The Positive Effects of the Device Distribution Structure Improvement Act on Consumers, Controversies, and Who is it for?

The Device Distribution Structure Improvement Act aims to establish a fair and transparent distribution order to protect consumer rights and interests, prevent overconsumption of resources, and solve the problem of phone takers. However, there is a negative public reaction, and I argue that it actually has a positive impact on consumers.

 

In South Korea, with 40 million smartphone subscribers out of a population of about 50 million, it’s surprising that the Handset Distribution Structure Improvement Act is not controversial. The Act, which aims to “promote the public welfare by establishing a fair and transparent distribution order for mobile communications terminal devices to ensure the healthy development of the mobile communications industry and protect the rights and interests of users,” was promulgated in May 2014, causing much controversy, and began to be implemented amidst controversy in October of the same year. The public’s reaction to this law has been largely negative, but I have a different opinion. In this article, I’ll explain why.
First, as stated in Article 1 (Purpose) of the Act, the Dantong Law was enacted to establish a fair and transparent distribution order and protect the rights and interests of users. This is evidenced by Article 3 (Prohibition of Discrimination in Subsidies), which states that subsidies must be paid on the same basis for each person, and Article 6 (Provision of Benefits to Non-Subsidized Users), which states that mobile operators must provide benefits commensurate with the subsidy to those who wish to subscribe to mobile services without receiving subsidies. Prior to the monopoly law, cell phones were often sold at a price difference of 10 times or more between the cheapest and the most expensive. This is a clear violation of the consumer’s right to know, and Article 3 of the Act prevents this from happening, and Article 6 compensates consumers who have been harmed. The Dantong Act is a law that protects the rights of consumers. This situation of people criticizing a law that protects them is no different from teenagers criticizing a law that protects them from selling alcohol and cigarettes to teenagers.
In addition to the direct effects of these laws, the Dantong Law has additional positive effects. The two biggest ones are preventing overconsumption of resources and preventing phone takers. First, let’s take a look at how the law prevents overconsumption of resources. Before the law was enforced, people would buy a new cell phone when their screen cracked rather than fixing it. In addition, when a newer cell phone came out, many people replaced their old cell phone even if it was still in good condition. According to ‘Smartphone Replacement Rate and Replacement Cycle in Major OECD Countries in 2013’, the replacement rate of smartphones reached 77.1% in 2013, and the replacement cycle of smartphones was 15.6 months, ranking first among OECD countries. This is an irrefutable waste of resources, and the One-Call Law has changed the game. Since the law came into effect, consumers have begun to look for the right phone, not just the latest and greatest, and we can’t ignore the number of consumers who are turning to second-hand devices. This can be seen in LG’s free liquid crystal replacement service, Double Care, which launched with the G4. Phone takers are people who make a profit by buying cell phones cheaply and selling them overpriced. They were able to take advantage of people who were ignorant of cell phone prices, but since they were not in violation of the law, they could not be punished. However, the short-circuit law requires cell phones to be traded at a set price within a certain range, which will have the effect of eliminating these phone takers.
There is a misconception that the only people who benefit from the monopoly are the carriers and the companies that make the phones, and that consumers lose out. According to proponents of the law, the net benefit of subsidizing fewer handsets and subsidizing fewer fees is nearly 2 trillion won. There are even claims that the Unified Communications Act was lobbied for by telecom companies. However, this is not true. It’s only natural that cell phone prices would increase and consumption would decrease. In fact, the number of cell phone purchases has dropped by almost half since the law was implemented. No company wants to see the number of consumers drop by half, no matter how much they cut subsidies. With no additional subsidies for number porting or new subscriptions, carriers will have to invest more capital to attract consumers. Consumers are the ones who will benefit. The benefits to consumers who were harmed before the law was implemented are not visible on the Internet, such as social media, and most of them do not realize that they have been harmed, so it is difficult for the public to realize. In addition, once the law is implemented, the price of mobile phones and mobile communication costs will gradually decrease over time due to market forces. In the end, consumers should not be impatient and wait for the law to be revised gradually. In fact, on April 24, 2015, the Device Distribution Structure Improvement Act was amended to increase the upper limit of subsidies from 300,000 won to 330,000 won and the corresponding rate discount from 12% to 20%.
Some people say that cell phones have become unaffordable for people with low incomes, but this is also not correct. If you look at the fact that cell phones have become unaffordable for people with low incomes as subsidies have decreased, you can see that this is not the case. The law doesn’t apply to phones that are 15 months old, which means you can buy a phone that’s 15 months old for very cheap without any subsidy restrictions. Before the short-circuit law was enforced, it was taken for granted to have the latest phone. As a result, people with low incomes were forced to buy the latest phones. However, since the short-circuit law was enforced, it is now considered wise to buy a cell phone that has been on the market for more than 15 months instead of buying the latest one. In other words, people with low incomes are free from fads and other people’s eyes, and can use a cell phone that suits them. This condition of the monopoly is also the basis for the idea that cell phone companies don’t make a profit.
Rather than blindly accepting articles on the internet and criticizing the law, I think it’s better to look up the details of the law and judge it objectively. We should also acknowledge that we can’t ignore the problems that existed before the law was implemented. It may seem like the three major carriers are getting richer since the law has only been in effect for a short time, but it is something that needs to be fixed by continuing to reflect consumer opinions, and I think it is definitely a meaningful law in the long run.