Amid mounting criticism that the domestic telecom market is dominated by a few carriers and services are too expensive, the government announced last week that it plans to allow new businesses into the market to boost competition.
Under the Ministry of Information and Communication's plan, businesses will be permitted to lease networks from telecom companies with more than a 50 percent share, to offer consumers mobile services.
Such businesses are known as mobile virtual network operators, or MVNOs.
The MVNO model has been successful in the United States and Europe, with some virtual operators accounting for up to 30 percent of certain European markets. This bodes well for the MVNO system in the Korean telecom market, government officials argue.
More telecom providers will increase competition, pushing down overall mobile service rates and benefiting consumers, they say.
"Competition among existing operators has so far produced only limited price cuts. But the introduction of resale opportunities will surely be effective in lowering rates," Information Minister Roh Jun-hyong said last week.
However, SK Telecom, the nation's largest mobile carrier with a 52 percent market share, and thus subject to the government's plan, expressed skepticism.
SK Telecom operates a joint-venture MVNO with Earthlink in the United States under the brand name of Helio.
"What we've learned through the Helio business is that it is difficult to differentiate yourself from the major players on service quality. It is hard to compare the U.S. MVNO system to the Korean case, but the MVNO business will not be easy," SK Telecom's chief financial officer Ha Sung-min said last Thursday during a conference call with investors.
Other industry officials say entering the mobile market, even as an MVNO, will require significant infrastructure investment.
"To succeed in the mobile business, it is very important to have experience in dealing with customers. The cost of setting up call centers and billing systems and hiring new staff will not be small, but who would enter the already-saturated market at the cost of such large infrastructure spending?" said an LG Telecom official, pointing out that more than 42 million Koreans are mobile service subscribers.
While there is speculation that the affiliates of conglomerates like Samsung, LG or Hyundai, or large retailers might attempt to make inroads into the wireless business, only Hanaro Telecom and Onse Telecom have officially said they would consider entering the mobile business.
An Information Ministry official, who declined to be named, said MNVOs will appeal to some customers, as they are expected to offer much cheaper rates than existing carriers, which spend a large proportion of money on marketing.
"Consumers don't really care whether mobile carriers have to spend a huge amount of money on promoting a commercial or paying for retail channels. What they're interested in is whether the rates will be low enough to switch to the carriers," said the official.
"We don't know yet if the MVNO system will work or not, but one thing for sure is that the government's will is very strong now," he said.
The Information Ministry is to hold public hearings in August and submit a bill to the National Assembly in October, ministry officials said.
https://www.koreaherald.co.kr/SITE/d...0708010046.asp
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