[Digital Today reporter Jin-ho Lee] Criticism is growing that while the repeal of the Mobile Device Distribution Improvement Act has somewhat reduced the burden of buying mobile phones, telecom bills are not falling. An analysis says household telecom spending is instead rising as subscriptions to paid online video services (OTT) and AI services are added. As the government reviews measures to ease the burden that also factor in OTT and AI subscription fees, attention is focusing on the effectiveness of future policy.

According to the telecom industry and the National Assembly on Oct. 13, the law was repealed on July 22 last year, removing mobile carriers' obligation to disclose handset subsidies and the cap on additional subsidies offered by retailers. Retailers can now provide additional subsidies at their discretion, which had been limited to within 15 percent of the publicly disclosed subsidy. For consumers, the structure allows the actual purchase price to fall through subsidies even if the handset's list price remains unchanged.

An analysis of household trends survey data by the National Data Policy Committee, conducted by the office of Hwang Jung-a (황정아), a Democratic Party lawmaker on the National Assembly's Science, ICT, Broadcasting and Communications Committee, showed that in the second quarter this year the lowest-income quintile's average monthly spending on communications equipment was 5,994 won. That was down 43.9 percent from 10,676 won a year earlier.

Telecom service fees, however, increased. Over the same period, the lowest-income quintile's average monthly spending on telecom services rose 0.1 percent to 47,742 won from 47,709 won. The second quintile rose 1.0 percent, the third 1.6 percent, the fourth 4.4 percent and the fifth 1.2 percent.

Hwang's office said it saw the decline after the law's repeal as stemming from expanded discounts, mainly on mid- to low-priced devices, due to subsidy competition. The rise in telecom services was attributed to increased data consumption and a growing number of subscription-based bundled products.

OTT and AI subscriptions add to household telecom burden

In particular, OTT and AI service subscription fees have become a factor increasing fixed spending. The cost burden also emerged as an issue during this year's parliamentary audit. The office of Democratic Party lawmaker Lee Hoon-ki assumed a case in which a user subscribes to all four services — YouTube Premium, Netflix Premium, ChatGPT and Claude Pro — and added up domestic payment prices. It found the monthly subscription cost was about 90,000 won, exceeding 1 million won a year.

Mobile carriers are also expanding rate plans bundled with OTT and AI services. Data submitted by the Ministry of Science and ICT to the National Assembly showed KT's mobile OTT bundle offerings increased to 14 types this year from three in 2020. KT also operates four AI bundle products. LG Uplus also expanded its lineup from three existing Netflix bundle products to 12 OTT bundle products and six AI bundle products. SK Telecom is also offering major OTT services and Google AI services as rate-plan benefits.

Lee said during the ministry's parliamentary audit, "In the past, mobile phone and internet bills were central, but now OTT and AI subscription fees have also become fixed monthly costs borne by the public." From the carriers' perspective, the bundles can be expected to help differentiate services and retain customers, but critics say consumers may choose high-priced plans beyond what they need or see their overall spending rise.

Government seeks to ease telecom cost burden, but real cuts uncertain

Bae Kyung-hoon, deputy prime minister and minister of science and ICT, replied during the earlier parliamentary audit, "I will report to the lawmaker's office a plan to cut telecom bills including OTT and AI subscription fees." No detailed proposal or timetable was presented. Unlike mobile telecom services directly provided by carriers, OTT and AI services have prices set separately by platform companies. This makes it difficult for the government to apply its existing mobile tariff-cutting policies to OTT and AI subscription services as they are.

The Ministry of Science and ICT is already pursuing policies to cut telecom bills, but their effectiveness has yet to be confirmed. One example is a system requiring notification of the optimal rate plan. The policy is designed to encourage lower bills by having the three mobile carriers regularly analyse users' usage patterns and guide them to suitable rate plans.

The timing of implementation remains unclear. The Telecommunications Business Act containing the measure passed a cabinet meeting, but reviews of subordinate regulations have been delayed, leaving the launch date undecided. Attention is also focusing on the details of implementation, as the telecom industry is asking to extend the notification cycle from the current six months to 12 months.

The telecom industry is feeling burdened. One industry official said, "OTT and AI subscriptions are packages that we offer at a lower price than individual fees while accepting losses from the company's perspective," and added, "Carriers have limited room to provide additional discounts."