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Illegal S. Korean subsidies return for iPhone 6 despite new law

November 3, 2014

New telecom law becomes ineffective; regulator issues warning

ustomers queue to buy Apple's iPhone 6 at a mobile phone store in Goyang, Gyeonggi Province, early Sunday. Some mobile phone retailers allegedly provided excessive subsidies for the 16-gigabyte model on Saturday and Sunday, which is illegal under the new telecom act that prohibits subsidies of more than 300,000 won per phone. (Yonhap)

Customers queue to buy Apple’s iPhone 6 at a mobile phone store in Goyang, Gyeonggi Province, early Sunday. Some mobile phone retailers allegedly provided excessive subsidies for the 16-gigabyte model on Saturday and Sunday, which is illegal under the new telecom act that prohibits subsidies of more than 300,000 won per phone. (Yonhap)

By Yoon Sung-won

Illegal handset subsidies to lure customers into buying new iPhone models have returned to the market, rendering the new telecom law designed to prevent such practices almost ineffective.

The Korea Communications Commission (KCC), the nation’s telecom watchdog warned the three mobile carriers ― SK Telecom, KT and LG Uplus ― against such practices and pledged to enforce “tough measures if any illegality is confirmed.”

An expert pointed out more customers who paid the regular price to buy the handset will suffer disadvantages unless the government establishes strict punishment for such illegalities.

“The current law stipulates that smaller retail stores other than official franchise outlets of mobile carriers be subject to punishment in case of any illegalities. This means that even the chief executive officers may fall under criminal charges, stripping them of their positions,” said Choi Nam-gon, an analyst at Yuanta Securities, Monday. “In terms of the matter of responsibility, it is obviously the mobile carriers’ because the subsidy must have come from them, not from the private purse of small retailers or dealers.”

According to the telecom industry and news reports, a 16-gigabyte iPhone 6 was sold at between 100,000 and 200,000 won in some online handset shops, retail stores and private dealers on Saturday, one day after the launch of Apple’s latest smartphone in the country.

The factory price of the model was set at 789,900 won and the maximum about of subsidy reported on Friday by three mobile carriers was about 250,000 won. The telecom act regulates that any provision of a subsidy over 300,000 won as illegal.

After the news, the KCC urgently announced Sunday that it will strengthen the crackdown on the illegal provision of subsidies, and summoned the heads of the three telecom companies to warn them.

However, the companies denied direct involvement and said that it is impossible to watch and confirm all the illegal practices committed by retailers and phone dealers.

“We will try to protect our customers, but it is difficult to monitor all the illegal provisions of excessive subsidies because many of these illegalities are done outside our surveillance,” a public relations official at SK Telecom said.

A KT spokesman also said, “Some retailers and dealers provide the incentives the company provides in order to encourage good performances as subsidies which, in many cases, become illegal. We will do what we have to do as a company in the local telecom industry as we promised to at the recent KCC meeting. But it is difficult to monitor all of them.”

LG Uplus declined to comment on the matter.

Customers who already bought the iPhone 6 paying the full price expressed regret about the irresponsibility of both mobile carriers and the government.

“The government claimed to protect our consumer’s rights with the new telecom act and the mobile carriers promised to benefit us, but they both disappointed me,” an anonymous online user said in a South Korean online IT community. “I had felt good to be one of the first iPhone 6 users in Korea, but now I feel like a complete fool.”