Telecom Bills Rise Despite Subsidy Law Changes and New Services

Impact of Subsidy Law Repeal

Despite the recent repeal of the Mobile Device Distribution Improvement Act, which was designed to reduce the cost of mobile phones, households are experiencing higher telecom bills. This indicates that while phone purchase costs may have fallen, ongoing telecom expenses are increasing due to more subscriptions to paid online streaming services (OTT) and artificial intelligence (AI) tools.

The law, which was removed on July 22, 2022, lifted the requirement for mobile carriers to disclose handset subsidies and removed the cap on additional discounts retailers could offer. This shift has allowed retailers to provide greater subsidies, although actual phone prices may remain the same.

Household Spending Trends

A study conducted by the National Data Policy Committee and summarized by Democratic Party lawmaker Hwang Jung-a revealed interesting trends in household spending on telecom services. According to the analysis, the average monthly spending on communication devices for the lowest-income quintile dropped significantly from 10,676 won to 5,994 won, a decrease of 43.9%.

However, telco service costs did not mirror this decline. Over the same period, spending on telecom services in the lowest-income group edged up by 0.1%, reaching 47,742 won. Increased rates were noted across other income brackets as well.

Subscription Services Contributing to Costs

The rise in telecom bills has been attributed to users subscribing to multiple OTT and AI services. For instance, a household subscribing to popular services like YouTube Premium, Netflix Premium, and AI services such as ChatGPT and Claude Pro could be spending approximately 90,000 won monthly, which equates to over 1 million won annually.

Telecom providers are responding by bundling these OTT and AI services into their rate plans. For example, KT has increased its mobile OTT bundle offerings from three in 2020 to 14 in 2023, while also providing four AI-related packages. Similarly, LG Uplus has expanded its offerings significantly, highlighting the increasing focus on combined services.

“Mobile phone and internet bills were once central, but now OTT and AI subscriptions are becoming substantial monthly expenses,” commented Lee Hoon-ki, a Democrat lawmaker.

Government Efforts and Future Policies

Bae Kyung-hoon, Deputy Prime Minister and Minister of Science and ICT, recently discussed plans to address rising telecom costs during a parliamentary hearing. However, no specific measures or timelines were provided, making consumers skeptical about potential pricing relief.

OTT and AI service pricing is determined by separate platform companies, complicating the government's ability to impose reductions uniformly. Currently, the Ministry of Science and ICT is exploring policy adjustments aimed at decreasing telecom bills, including suggesting systems to inform users about optimal rate plans based on their usage. However, the effectiveness and timing of these policies remain uncertain.

The proposed system would help consumers choose better rate plans based on their actual usage, but implementation has been stalled by regulatory delays. The telecommunications industry is also expressing concerns, as profit margins tighten under intense price competition.

One industry representative stated that profit-sharing arrangements with OTT and AI service providers may limit the ability of telecom companies to provide further discounts, leading to rising overall costs for consumers.