[Initial Perspective] Is This a Plan Necessary for the People?

[Asia Economy Reporter Im Hye-seon] 131,000 KRW. This is the average monthly communication cost per household (including devices) for July to September, as announced by Statistics Korea. It increased by 3,000 KRW (2.8%) compared to the previous year and by 12,000 KRW (10.0%) compared to ten years ago. Although the government has prepared various measures every year to reduce communication costs, their effectiveness has been low. The market response to the 5G mid-tier plans introduced in August this year has also been lukewarm. Most consumers evaluate that telecom companies have presented superficial plans. As a result, the number of subscribers to the mid-tier plans of the three major mobile carriers?SK Telecom, KT, and LG Uplus?was about 300,000 in the two months following the introduction. This accounts for only about 1% of the three companies’ 5G subscriber base (26.85 million).

Meanwhile, the combined operating profit of the three mobile carriers in the third quarter of this year was 1.2036 trillion KRW, marking three consecutive quarters above 1 trillion KRW. The wireless business revenues for SK Telecom, KT, and LG Uplus in the third quarter were 3.123 trillion KRW, 1.547 trillion KRW, and 1.4622 trillion KRW, respectively, similar to the previous two quarters. The average revenue per user (ARPU), a key profitability indicator, also remained stable. KT’s ARPU increased by 1.5% compared to the second quarter, while SK Telecom and LG Uplus saw decreases of only 0.1% and 1.6%, respectively. This is because people still use high-priced plans despite the introduction of mid-tier plans. The government’s intention to expand choices through 5G plan restructuring and alleviate household communication cost burdens has thus become ineffective.

The government is once again considering diversifying 5G plans. It is expected that the National Assembly and the government will request the three major carriers to launch plans offering 50GB to 70GB of data, which falls between the current 30GB and 100GB plans. Introducing additional plans is necessary to improve and supplement the system. This time, bundled products should also be properly reviewed, as recent household communication costs are influenced by combined wired and wireless communication and broadcasting services.

Among government policies, the only one that has brought a tangible reduction in communication costs is the MVNO (Mobile Virtual Network Operator) service. It is popular because users can consume 100GB of data per month for around 40,000 KRW. In October, the number of MVNO mobile number portability subscribers exceeded 180,000, accounting for 50% of the total number portability subscribers (360,000). Ultimately, due to the popularity of MVNOs, SK Telecom revamped its online plans to attract subscribers. Previously, online-only plans required purchasing a phone from an online mall to subscribe, and existing contract users had to pay penalties to switch. This severely limited consumer choice, resulting in very few users. Now, contract users can purchase phones from the T Direct Shop and transfer their contracts without penalties. Bundled discounts for wired and wireless services are also offered. Additional discounts can be received through bundles such as the “Yojum Family Plan.” This was something that should have been done naturally with consumers in mind.

The government will soon announce measures to reduce household communication costs. Discussions are underway regarding lowering wholesale prices and revenue-sharing ratios to revitalize the MVNO market, as well as whether to abolish the sunset clause on wholesale provision. According to the Korea Electronics and Telecommunications Research Institute, after introducing the MVNO system, the U.S. saw about a 61% reduction in fees over five years, the U.K. saw a 45% reduction over three years, and Denmark experienced a 50% reduction over four years. Along with the government’s proper policy direction, it is time for mobile carriers to look further into the future and invest in consumers.

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