This blog post examines the main contents and effects of the Mobile Communication Terminal Distribution Act (MTDA) enacted in South Korea and analyzes the actual impact and significance of this law on Korean consumers.
With a population of approximately 50 million and 40 million smartphone subscribers, it is surprising that the Mobile Communication Terminal Distribution Act is not a controversial issue in South Korea. The Mobile Device Distribution Structure Improvement Act, which aims to “promote public welfare by establishing a fair and transparent distribution system for mobile communication devices, thereby ensuring the sound development of the mobile communication industry and protecting the rights and interests of users,” was promulgated in May 2014 and sparked much controversy. It was enacted amid controversy in October of the same year. The public response to the Mobile Device Distribution Structure Improvement Act has been largely negative, but I disagree. I would like to explain the reasons for my opinion in this article.
First, as stated in Article 1 (Purpose) of the Act, the Mobile Communication Terminal Distribution Act was enacted to establish a fair and transparent distribution system and protect the rights and interests of users. This can be confirmed by looking at Article 3 (Prohibition of Discrimination in Subsidy Payments), which stipulates that subsidies must be paid to each person based on the same criteria, and Article 6 (Provision of Benefits to Users Who Do Not Receive Subsidies), which stipulates that mobile communication carriers must provide benefits equivalent to the subsidies to those who wish to subscribe to mobile communication services without receiving subsidies. Before the Mobile Communication Terminal Sales Act came into effect, there were many cases where people who bought mobile phones cheaply and those who bought them expensively paid a price difference of more than 10 times. The situation where consumers are unable to obtain information on mobile phone purchases and end up paying more than 10 times the price paid by others is a clear violation of their right to know. In other words, Article 3 of the Mobile Communication Terminal Sales Act is a provision that prevents such situations from occurring, and Article 6 is a provision that compensates consumers who have suffered such damage. The Mobile Communication Terminal Sales Act is a law that protects the rights of consumers. Criticizing a law that protects them is no different from teenagers criticizing youth protection laws that prohibit the sale of alcohol and cigarettes to minors.
In addition to the direct effects mentioned above, the Mobile Communication Terminal Sales Act has additional positive effects. The two most significant effects are the prevention of excessive consumption of resources and the prevention of phone theft. First, let’s look at how the Mobile Communication Terminal Sales Act prevents excessive consumption of resources. Before the Mobile Communication Terminal Sales Act was enacted, people would buy a new cell phone rather than repair it when the screen was broken. Not only that, but many people replaced their phones with the latest models even if their old phones were still in good working order. According to data on smartphone replacement rates and replacement cycles in major OECD countries in 2013, the smartphone replacement rate reached 77.1% in 2013, and the smartphone replacement cycle was 15.6 months, ranking first among OECD countries. This is an undeniable waste of resources, and the Mobile Communication Terminal Equipment Act has completely changed this atmosphere. With the enforcement of the Mobile Communication Terminal Equipment Act, consumers began to look for mobile phones of a reasonable standard rather than the latest models, and the number of consumers turning to used mobile phones cannot be ignored. This atmosphere can also be seen in LG’s free LCD replacement service, Double Care, for the G4. A phone trader is someone who makes a profit by repeatedly buying mobile phones cheaply and selling them at a high price. They committed a kind of fraud against people who were ignorant about mobile phone prices, but they could not be punished because it was not against the law. However, under the Mobile Communication Terminal Sales Act, mobile phones must be sold at prices within a certain range, which will have the effect of eliminating phone traders.
There is a misconception that the only ones who benefit from the Mobile Communication Terminal Sales Act are telecommunications companies and mobile phone manufacturers, while consumers suffer losses. According to those who hold this view, the net profit gained from reducing subsidies for mobile devices and service fees is nearly 2 trillion won. There are even claims that the Mobile Communication Terminal Sales Act was enacted through lobbying by telecommunications companies. However, this is not true. With the enforcement of the Single Payment Regulation, it is only natural that mobile phone prices will rise and consumption will fall. In fact, since the Single Payment Regulation was enforced, the number of mobile phone purchasers has reportedly fallen by nearly half. No company would want to see its consumer base halved, no matter how much subsidies are reduced. Not only will the number of consumers decrease, but there will also be no additional subsidies for number portability or new subscriptions, so telecommunications companies will have to invest more capital to attract consumers. In fact, it is consumers who stand to gain. The benefits to consumers who were harmed before the Mobile Communication Terminal Sales Act was enacted are not visible on social media or other online platforms, and most consumers are unaware that they were harmed, making it difficult for the general public to understand. Furthermore, once the Mobile Communication Terminal Sales Act is enacted, market forces will cause the prices of mobile phones and mobile communication fees to gradually decline over time. Ultimately, consumers should not be impatient and should wait for the law to be gradually revised. In fact, the Mobile Device Distribution Structure Improvement Act was revised on April 24, 2015, raising the maximum subsidy from 300,000 won to 330,000 won and increasing the corresponding discount rate from 12% to 20%.
Some say that people with low incomes are now unable to afford mobile phones, but this is also incorrect. Looking at the data, it is clear that the reduction in subsidies has not made it difficult for people with low incomes to use mobile phones. The Mobile Communication Terminal Distribution Act does not apply to mobile phones that have been on the market for 15 months. In other words, mobile phones that have been on the market for 15 months can be purchased at a very low price without any subsidy restrictions. Before the Mobile Communication Terminal Sales Act was enacted, it was taken for granted that people would use the latest mobile phones. As a result, even people with low incomes ended up purchasing the latest mobile phones beyond their means. However, since the Mobile Communication Terminal Sales Act was enacted, it has become accepted that it is wise to purchase mobile phones that have been on the market for more than 15 months rather than blindly buying the latest models. In other words, people with low incomes are now free from trends and the gaze of others and can proudly use mobile phones that suit them. These conditions of the Mobile Communication Terminal Sales Act are also the basis for the argument that mobile phone manufacturers are unable to make a profit.
Rather than blindly accepting articles circulating on the internet and criticizing the Mobile Communication Terminal Sales Act, I think it is better to look up the contents of the law yourself and make an objective judgment. Furthermore, we must acknowledge that we cannot ignore the problems that existed before the Mobile Communication Terminal Sales Act was enacted. Although it may seem that the three mobile communication carriers are profiting greatly since the Mobile Communication Terminal Sales Act was enacted, I believe that it is a meaningful law in the long run, as it reflects consumer opinions and can be revised as necessary.
