[At the Brink of the 단통법] "Pay Full Price and You're a Hogang"... Abolish or Amend?

[Asia Economy Reporter Seulgina Jo] "Why is buying cheap illegal?" At the end of September, ahead of the Chuseok holiday, Ms. Kim Yukyung, in her 30s, visited a so-called 'holy ground' store in the Mapo-gu area of Seoul and expressed dissatisfaction with the Device Distribution Structure Improvement Act (Device Distribution Act), which has been in effect for six years. Having purchased Samsung Electronics' Galaxy S20 series for around 100,000 won through a device change, Ms. Kim said, "The Device Distribution Act is not a 'communication law' but a 'non-communication law' and a 'frustration law,'" and criticized, "Why do we let a law that only makes consumers look like fools remain as it is?"

Labeled 'Non-communication Law' Since Implementation

According to the National Assembly and the telecommunications industry on the 5th, as debates over the effectiveness of the Device Distribution Act continue, the Science, Technology, Broadcasting and Communications Committee (STBCC) of the 21st National Assembly is expected to treat this issue as a major agenda item. The atmosphere in the STBCC has already tilted toward revising or abolishing the Device Distribution Act. This trend was clearly reflected in a survey conducted by Asia Economy targeting members of the National Assembly's STBCC Information and Communications Broadcasting Bill Review Subcommittee (Subcommittee 2).

Cho Seung-rae, the ruling party's STBCC floor leader from the Democratic Party of Korea, argued for revision, saying, "(The Device Distribution Act) has contributed to resolving some issues but has not acted as a fundamental solution." Park Sung-joong, the floor leader of the People Power Party, also raised his voice, stating, "Complete abolition or a near-complete overhaul is necessary."

Enacted in October 2014, the Device Distribution Act has been criticized for blocking competition among businesses, infringing on market autonomy, and reducing consumer choice, contrary to its original intent. The law's purpose to prevent price discrimination where some buy phones cheaply and others pay more has long become meaningless. It has failed to stop 'zero-phone' and 'fare (payback)' schemes that distribute illegal subsidies. Even the marketing expenses of the three major telecom companies, which had been declining, surged to the 8 trillion won range after the commercialization of 5G last year. Han Sang-hyuk, chairman of the Korea Communications Commission, acknowledged the problems of the current Device Distribution Act in his inauguration speech last August, stating, "It will be redesigned."

Heated National Assembly Debate on "Abolition" and "Revision"

Following the 20th National Assembly, where as many as 26 revision bills for the Device Distribution Act were proposed, legislative competition is intensifying in the 21st National Assembly as well. Kim Young-sik of the People Power Party proposed complete abolition, while Cho Seung-rae proposed a revision last month aimed at inducing a reduction in device prices through a separated disclosure system. Jeon Hye-sook of the Democratic Party of Korea proposed revisions focusing on the separated disclosure system and reforming the penalty system.

Currently, major issues include sales incentives, a complete device self-supply system, and the introduction of a separated disclosure system. According to the survey results, nearly half of the respondents from the ruling party (3 members) expressed support for the separated disclosure system. However, the opposition party's stance differs. One opposition lawmaker opposed it, saying, "There is no practical benefit," citing the possibility of a counterproductive effect of reduced manufacturer subsidies. Another opposition lawmaker expressed a cautious stance, noting, "Market conditions have changed since the initial push for introduction, and the effectiveness has also been questioned."

Discussions on the complete device self-supply system are expected to accelerate. The survey showed 2 in favor, 3 conditionally supporting discussions, and 2 non-respondents. Market interest in the self-supply system, which separates telecom services from device sales, has recently been clearly detected in online communities. An opposition lawmaker argued, "No preparation period is necessary," and "It is appropriate to implement the complete self-supply system immediately and then improve it gradually." However, concerns about the impact on distribution networks have also been raised. A ruling party lawmaker emphasized, "While I agree with the purpose of the complete self-supply system, prior consent from those currently engaged in phone sales is necessary."

Other alternatives discussed in the first half of the year at a consultative body led by the Korea Communications Commission included ▲raising the limit on additional subsidies and shortening the disclosure period ▲linking the incentives paid by telecom companies to distribution networks with subsidies ▲and improving the current penalty structure, which garnered majority support.

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