Mobile Device Subsidy Ban Lifted
On July 22nd, the government officially repealed the Mobile Device Distribution Improvement Act (MDDIA). The MDDIA was enacted in October 2014 to prevent telecommunication carriers and retailers from selling smartphones with excessive subsidies to improve the transparent distribution of mobile devices. Through MDDIA regulations, telecommunication companies were required to report the official cash subsidy for each mobile handset model, with retail shops only allowed to offer up to 15% of the initial subsidy with additional incentives. Following this repeal, telecommunication carriers now provide common subsidies, with retailers able to set unlimited additional subsidies. For example, if the common subsidy of a ￦1 million mobile phone from the factory is ￦500 thousand, additional subsidies can vary from the previous limit of 15%, depending on the retailers. Furthermore, it is now possible to receive additional funds with the optional contract discount system, which gives discounts of up to 25% on monthly communication fees instead of subsidies. Additionally, certain types of subsidies such as paybacks, which provide cash subsidies and were previously illegal, are now possible if clearly stated in the contract. The lifting of the subsidy ban is expected to boost competition in the telecommunications market, provide fairer mobile device prices to consumers, and reduce illegal subsidies that have continued despite the ban. Although concerns have been raised as the repeal could trigger market disruption, major telecommunication companies have agreed to work closely with the Korea Communications Commission (KCC) to disclose the amount of subsidy daily on their respective websites.