Government Policy Blamed for High Cost of Mobile Phone Service

The policies of the Ministry of Information and Communication are being blamed for burdening consumers and failing in their original intention of giving benefits to consumers and boosting competition among mobile communication businesses.

The ministry, when it was encouraging mobile communication companies to lower their calling rates in 2002, requested SK end its discount service for calls between subscribers, according to a document by the ministry and SK that was sent to Rep. Kim Hee-Jung (Grand National Party) of the Science, Technology, Information, and Telecommunication Committee of the National Assembly on September 15.

The discount service offered an additional discount of one won per 10 seconds, and until 2001 all three mobile communication companies had adopted the service.

The ministry explained that given SK Telecom subscribers accounted for a half of the total number of mobile communication subscribers in Korea, the discount service in question was particularly favorable to SK, which caused the ministry decide to recommend the termination of the service for the fairness of competition.

However, following SK Telecom’s cancellation of the service in January 2002, LG Telecom followed suit, and KTF reduced the number of eligible subscribers to its discounted service by a large amount.

Ending the discount service eventually let SK telecom raise its calling rate, which in turn brought about a series of rate increases from KTF and LG Telecom.

“Considering the volume of telephone traffic this year, SK Telecom has gained profits of at least 240 billion won from 2002 until now. This can be interpreted to mean that consumers have been unfairly overcharged,” according to Rep. Kim.

The ministry argued that KTF still offers a discount service and that LG Telecom has introduced several new discount systems, which have resulted in reduced calling rates for consumers.

Sang-Hoon Kim sanhkim@donga.com