From next month, mobile carriers will analyse subscribers’ telecommunications usage and first notify them of rate plans more suitable than their current ones. Users are expected to reduce cases of keeping plans that are more expensive than their actual usage and cut telecom bills. The mobile telecom industry, however, is expected to face pressure from potential declines in average revenue per user (ARPU) due to shifts to cheaper plans, as well as costs to build related systems.

According to the telecom industry and the Ministry of Science and ICT on Sept. 9, the optimal rate plan notification system will take effect on Oct. 1. Under the amended Telecommunications Business Act, telecommunications operators above a certain size must analyse users’ fees, terms and conditions and usage patterns, and notify users of suitable optimal rate plans. The ministry has prepared a revised enforcement decree and a draft public notice setting detailed standards ahead of the launch. Follow-up procedures, including regulatory review, are under way for the decree and the notice.

◆From 'searching yourself' to 'carrier notifies first'

The key change is that the party responsible for searching for plans shifts from users to carriers. Carriers will analyse subscribers’ actual usage information they already hold and first notify them of suitable rate plans. At present, users who want to lower their telecom bills must check their own data and voice usage, then find suitable products through a carrier website, the Korea Telecommunications Operators Association (KTOA)'s Smart Choice, or private comparison platforms.

A ministry official explained that the system is meant to eliminate the inconvenience of users having to find plans that fit them and to support reductions in telecom bills.

Under the draft notice the ministry has put up for administrative pre-announcement, carriers will calculate optimal plans by considering subscribers’ average usage over the past 6 months for voice, texts and data, and user information related to conditions for specific plans, such as age, occupation and physical conditions. For now, a plan to notify users once every 6 months is considered likely.

Carriers are required to present cheaper plans as a priority but to take users’ conditions into account. If carriers recommend the cheapest product based only on data allowances, bundled discounts or additional benefits could disappear and the actual amount paid could increase. Carriers will notify users of the analysis results and switching procedures through text messages, email or messengers, and users will decide whether to make the final change.

◆Applies first to three major carriers; budget carriers excluded for now

The system will apply first to the three major mobile carriers: SK Telecom, KT and LG Uplus. The draft notice sets the revenue threshold for operators subject to the notification obligation at 1 trillion won. The ministry reviewed a plan to include budget carriers in the system design process, but excluded them from the initial rollout after considering that analysing usage and building recommendation systems could involve significant costs.

A ministry official said it will first be implemented for the three major carriers after discussions with the industry and experts, and that it will decide later whether to expand the system to include budget carriers while operating it.

Existing subscribers who have been using the three major carriers since before Oct. 1 are also expected to be included in the notification 대상. The government and the telecom industry have agreed in principle to notify existing subscribers of optimal plans and are discussing specific timing and methods.

Once the system takes hold, it is expected to be particularly effective for users who have kept the plan they chose at sign-up for a long time. Typical examples include users who have no intention of switching carriers due to family bundles, long-term subscription discounts or memberships, but need to switch to an in-house plan that matches their current usage. For carriers, the system is a burden. If subscribers who use expensive plans despite not using much data move to cheaper plans, ARPU could fall.

◆Overseas has already confirmed effects; will it break 'plan inertia' at home

Similar systems are already operating overseas. According to the Korea Information Society Development Institute (KISDI), the European Union introduced obligations to notify users of contract expiry and provide annual optimal plan information through the 2018 European Electronic Communications Code. Ireland and Germany impose an obligation on operators to provide annual optimal plan information. Britain also operates systems to notify users of contract expiry and annual optimal plans.

Overseas cases have also confirmed effects that change users’ plan selection behaviour. A post-evaluation in Britain showed that the annual optimal plan notification system affected subscribers’ contract renewal and provider switching behaviour.

Ultimately, the actual effect on reducing telecom bills is expected to depend on the share of users who change plans. Even if carriers notify users of more suitable plans, the effect will inevitably be limited if users keep their existing plans.

A telecom industry official said, "We do sympathise with the aim of expanding users’ choice of rate plans," but added, "Because bundled discounts, additional services and contract terms vary by subscriber, it is hard to compare simply by monthly fees, and we will have to see how many users actually change plans after implementation."