tariff approval system, stalled due to the obstinacy of civic groups, is currently at a standstill. The logic follows that 'abolishing the tariff approval system → increase in communication fees → consumer harm,' but the industry sees the approval system as actually hindering competition among the three major carriers and encouraging collusion, making it difficult to launch diverse tariff plans.

The government has left a brake device on communication fee hikes through a 'reserved notification system,' and the Ministry of Science and ICT, the Science, ICT, Broadcasting and Communications Committee, and the telecommunications industry generally agree that the 'pre-price regulation,' unique to Korea, is anti-market.

Abolishing the Approval System = Fee Increase? 'Reserved Notification System' Device Left Intact

According to the industry on the 15th, seven major civic groups are reigniting the issue of abolishing the tariff approval system by urging the withdrawal of the amendment to the Telecommunications Business Act, which includes the tariff approval system. The Citizens' Coalition for Economic Justice, the Institute for Livelihood Economy, Open Net, the Consumer Citizens' Organization, the Progressive Network Center, People's Solidarity for Participatory Democracy, and the Korea Consumer Federation have opposed the abolition of the approval system.

Civic groups emphasize that without the approval system, the three major mobile carriers would have no regulatory authority to stop them from launching expensive tariff plans. However, experts say this concern is exaggerated because the amendment includes a reserved notification system rather than a complete notification system. The 'reserved notification system' in the amendment reduces procedures to stimulate tariff competition while leaving a brake device that allows rejection within 15 days.

Above all, the reason why the 5G tariff plans of the three major carriers are almost similar in the '50,000 won, 70,000 won, 90,000 won' range is widely accepted in the industry to be due to the approval system, which takes one to two months. During the approval review period, the baseline tariff of the top carrier is revealed, and the second and third carriers follow it exactly, creating a price-setting structure of 'collusion rather than competition.' An expert from the Democratic Party, An Jeong-sang, noted, "The approval system actually blocks tariff competition among carriers and causes tariff collusion where other carriers follow the approved tariffs of the market-dominant carrier, reducing consumer welfare, so abolishing it is reasonable."

No Pre-Retail Price Regulation... Need to Promote Tariff Competition

The original purpose of introducing the tariff approval system was not to block 'expensive' tariff plans but to prevent the top carrier from monopolizing the market by launching 'cheap' tariff plans, which is the basis for the argument that the approval system is ineffective. A telecommunications industry official explained, "In the US and UK, price cap regulations related to tariff plans were abolished in the early 2000s and left to market autonomy," adding, "Since then, innovative and diverse tariff plans like unlimited data plans and Black Friday plans have been launched." The abolition of the tariff approval system has shortened the review procedures and time for communication fees, enabling the rapid launch of various new products and further promoting competition in communication services and fees.

There is also an argument that even if 'high-priced' tariff collusion occurs after abolishing the approval system, there are checks and balances such as the Fair Trade Commission's ex-post regulation. Committee member An Jeong-sang said, "Just as the US Federal Communications Commission (FCC) imposes strict sanctions on tariff collusion through ex-post cease and desist orders, Korea can also prevent collusion through ex-post regulatory measures," explaining, "It is appropriate to move price regulation to ex-post regulation." Professor Shin Min-su of Hanyang University's Business Administration Department said, "Granting approval to retail tariffs is unprecedented and should be viewed as violating market competition principles."

Meanwhile, the bill to abolish the tariff approval system is left with only the National Assembly's Legislation and Judiciary Committee and plenary session (on the 20th) procedures next week. A National Assembly official said, "Passing the bill in the Legislation and Judiciary Committee is currently uncertain," adding, "The entire amendment to the Telecommunications Business Act could be scrapped due to the abolition of the approval system, so we are monitoring the situation."

This content was produced with the assistance of AI translation services.