KT ended its "advance compensation program," which discounts the list price when purchasing the iPhone 17 series on the condition of returning the device after two years, early on the 31st of last month. The reason was that, as reported by ChosunBiz on Oct. 10 (see "The 'pre-compensation' for used phones that drew a penalty surcharge 10 years ago resurfaces… more than half of KT subscribers are in their 50s or older"), the advance compensation program restricts users' service use or termination. The advance compensation program allows customers to sign a three-year installment plan when buying a handset, then receive a 50% discount on the list price at activation in advance on the condition that they return the device and change handsets after two years.
According to the industry on the 3rd, KT decided to move up the subscription period for the iPhone 17 advance compensation program by one month, from the originally announced Nov. 30 to the 31st of last month.
Critics said the advance compensation program is effectively similar to the "pre-compensation system for used phones," which the Korea Media and Communications Commission halted with a penalty surcharge due to consumer harm concerns 10 years ago. In 2015, the Mobile Device Distribution Improvement Act was in effect, so paying excessive subsidies in addition to legally provided subsidies was the issue. In particular, not only was the pre-compensation system for used phones tied to high-priced plans, but if users failed to meet the mandatory use period, they had to return the entire pre-compensation amount at once as a penalty, sparking controversy. Moreover, the three telecom companies violated the Telecommunications Business Act by failing to properly notify subscribers of the return conditions for used phones. Ultimately, the Korea Media and Communications Commission imposed a penalty surcharge of 3.402 billion won on the three telecom companies, saying the pre-compensation system for used phones caused consumer harm.
Of course, unlike when the pre-compensation system for used phones was implemented, the Mobile Device Distribution Improvement Act has now been abolished. However, criticism arose that the advance compensation program restricts user choice. To secure up to a 50% discount two years after subscribing to the service, users of KT's advance compensation program must change devices on a KT line. Even when the 24-month contract ends, it is difficult for users to switch to another carrier. In addition, if they port their number or change devices during the mandatory use period (24 months) while paying the monthly fee for the advance compensation program, they must return the entire amount discounted in advance, not just a portion.
Controversy also flared as more than half of those who enrolled in the earlier advance compensation program for the Samsung Galaxy Z Fold 7 and Flip 7 were in their 50s or older, suggesting consumers signed up without sufficient understanding. According to data titled "Fold 7 and Flip 7 advance compensation program sales status," submitted by KT to People Power Party lawmaker Kim Jang-kyom, a member of the Science, ICT, Broadcasting and Communications Committee of the National Assembly, 30.3% of users were in their 50s, 17.3% in their 60s, and 5.2% in their 70s.
Kim Jang-kyom said, "Even the Korea Media and Communications Commission did nothing until concerns were raised about KT's advance compensation program," and added, "Pre- and post-market oversight in the telecom sector must work properly so that such misselling never happens again."
KT said it decided to end the subscription deadline for the iPhone 17 advance compensation program early "to closely listen to customers' voices and make improvements."