[At the Brink of the 단통법] "Phone Prices Rise... Competition Must Be Revived Like Before"

The First Discussion on the 21st Term's 'Device Distribution Act' Sparks Debate
Competition Should Be Revitalized to Pre-DanTongBeop Levels

[Asia Economy Reporter Koo Chae-eun] The Device Distribution Act, enacted in 2014, was introduced to prevent price discrimination where some people buy mobile phones cheaply while others pay more. The soaring subsidy competition has eased, and the profitability of the three major telecom companies has improved thanks to reduced marketing expenses.

However, it did not lead to the originally intended reduction in household communication costs. With minimal subsidies, the retail prices of mobile phones have been standardized at a higher level, and mobile phone "holy sites" advertising "XX phone 0 won phone" are still frequently caught. The Device Distribution Act has rather encouraged price collusion among telecom companies, leading to consumer complaints that "buying cheaply is illegal, buying expensively is legal."

Because of this, many stakeholders including telecom companies, manufacturers, distributors, and consumers are paying attention to the amendment bill proposed by Kim Young-sik, a member of the People Power Party representing Gumi-si Eul, Gyeongbuk, who first mentioned the "abolition of the Device Distribution Act" in the 21st National Assembly. In an interview with this publication before Chuseok, Representative Kim repeatedly emphasized the principle that "the most effective way for the public to purchase mobile phones cheaply is to revitalize competition in the distribution market. Competition should be activated to the level before the Device Distribution Act."

The Device Distribution Act only raised phone prices... Competition must be revitalized

The bill that Representative Kim is preparing proposes to abolish the Device Distribution Act and transfer only essential user protection regulations, such as the user notification obligation, to the Telecommunications Business Act to induce "market competition promotion and mobile phone price reduction."

Representative Kim believes that the more the government artificially controls market prices, the more consumer welfare declines. He views the system as a failure due to "excessive regulation of the Device Distribution Act → fixed device subsidies → increase in smartphone retail prices → increased consumer burden." Rather than fixing subsidies through government regulation as it is now, it is better to legalize illegally and discriminately provided subsidies to reduce consumers' search costs.

Gathering opinions from the government, manufacturers, telecom companies, distributors, and academia to prepare the bill, Representative Kim added, "(The Device Distribution Act) is a prime example of government failure that significantly lowered consumer welfare by artificially controlling market prices. We will focus most on reducing consumer burden."

Separate Disclosure System lacks effectiveness... Caution needed on Complete Subsidy System

Representative Kim views the separate disclosure system, currently promoted by the government and ruling party, as ineffective. He said, "The separate disclosure system risks causing side effects where manufacturers' subsidies are fundamentally blocked rather than lowering prices," adding, "Premature regulation risks distorting the market, so careful decisions are necessary."

He also believes that a cautious approach is needed regarding the complete subsidy system. Representative Kim stated, "Ultimately, moving toward a complete subsidy system will help increase user benefits," but added, "However, considering the livelihoods of telecom distribution agencies and retailers and the short-term increase in consumer burden, it is difficult to introduce a complete subsidy system under the current circumstances."

Regarding the issue of distribution stores struggling due to the spread of non-face-to-face transactions caused by the novel coronavirus disease (COVID-19), he mentioned, "As society approaches zero marginal cost, simplification of the distribution structure is an inevitable phenomenon." Representative Kim pointed out, "Distribution stores need to shift from merely selling mobile phones to consulting and services. Through this, additional value creation can also be expected."

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