Doubts Over Communication Cost Reduction Effect... Another Call for Abolishing the 'Dantongbeop' Law

Increased Consumer Burden... Persistent Excessive Subsidies
Retailers' 'Seongji' Emerges Despite Galaxy S24 Launch
Effectiveness Questioned... Claims of Weakened Carrier Competition

The Act on the Improvement of Distribution Structure for Mobile Communication Terminals (hereinafter referred to as the Terminal Distribution Act) is once again expected to face controversy over its continuation or abolition. Enacted in 2014 and now in its 10th year, it has repeatedly faced calls for revision or repeal every year due to questions about its effectiveness. This year, the controversy was sparked again when the Presidential Office instructed related ministries to "completely review the Terminal Distribution Act, including its abolition." The Act was designed to allow consumers to purchase terminals at the same price nationwide, but every time a new terminal is released, prices have surged, which has been pointed out as a cause of increased consumer burden.

Smartphone stock photo / Photo by Hyunmin Kim kimhyun81@

Repeal Debate Resurfaces

The repeal of the Terminal Distribution Act aligns with the government's policy to reduce communication costs. The government ordered mobile carriers to offer 5G service plans priced around 30,000 KRW, but the soaring terminal prices have undermined this effect.

In particular, the recent release of Samsung Electronics' Galaxy S24 series, the world's first AI smartphone, has been seen as igniting the debate over the Act's repeal. The starting price of the Galaxy S24 Ultra model approaches 1.7 million KRW. Moreover, the original intention to prevent consumer discrimination through subsidies has become ineffective due to the emergence of so-called 'holy sites' (성지).

From the 19th, pre-orders for the Samsung Galaxy S24 series began, with announced carrier subsidies from the three major telecom companies as follows: KT offers 85,000 to 240,000 KRW, SK Telecom 100,000 to 170,000 KRW, and LG Uplus 52,000 to 230,000 KRW, depending on the plan. Adding additional subsidies provided by distributors (15% of the announced subsidy), consumers could receive support ranging from 57,500 to 276,000 KRW. However, online blogs have already posted claims such as "You can get up to 700,000 KRW" and "Store-specific subsidies allow purchases at even lower prices."

There are also claims from the distribution industry that the three major mobile carriers are the only ones benefiting. The Korea Mobile Distribution Association (KMDA) stated in a press conference last August, "The small business distribution, a core pillar of the mobile communication industry, has collapsed," and argued, "Despite consumers using old smartphones for extended periods, household communication costs continue to rise, proving the original purpose of the Terminal Distribution Act is ineffective." They added, "Meanwhile, mobile carriers have achieved record-high operating profits over the past three years, which is evidence of rising household communication costs, prompting a need to reconsider the purpose of the Terminal Distribution Act."

Terminal Distribution Act Passed Before 2014 Election

The Terminal Distribution Act was triggered by the "Galaxy S3 170,000 KRW incident" in September 2012. At that time, the Galaxy S3, priced at 990,000 KRW, saw its installment principal drop to 170,000 KRW due to carriers' subsidy competition. The relevant authorities, the Korea Communications Commission and the then Ministry of Science, ICT and Future Planning, pledged to implement strong countermeasures. Subsequently, both ruling and opposition parties proposed amendments to the Telecommunications Business Act, which were consolidated into the Terminal Distribution Act bill by Assemblyman Jo Hae-jin of the Saenuri Party (now People Power Party).

In early 2014, massive terminal subsidies were concentrated during the early morning hours, causing a frenzy where buyers lined up before dawn at mobile phone stores to purchase smartphones cheaply. Then-President Park Geun-hye urged the passage of the Terminal Distribution Act, which passed the National Assembly plenary session a month before the local elections scheduled for June that year and was implemented starting October.

'Anti-Customer Exploitation Law' Made Everyone a Victim?

Experts unanimously argue for the repeal of the Terminal Distribution Act, stating it failed to achieve its original goals of stabilizing terminal prices and improving distribution structures. Professor Lee Byung-tae of KAIST's Business School said, "After the Act's implementation, carriers spent less on subsidies, which helped their performance, but consumer benefits drastically decreased." He explained that the three major carriers' sales and operating profits steadily increased because they did not engage in aggressive marketing.

There are also claims that the Act weakened competition among carriers. According to the Ministry of Science and ICT's report on "Mobile Number Portability Status," the number of mobile number portabilities steadily decreased from about 8.65 million in 2014 to 5.66 million in 2018, and further down to 4.53 million in 2022. Professor Lee Kyung-won of Dongguk University's Economics Department analyzed, "The number of consumers switching from one carrier to another has significantly decreased compared to before the Act's implementation," adding, "This means consumers show loyalty to one company, and carriers do not have to make great efforts in price competition as there is little risk of losing customers."

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