Ten years ago, South Korea introduced a law intended to bring transparency and fairness to its mobile phone market: the "단통법" (Dantong Law), officially the "Mobile Device Distribution Structure Improvement Act." The premise was simple: force mobile carriers and retailers to publicly disclose subsidy amounts for handsets, preventing them from offering different deals to different customers. While the intentions might have seemed noble, the law quickly became a source of widespread frustration and is now being abolished.
Prior to Dantong Law, the mobile phone market was a chaotic landscape of competing subsidies. Retailers engaged in aggressive price wars, offering vastly different deals depending on the customer's negotiation skills and access to information. This system often disadvantaged vulnerable consumers, particularly older individuals who were less likely to be aware of the best deals and ended up paying significantly more for the same device. The subsidy system was opaque and discriminatory.
The government argued that this chaotic competition was also detrimental to businesses. Mobile carriers and manufacturers were pouring vast sums into marketing and subsidies, leading to higher costs for everyone. The practice of bundling expensive data plans with handset purchases was also seen as forcing unnecessary overspending on consumers.
The stated goal of Dantong Law was to alleviate this burden on consumers. However, a moment's reflection reveals the inherent flaw in the legislation: it essentially eliminated competition. Predictably, the law resulted in higher perceived mobile phone costs for consumers and a reduction in available subsidies. Once carriers and manufacturers no longer needed to compete on price, they had little incentive to offer discounts. It was a win for the carriers at the expense of consumers.
Within a month of its implementation, public opinion polls showed that 63.6% of Koreans believed the law favored mobile carriers and would ultimately harm consumers. Public anger was palpable. The government's response was, to put it mildly, underwhelming. A now-infamous quote from an official at the Korea Communications Commission (KCC) stated, "Over time, if mobile carriers have excess revenue, they will surely lower rates."
However, years passed, and handset subsidies never recovered. Now, a decade later, the government is using the same justification – consumer welfare – to justify abolishing the very law they introduced. The irony is thick.
Many believe that Dantong Law further disadvantaged smaller handset manufacturers like Pantech and LG, contributing to their decline in the market. Meanwhile, as predicted, mobile carriers saw their profits soar.
Even with the abolition of Dantong Law, it remains to be seen whether carriers will return to the aggressive subsidy competition of the past. The mobile landscape has changed significantly. Handset replacement cycles are longer, and carriers are less focused on aggressive subscriber acquisition. Some analysts predict the law's removal will have minimal impact.
The situation bears a striking resemblance to another controversial policy in South Korea: the fixed book price system (도서정가제). This law, also intended to address price gouging, has similarly failed to achieve its stated goals and remains in effect. The parallels are unsettling. Both cases demonstrate how well-intentioned interventions in the market can have unintended and detrimental consequences.
The repeal of Dantong Law marks the end of a controversial chapter in South Korea's mobile market. Whether it truly benefits consumers remains to be seen. The whole saga serves as a cautionary tale about the complexities of market regulation and the importance of anticipating unintended consequences. It appears the lesson, that suppressing market competition rarely benefits the consumer, has been learned the hard way.
Comments
Post a Comment