How Much Regulatory Interference Is Too Much: Korea Case

Techdirt readers will have learned by now that we are lukewarm to regulation. Government interference in free markets usually ends up causing more collateral damage than a Falluja sortie. And that counts double when it’s a technology market, where the underlying rules change with every new invention. However, we sometimes find ourselves questioning just how “free” certain markets are, and thus whether a little gubernatorial guidance might not improve the lot of the nation. True “free” markets require perfect information, and adequate choice for the consumer to select another vendor, either of which exists only in our economics texts.

But even if we see the role of a law or a rule here or there, we certainly don’t understand the the degree to which the Korean government gets involved with the telecom market. The Korean Ministry of Information and Communication (MIC) launched WLNP on January 1 this year. The MIC staggered the rollout such that customers could only take their numbers when leaving the biggest carrier, SK Telecom. Only months later did LNP apply to second place KTF, and only next year will smallest carrier LG Telecom’s customers be able to leave with their phone number. In January, we commented that this is unfair to LG customers who want to leave, but the MIC was heavy-handed in their market-making. Ironically, the end result of WLNP has been a net gain for SKT, who has lost 310k subs, but gained back 340k from KTF. KTF has been the net loser, churning off 260k subs while churning in just 196k from SKT. LGT, protected from churn, has gained 230k subs. Meanwhile, the MIC also forbids handset subsidies, and this year they penalized all three carriers for illegally subsidizing terminals. The penalties took the form of a staggered, one-month hiatus from taking on new customers for each of the carriers. So while the WLNP stimulated the competitiveness of the carriers early in the year (but excluded LGT from needing to be competitive), the sales hiatus has since quelled the earlier marketing blitz. The MIC appears, instead of laissez-faire government, to be more like a mob boss allocating rights and territory to his capos… cut a little here, give a little there, don’t let anyone get too big, and bada bing! Note to the MIC: impose fines if you want to penalize a carrier. But by preventing sign-ups and restricting WLNP, you penalize consumers who want to move as much as you penalize the company. You aren’t just interfering with telecom companies, you are making consumer’s decisions for them. When is someone going to get angry?

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