There are warnings that KT's "pre-compensation program," unveiled in Jul. alongside the repeal of the Mobile Device Distribution Improvement Act and the launch of Samsung's Galaxy Foldable 7 (Fold 7, Flip 7), is effectively similar to the "upfront compensation program for used phones," which the Korea Communications Commission imposed a penalty surcharge on and halted 10 years ago over concerns about consumer harm. The pre-compensation program allows buyers to receive a 50% discount on the phone's list price at activation on the condition that they sign a three-year installment contract and, after two years, return the device and change handsets. If the used-phone value of the device returned after two years falls, customers must pay the difference. More than half of all subscribers to the Foldable 7 pre-compensation program are confirmed to be in their 50s or older.
According to data titled "Foldable 7 pre-compensation program sales status," submitted by KT to the office of Kim Jang-kyom of the People Power Party, a member of the National Assembly's Science. ICT. Broadcasting. and Communications Committee, on the 10th, as of Sept. 15, among customers who purchased the Foldable 7 and used the pre-compensation program, those in their 50s were 30.3%, those in their 60s were 17.3%, and those in their 70s were 5.2%. With people in their 50s and older accounting for about half (52.8%) of the total, there are concerns that consumers may have signed up without sufficient understanding and could suffer harm. KT is running the same program for the iPhone 17 series as well.
In 2015, the Korea Communications Commission imposed a total of 3.402 billion won in penalty surcharge on the three telecom companies, saying the "upfront compensation program for used phones" caused consumer harm. Although each company used different names, the program separately assessed and compensated the used-phone price of a device upfront on the condition that it be returned after 18 months, in addition to the subsidy provided at purchase. At the time, because the Mobile Device Distribution Improvement Act was in force with the intention of allowing everyone to buy phones cheaply without discrimination, it became a problem to pay excessive subsidies separate from the legally provided subsidy, and controversy arose as companies not only linked the program to certain high-priced plans, but also required customers to return the entire upfront compensation amount at once as a penalty if they failed to meet the mandatory usage period. Moreover, the three telecom companies were found to have violated the Telecommunications Business Act by failing to properly inform subscribers about the used-phone return conditions.
With the repeal of the Mobile Device Distribution Improvement Act and limited marketing leeway, price competition among carriers has intensified, and a service similar to the "upfront compensation program for used phones" has reappeared. However, some elements directly reflect the Korea Communications Commission's 2015 criticisms.
To secure up to a 50% discount two years after enrolling, users of KT's pre-compensation program must change handsets on a KT line. It is also difficult to switch to another carrier when the 24-month contract ends. In addition, if a user ports their number or changes devices during the mandatory usage period (24 months) while paying the monthly fee for the pre-compensation program, they must return the entire amount discounted upfront, not just part of it. This is the same structure as the Korea Communications Commission's 2015 critique of the upfront compensation program for used phones, which said it "restricts users' service use or termination by requiring the entire upfront compensation amount to be returned at once if the mandatory usage period is not met." Under the pre-compensation program, even if users only return the used phone without changing devices, they must return the entire amount discounted upfront.
KT actively advertises the pre-compensation program with the phrase that it discounts 50% of the device's list price, but in reality it is a service in which users must pay 10,500 won per month for the Flip 7 and 17,000 won for the Fold 7 for two years.
Some say it is not easy to have the used-phone value recognized at 50% of the list price upon return if there is damage. KT advertised that it "includes loss and damage insurance benefits," but if there is significant damage at the time of return, out-of-pocket costs beyond insurance may be incurred. In particular, due to the nature of Foldable 7 devices, issues that can occur frequently—such as "hinge play," "LCD creases," and "scratches"—are included among the criteria that reduce the maximum 50% benefit.
Kim Jang-kyom said, "It is highly likely that many users, not fully aware of the losses that will occur at the time of return after 24 months, were lured by marketing claiming they could use an expensive phone at half price and signed up for the pre-compensation program," adding, "This is a typical act of misleading consumers by hiding stringent conditions, and there are also serious concerns about misselling."
KT said, "We have improved the enrollment process so that customers who sign up for the pre-compensation program can clearly understand the details, and we will continue to work to ensure that customers do not experience inconvenience."