Mobile handset subsidy policy in Korea: historical analysis and evaluation

With increasing competition in the mobile communication market in Korea, the policy of subsidising mobile handsets has become an on-going issue causing considerable controversy. This paper analyses the development of handset subsidy-related policies in Korea from 1997 to 2001. In particular, it considers the multiple regulatory schemes and feasibility of regulatory policies from the three authorities: the MIC, the KCC and the KFTC, all of which were involved with the handset subsidy policy in Korea. In April 1999, these authorities eventually abolished the obligatory subscription period that had underpinned the handset subsidy and finally banned it in June 2000. These decisions affected each of the players differently, ranging from a positive impact on the mobile communication carriers to a negative impact on the handset manufacturers. In addition, conflicting approaches by the different authorities created inconsistencies in the handset subsidy policies. This paper shows that multiple regulatory schemes designed to control handset subsidy policy without consensus increases market uncertainty. It reviews the feasibility of the ban on handset subsidies by regulatory enforcement. With consensus and agreed regulatory goals and consistent, stable and predictable policies, the regulatory costs of the handset subsidy related policy can be reduced.