The Ministry of Science and ICT announced the 'Measures to Strengthen the Competitiveness of Budget Phones' and the 'Results of Discussions on Policies for New Operators' on the 15th. The plans included reducing the wholesale prices (network rental fees) that budget phone companies must pay to the three major telecom operators (SK Telecom, KT, LG Uplus) and reviewing after which to open the frequency bands desired by the operators.
◇ Maximum 52% reduction in wholesale prices for budget phones… QoS speed also increased
The Ministry of Science and ICT plans to reduce the data wholesale prices of the mandatory wholesale provider (SK Telecom) by up to 52% (1.29 won/MB → 0.62 won/MB) to allow budget phone companies to actively design and launch their own unique price plans. It also plans to significantly lower the pay-as-you-go data wholesale price from the current 1.29 won/MB to 0.82 won/MB (-36%), which represents the largest reduction in the last decade.
Additionally, the benefits of discounts for budget phone companies purchasing data in bulk will be expanded, allowing for an additional 25% discount on wholesale prices if they pre-purchase over 50,000 TB (terabytes) a year (based on SK Telecom). Once the reduction in wholesale prices is officially applied, budget phone 'own rate plans' are expected to be available for the average data usage range of mobile phone users, which is between 20-30 GB (gigabytes), leading to the potential launch of 20GB plans priced in the 10,000 won range.
To create an environment where full mobile virtual network operators (MVNOs) can freely launch user-customized rate plans like mobile carriers, the Ministry of Science and ICT plans to proactively support regulatory improvements and facility investments. They will also improve the system to mandate network interconnections between mobile carriers and operators promoting full MVNOs and will support policy finance for facility investments aimed at full MVNOs. Furthermore, they will designate all three major telecom operators as mandatory wholesale providers for full MVNOs to ensure stable facility interconnections.
The Ministry of Science and ICT intends to add an additional 1 Mbps to the existing 400 Kbps limit on data speed restriction products (QoS) that budget phone companies can provide alongside their own price plans, and to increase the range of overseas roaming products from one type to four types, thereby providing users of budget phones with a greater variety of choices. Furthermore, when budget phone companies seek to design their own price plans, the ministry plans to reflect in wholesale provision agreements that mobile carriers must cooperate proactively to avoid operational constraints.
◇ Mandatory ISMS certification for budget phone companies to prevent fraudulent activations… Annual post-review also to be conducted
To prevent public harm from fraudulent activations of budget phones, the Ministry of Science and ICT will mandate that budget phone operators obtain Information Security Management System (ISMS) certification and will conduct annual post-reviews to regularly assess their information protection capabilities. They will also require the appointment of a chief information security officer (CISO) to strengthen the information protection systems and capabilities of budget phone companies.
For new operators seeking to enter the budget phone market, the capital requirements will be raised from 300 million won to 1 billion won to ensure they meet their obligations for information protection and have sufficient financial capacity. It will also mandate the submission of user protection plans upon registering for period telecommunications businesses to fundamentally prevent the entry of operators lacking in information protection or customer service capabilities.
To enhance the customer service quality experienced by budget phone users, the Ministry will revise the 'Budget Phone User Protection Guidelines' to specifically present the varied cancellation procedures operated by each provider, and support mobile carriers in expanding customer service functions provided to budget phone companies, such as loss reporting and usage inquiries to alleviate user inconveniences.
The Ministry of Science and ICT plans to implement policies aimed at enhancing consumer welfare through vigorous competition among operators in the budget phone market. In particular, to reduce the influence of telecom subsidiaries in the budget phone market, they will review the application of differentiated regulations to promote competition between mobile subsidiaries and independent medium and large enterprises, aligning this with legislative discussions currently underway in the National Assembly.
In response to the transition of the wholesale price system, a system will be prepared to prevent abuse of status by mandatory wholesale providers. With the revision of the Telecommunications Business Act in December 2023, starting from the end of March this year, the regulation system for wholesale prices for budget phones will change from a pre-regulation type where the government verifies wholesale prices to a post-regulation type where negotiations between operators occur before reporting. As a result, if any unjust wholesale provision agreements are reported, they can be refused or corrected based on specific judgment criteria included in the enforcement decree.
◇ Opening frequency bands desired by operators… Principles of one-time payment for allocation fees
Following the cancellation of the selection of StageX as a target company for frequency allocation for mobile communications on July 31st, the Ministry of Science and ICT has formed a comprehensive research group on communication and radio waves consisting of experts from academia and related organizations to discuss policy directions for new operators and improvements to the frequency allocation system.
As a result of the discussions within the research group, considering past policy experiences and the current market environment and competitive conditions, it has been concluded that, while the government has been determining frequency allocation bands and business models so far, it is more appropriate to keep opportunities for market participation open and advance when there are operators challenging in the market based on market demand.
Therefore, to promote market demand and facilitate challenges, the Ministry of Science and ICT plans to establish procedures allowing operators to propose frequency allocation announcements for frequency bands they desire within the available frequency range as long as they are not frequencies designated by the government.
Key aspects of the improvement plan include the establishment of procedures for proposing frequency allocation announcements, as well as stipulating that only those who meet the capital requirements above the minimum competitive price proposed by the government in frequency auctions can participate in the auction. In the case of corporations intending to be established, legally binding documents such as investment commitment letters from participating shareholders must be submitted.
Furthermore, when paying frequency allocation fees, the principle will be one-time payment; however, if partitioning is desired, participating shareholders, investors, etc. must submit legally binding documents guaranteeing the payment of the frequency allocation fees to the government. Additionally, to induce careful participation in the allocation process, measures will be implemented to restrict participation in frequency allocations for those with responsible issues, including cancels involving their selection as target corporations.
The Ministry of Science and ICT plans to disclose and finalize the detailed contents of the frequency allocation system improvements established this time through future public opinion collection procedures and will then initiate amendments to the legal texts.
Minister Yoo Sang-im said, "In these difficult times for the public, we will push ahead with the measures announced to strengthen the competitiveness of budget phones without delay to alleviate communication cost burdens on the public through affordable and diverse rate plans unique to budget phones." He noted the intention to continue efforts to enhance public telecommunications benefits through supporting the growth of budget phones and activating competition across the telecommunications market.