'The Futility of the Mobile Subsidy Law' with a Shocking Doubling of Additional Support Funds... Distribution Networks Oppose

The Neglected Status of the Device Distribution Act
Limit for Additional Subsidies Given When Purchasing Mobile Phones Doubled
Announcement Frequency Shortened to Twice per Period

[Asia Economy Reporter Cha Min-young] The government has decided to double the cap on additional subsidies given to customers when purchasing mobile phones in order to enhance the effectiveness of the Device Distribution Structure Improvement Act (Device Distribution Act), which has become a neglected law. The announcement cycle will also be fixed twice a week on Mondays and Thursdays to increase predictability.

While concerns have been raised about the "rich get richer, poor get poorer" phenomenon of subsidies centered on large online retailers, the Ministry of Science and ICT, the main regulatory body, maintains that it has thoroughly deliberated the matter. The Ministry plans to proceed with government legislative procedures such as review by the Ministry of Government Legislation, vice ministerial meetings, and Cabinet meetings, aiming for legislative approval by March next year.

On the morning of the 26th, the Ministry held the 21st plenary meeting and prepared a revision of the detailed standards notice related to the Device Distribution Structure Improvement Act and the method of announcing and posting subsidies.

The revision includes expanding the cap on additional subsidies from the current 15% of the announced subsidy to 30%, doubling the limit. For example, the average announced subsidy for eight major devices under a 70,000 KRW plan is about 318,000 KRW. Under the current law, the maximum additional subsidy is 47,700 KRW, but with the revision, it will increase to 95,400 KRW. This effectively expands consumer discount benefits by about 50,000 KRW.

Since its implementation in October 2014, the Device Distribution Act has faced criticism for blocking competition among businesses, infringing on market autonomy, and reducing consumer choice, contrary to its original intent. Rather than preventing price discrimination, it failed to curb hotspots distributing illegal subsidies under names like "0 phone" and "fare (payback)," leading to calls for its abolition. Additionally, high-priced devices have been identified as a factor increasing household burdens, deepening the Ministry’s concerns.

The Ministry plans to shorten the announcement cycle from the current 7 days to 3-4 days through the revision of detailed subsidy standards. Currently, telecom companies maintain announced subsidy information for 7 days regardless of the date, but going forward, it will be possible to change to twice a week on Mondays and Thursdays. This aims to increase public predictability of announcements and induce competition among telecom companies on announced subsidies.

However, opposition is strong among distribution channels. Small retailers, which operate under consignment sales contracts with agencies, rely heavily on incentives as their main source of income. Since part of these incentives is used as additional subsidies for customers, the implementation of the revision could directly impact their revenue.

A distribution network official criticized, "As subsidies increasingly concentrate on large retailers, the rich get richer, poor get poorer phenomenon will accelerate. If only the hotspots distributing illegal subsidies were properly controlled, the entire industry wouldn’t be harmed." Telecom companies have also expressed opposition due to the burden of increased excessive marketing costs.

The Ministry emphasized that the revision aims to reduce the national communication fee burden and expressed determination to pass it. Kim Jae-cheol, Director of the User Policy Bureau at the Ministry, stated, "We expect that raising the cap on additional subsidies will return up to about 50,000 KRW in additional benefits to the public," adding, "It will induce competition among businesses, increase predictability of announcements, and strengthen user choice."

Meanwhile, the separate announcement system, initially targeted for year-end implementation and designed to induce subsidy competition among manufacturers during distribution, has stalled due to LG Electronics’ withdrawal from the smartphone business, which was a rival to Samsung Electronics.

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