The Single-Price Law at a Crossroads... Repeal or Supplement?

Government Proposes Improvements to Market Competition Promotion Policies
National Assembly Prepares to Amend Mobile Phone Law, Early Stage Discussions

The Mobile Device Distribution Structure Improvement Act (DanTongBeop), which has been in effect for 10 years, is now at a crossroads regarding its continuation. The government has decided to include improvement measures for DanTongBeop in the telecommunications market competition promotion policy to be announced next month. The National Assembly is also preparing to revise the law. Within the People Power Party, there is a growing sentiment that the repeal bill for DanTongBeop, proposed three years ago, should be refined and discussed in the National Assembly starting next month.

The Ministry of Science and ICT is carefully reviewing each provision of DanTongBeop. They are approaching the issue cautiously to determine whether it is better to repeal the law and leave the market to self-regulate or to maintain the law while introducing supplementary measures. A Ministry of Science and ICT official said on the 11th, "We are still in the early stages of discussion" and "We will gather various opinions to set the policy direction."

After the Implementation of DanTongBeop

Enacted in October 2014, DanTongBeop aimed to improve the chaotic distribution structure of the telecommunications market caused by opaque mobile device subsidies. The core idea was to ensure consumers receive a certain subsidy when purchasing phones at dealerships so they would not become 'Hogang' (a portmanteau of 'Hogu' meaning sucker and 'customer'). If the principal amount was not received, a 25% discount on the fee was provided. Although discrimination regarding subsidies was eliminated, consumer sentiment remains unfavorable. As the subsidy competition among the three major mobile carriers disappeared, voices grew louder that consumers were actually losing out by paying higher communication fees. Before DanTongBeop, consumers who paid more than others were called 'Hogang'; after DanTongBeop, there was the issue of so-called 'Seongji' (illegal subsidy support stores) selling devices at unlawfully low prices. Ultimately, some consumers suffered losses.

The biggest problem is that the prices of high-end devices have continued to rise. With low-cost devices disappearing, the average price has increased further. In fact, this year Samsung Electronics released only one mid-range device (Galaxy A34) in the domestic market. After DanTongBeop, Pantech and LG Electronics exited the mobile phone business, leaving Samsung and Apple to dominate the manufacturing market. Consumers now have no choice. Samsung and Apple have focused on high-end premium products rather than low-cost ones, and phone prices have continued to rise. According to Statistics Korea, last year, household spending on communication fees in South Korea increased by 3.5%. Of this, the increase in costs for devices and communication equipment accounted for 6.9%, while the increase in communication service fees was 2.6%.

Market competition has also shrunk. As marketing competition among the three carriers waned, the number of mobile number porting users sharply declined. The number of ported numbers was 11.16 million in 2013 before DanTongBeop, dropping to 7.04 million in 2017, 5.8 million in 2019, 5.08 million in 2021, and 4.53 million in 2022. With reduced marketing expenses, the three carriers' performance naturally improved.

Will Repealing DanTongBeop Revitalize Competition?

Experts predict that repealing DanTongBeop will activate market competition, but they do not expect the previous overheating phenomena to recur. As of March, the number of mobile phone lines reached 55.82 million, indicating that the telecommunications market is already saturated.

Professor Shin Min-su of Hanyang University said, "If DanTongBeop is repealed, competition will intensify, but the telecommunications market is already saturated. In the past, LG Electronics was a manufacturer, but now Samsung Electronics is the only one, so the situation is different from before. Even if the law changes, the competitive landscape will not change significantly."

While price discrimination may occur if DanTongBeop is repealed, there is also a forecast that the overall burden of communication fees will decrease. Professor Hwang Dong-hyun of Hansung University said, "When DanTongBeop did not exist, there was a gap between those who gained 1 million won and those who gained 300,000 won, but overall consumer welfare was better. Consumers will benefit. In the current situation where real competition does not occur, the market needs a shock through repeal or innovative improvements." There are also voices advocating for a complete self-sufficiency system that separates communication services and device sales, which would increase user utility. This is because online channels, self-sufficiency, and the budget phone market have become more active than 10 years ago. Just as TVs are purchased in stores and IPTV or cable broadcasting is separately activated, the telecommunications market should adopt the same approach. If the carriers' 25% selective discount is maintained, consumers can receive both fee discounts and device subsidies simultaneously.

Positive effects are also expected in the distribution field. A representative of the National Mobile Telecommunications Distribution Association said, "Compared to before DanTongBeop, annual device demand has halved. If device demand increases (due to DanTongBeop repeal), sales will be revitalized, and small business owners in distribution stores will also recover."

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