Ban on (Korean) handset subsidies to be eased
The Ministry of Information and Communication said yesterday that it plans to loosen the controversial ban on handset subsidies for select models, signaling a major change in its stance over the issue that has long divided the wireless industry.
"The ministry will allow mobile handset distributors to offer a set amount of subsidies and recognize limited subsidies for W-CDMA third-generation (3G) phones, PDAs and outdated handsets," local media quoted Information and Communication Minister Lee Sang- chul as saying in an interview.
The measure will go into effect as early as March this year, helping mobile phone users to purchase mainline models at lower prices. The discount rate will be up to 10 percent.
The revision to the rules, however, falls short of allowing carriers to offer substantial subsidies as an incentive to customers who purchase their hansets in an attempt to improve their market share, as was done in the past.
Three mobile service providers - SK Telecom, KTF and LG Telecom - are offering sales incentives to their handset distributors and sales outlets. Under the revised regulations, distributors will be allowed to offer a discount to attract more subscribers by giving up part of such sales incentives.
The ministry maintains a strict ban on handset subsidies, which formally went into effect in May 2000. Korea is one of few countries where handset subsidies, part of marketing activities by private firms, are formally banned.
Aside from the limited handset subsidies by sales representatives, what matters for the mobile industry struggling with the market saturation is that a set amount of subsidies will be given to users to promote the sales of W-CDMA 3G handsets, PDA (personal digital assistant) and outdated handset models.
SK Telecom, the country's largest mobile service provider, and No. 2 player KTF are set to launch W-CDMA 3G service known here as IMT-2000 later this year. By allowing a limited subsidy for W-CDMA 3G handsets, the government would help fledgling 3G services gain a foothold in the domestic market largely dominated by existing cdma2000 1x services based on CDMA (code division multiple access) technology.
Analysts and market experts said W-CDMA handsets will feature multimedia functions, particularly videophone and MMS (multimedia messaging service). Given that cdma2000 1x EV-DO mobile phones armed with videophone feature are priced at over 700,000 won ($593), W-CDMA 3G phones are expected to be equally pricey.
But lower handset prices supported by subsidies might encourage Korean mobile phone users to switch subscriptions to the W-CDMA services.
Another beneficiary to the change in handset subsidy policy are PDAs (personal digital assistants). Korea's major broadband carriers are now promoting wireless LAN (local area network) services, which offer portals from where people can access the Internet. Wireless LAN services are increasing their presence, and the key access device is the PDA.
PDAs, however, remain expensive and broadband carriers are arguing that they should be allowed to grant subsidies in order to increase their market share.
In addition, the ministry will allow sales outlets to sell outdated handsets at lower prices than the manufacturer's suggested retail price in order to deal with burgeoning inventories of obsolete models.
Korea has more than 32 million mobile phone users and current trends favors chic, high-powered multimedia phones. The upgrade cycle is also short, making new handset models obsolete at breakneck pace.
The increasing inventory of outmoded handset models is a continuing problem for sales outlets and mobile carriers, as they are legally blocked from offering any discount whatsoever, thereby having no opportunity to sell old models efficiently.
The ministry said the yardstick for classifying certain handsets as outdated models with regards as to whether or not they are entitled to subsidies will be whether 12 months have passed since the formal launch of those models in the domestic market. If the qualification is met, up to a 20 percent discount will be possible.
Although the information ministry has accepted demands from service providers for offering limited subsidies, the information minister said the ban will remain intact for existing mobile phones and cdma2000 1x EV-DO handsets.
(insight@koreaherald.co.kr)
By Yang Sung-jin Staff reporter
2003.01.13
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My! MIC is up to all sorts of mischief!
Will subsidies sell buggy, slow wCDMA in Korea?
LOL! |
