[Insight & Opinion] Are We Enjoying Services Proportional to the Burden of Communication Costs?

Published 07 Aug.2023 13:23(KST)

To reduce the communication cost burden on ordinary people, it is necessary to innovate the telecommunications industry itself rather than creating a fourth mobile carrier. Meanwhile, the three major telecom companies are complaining that the price of communication devices (phones) is also a factor. They present data showing that while communication service fees increased by 1.8% compared to the same period last year, the price of communication devices rose by 28.9%.

At this point, a policy to completely separate communication services and device sales (so-called self-sufficiency system) should be implemented. Devices should be supplied through manufacturers' distribution channels, and telecom companies should be responsible only for distributing communication services. Currently, telecom companies are not competing in service but rather in device distribution. Meanwhile, the previous government enacted a half-baked Device Distribution Act.

Number portability is a policy to promote competition and increase consumer choice, but using devices as incentives has led to the absurd situation where customers switching from other carriers are favored more than long-term existing customers. In the long run, customers who use devices for a long time and stay with one telecom company are desirable both for the telecom companies and the country.

Although calls to reduce communication costs have been made for more than a year or two, every policy announcement seems to fail to address fundamental issues or be revolutionary. First, it is necessary to determine whether communication service fees are really high and what causes them to be high.

To conclude, although the burden on ordinary people appears high, considering the content and quality of the service, it cannot be said to be higher than in other countries. Also, the responsibility does not lie solely with the telecom companies. In that sense, telecom companies must feel both unfair and frustrated. This can be seen from the low profit margins and stock prices of telecom companies from a management perspective.

There are many burdens on Korean telecom companies that the general public is unaware of. The government, promoting itself by claiming world-first achievements, has shortened investment cycles by pushing 4G, 5G, and 6G, which is also a burden. Investment in communication networks should primarily be judged by consumer (market) demand and operators, but the government leads by allocating frequencies and even reclaiming them when investments are insufficient. This is why Western operators do not understand the investment pace of our telecom companies. Operators basically need to recover existing investments sufficiently before making the next investment. The only ones cheering for such rapid investment are OTT operators, including Netflix.

Korea’s terrain and urban environment, with many mountains and densely packed high-rise buildings, are disadvantageous for operators’ infrastructure investments. Moreover, since we do not tolerate shadow zones regardless of high mountains or underground spaces, this is also a huge cost increase factor for telecom companies.

While all distribution is shifting online, our telecom distribution still relies on hundreds of thousands of retail stores, and these distribution costs are also borne by consumers. Naturally, the global trend is to apply online and receive devices or SIM cards at home, but such changes are neither promoted nor accepted here. Although workforce restructuring (in terms of number and expertise) should be at the center of innovation, it is impossible under our labor environment.

Instead of pressuring telecom companies only to discount communication fees despite the high burden, the government should discover and implement policies that can reduce costs and expenses.