The Light and Shadow of the Mobile Device Distribution Act's 10 Years
Everything about the law that shook South Korea's mobile telecommunications market (2014-2025)
Beginning: Why was the Mobile Device Distribution Act (Dantong Act) needed?
Before 2014, the South Korean mobile phone market was in chaos. Some people bought the latest phones almost for free, while others became 'ho-gaeng' (a derogatory term for a naive customer) paying the full price. Excessive subsidy competition among telecommunication companies concentrated benefits on specific consumers, and market transparency hit rock bottom. To solve this problem, the government implemented the 'Act on the Improvement of the Distribution Structure of Mobile Device Terminals,' or the 'Dantong Act,' with the goal of providing fair benefits to all consumers.
User Discrimination
Subsidies concentrated only on number portability and high-tier plan subscribers
Opaque Pricing
Fluctuating subsidies, consumer confusion
Excessive Competition
Intensified market instability due to telcos' cut-throat marketing
10 Years of Dantong Act: Reality Different from Intent
Dramatic Change in Telco Operating Profit
One of the biggest criticisms of the Dantong Act is that it only increased telcos' profits instead of consumer benefits. In fact, after the law's implementation, the marketing expenses of the three major telcos significantly decreased, and their combined operating profit surged, exceeding 4 trillion won for three consecutive years since 2021.
Seismic Shift in Subscription Types
The Dantong Act reduced the 'subscriber poaching' competition among telcos. As a result, 'number portability' (changing telcos) sharply decreased, and 'device change' (upgrading device with the same telco) became dominant. This contributed to market stabilization but is also criticized for leading to reduced competition.
Unexpected Outcomes of the Dantong Act
As subsidy benefits decreased, consumers began to seek new alternatives. This led to the explosive growth of the 'BYOD (Bring Your Own Device)' market, where consumers purchase devices directly without being tied to a telco, and the 'MVNO (Mobile Virtual Network Operator)' market, offering affordable plans. Ironically, regulation opened the door to new markets.
More than 9 out of 10 BYOD device purchasers choose MVNO plans, making the 'BYOD + MVNO' combination the most rational consumption method.
End of a 10-Year Journey: Repeal and a New Beginning
Ultimately, the Dantong Act, which could not shed its 'ho-gaeng law' stigma, will disappear into history on July 22, 2025. However, not everything will revert to the past. Some key provisions will be maintained, and new regulations will be introduced.
❌ What Disappears
- ›Subsidy Disclosure Obligation: Telcos will no longer be obligated to disclose subsidies.
- ›15% Cap on Additional Subsidies: The limit on additional benefits from distributors beyond disclosed subsidies will be removed.
- ›Prohibition of Discrimination by Subscription Type/Plan: More subsidies can be given for number portability and high-tier plans.
✅ What is Maintained/Newly Introduced
- ›Selective Contract Discount System (Maintained): The 25% monthly fee discount in lieu of subsidies will remain.
- ›Protection of Vulnerable Groups (Maintained): Unfair discrimination based on age, region, or physical condition will continue to be prohibited.
- ›Manufacturer Incentive Submission (Newly Introduced): Device manufacturers must submit sales incentive information to the government.
Future Outlook: Crossroads of Hope and Concern
❓Will the Subsidy War Reignite?
Hope: Aggressive marketing, such as the return of 'zero-won phones,' could reduce the burden of device purchases.
Concern: The market is saturated, making it unlikely for telcos to spend massive amounts like in the past.
❓Will Telecom Fees Really Decrease?
Hope: Increased competition could lead to long-term reductions in telecom fees.
Concern: Discrimination might recur, where only 'informed' consumers buy cheaply, while uninformed ones still pay high prices.
❓Crisis for the MVNO Market?
Hope: The 'BYOD + MVNO' combination is already well-established, so there might not be a significant impact.
Concern: If telcos' subsidies increase, MVNOs' price competitiveness could weaken, leading to subscriber churn.
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