A, who runs a telecom retail shop in Seoul, sighed over the sales policies for KT and KT Skylife's fixed-line (internet/IPTV) products. That is because when a KT fixed-line subscriber is moved to KT Skylife, the commission is reduced, and when a KT Skylife fixed-line subscriber is brought to KT, the case is excluded from commission eligibility. A said, "Isn't this effectively blocking users of KT, the parent company, and KT Skylife, the subsidiary, from moving between them?" adding, "It's like telling us not to do sales for subscribers of either company."
It has been confirmed that KT and KT Skylife operated policies that reduced or excluded distribution channel commissions when they attracted each other's fixed-line internet/IPTV subscribers. As the effect of limiting customer movement between affiliates within the KT Group appears at the sales network stage, critics say it infringes on consumer choice and weakens competition.
According to ChosunBiz reporting compiled on the 30th, KT sent nationwide agents a directive excluding from commission eligibility those customers who moved to KT's fixed-line products from KT Skylife. KT agents shared this policy with their subordinate sales outlets (which handle all three telecom companies).
In the fixed-line internet/IPTV market, shop commissions are directly connected to consumer benefits. According to the industry, when a shop attracts one fixed-line subscriber from another telecom company, it typically receives a commission of around 400,000 to 600,000 won. This money is used as the source for cash-like paybacks or gifts provided to customers. If commissions for customers moving between KT and KT Skylife are reduced, the benefits consumers can receive inevitably shrink as well.
◇ "Exclude Skylife conversions" in KT document… one-stop conversion also left out
In KT's fixed-line sales policy documents obtained by ChosunBiz, conversions to KT Skylife are explicitly listed as excluded from commission payments. The "basic operation guide for fixed-mobile bundles" and the "basic operation guide for fixed-line" each specified "Skylife single-product conversion" and "skylife single-product conversion" as excluded from commission payments. The documents also included the phrase "Warning: Absolutely no arbitrary adjustments to headquarters policy."
The same structure was found in KT's "internet one-stop conversion activation policy" document. While the document listed SK Telecom, SK Broadband, LG Uplus, LG HelloVision, D'LIVE, and CMB as eligible one-stop conversion operators, it separately specified "Skylife/HCN" as excluded. In other words, while conversions from competitors were included for support, conversions involving KT affiliates KT Skylife and HCN were removed from the policy.
Internet one-stop conversion is a system that allows users to process termination and new enrollment at once through the new operator without separately going through the termination process with the existing operator. If this process is not supported, movement between KT and KT Skylife fixed-line subscribers inevitably becomes more cumbersome than moving to another operator.
Some in the industry raise suspicions that this is a device to prevent customers from moving from KT, which focuses on high-priced products, to KT Skylife, which sells relatively lower-priced products. Since the two companies are affiliates within the KT Group, the effect is to reduce price competition within the affiliates. Based on a bundle of 100 Mbps internet and basic IPTV, KT Skylife is about 4,000 to 12,000 won cheaper per month than KT headquarters' products.
◇ Skylife also penalizes commissions if the share of KT customers is high
KT Skylife is understood to be implementing a policy that pays an "sales growth commission" only if the proportion of fixed-line subscribers who moved to it from KT does not exceed a certain level.
The sales growth commission KT Skylife pays to agents is structured so that if the share of fixed-line customers coming from KT is 7% or less, it pays up to 15,000 won per case, and if it is 7% to 12%, it pays up to 13,000 won per case. If the KT customer share exceeds 12%, it becomes difficult to receive the commission.
For example, if a particular agent attracts 500 fixed-line subscribers in a month and the number coming from KT does not exceed 60, the agent can receive a commission of 6.5 million won, and if it does not exceed 35, 7.5 million won. Conversely, if the inflow share of KT customers exceeds the thresholds, the agent could miss out on commissions worth several million won. Although agents conduct their own sales, they also attract subscribers from multiple subordinate sales outlets, so the number of subscribers they attract in a month is known to range from dozens to, at most, hundreds.
As a result, some agents that received KT Skylife headquarters' directives are said to have passed modified policies to shops, such as "if you attract one KT fixed-line customer, 100,000 won will be deducted from the commission." An industry official said, "Since the policy was implemented, it clearly has the effect of preventing KT IPTV customers from moving to KT Skylife."
In effect, customer movement between KT and KT Skylife is being restricted at the distribution network stage. In the telecom industry, critics also say it reflects an intention of "not competing to poach customers between the parent company and the subsidiary."
◇ Dispute over limiting consumer choice… possible Fair Trade Act violations
There is also an interpretation that if KT and KT Skylife effectively restricted customer movement between affiliates through distribution channel commission policies, it could lead to controversy over unfair concerted practices or abuse of superior bargaining position under the Fair Trade Act. That is because it could be seen as discouraging the attraction of certain customers by imposing disadvantages such as commission deductions on shops.
There are also issues under the Telecommunications Business Act. Without justifiable reason, it is prohibited to restrict service subscriptions or to unfairly provide economic benefits with discriminatory treatment by user. If differentiated commission payments lead to reduced gifts or paybacks, the benefits available when KT and KT Skylife customers move between each other would decrease, potentially escalating into a consumer discrimination issue.
Shin Hyun-du, head of the Korea Consumer Association, said, "Even if KT and KT Skylife are separate corporations, if a structure has been created that effectively blocks customer movement between the two companies in the distribution network, it is hard to avoid controversy over infringing on consumer choice," adding, "It is also necessary to examine whether the commission policies lead to reduced customer benefits."