South Korean telcos face stiff fine for subsidies

5G might enjoy a rep as a game-changer, but South Korean and Chinese operators are in trouble for some old-school behavior with their 5G customers.

The three South Korean telcos are reported to be facing a record fine for their illegal 5G subsidies, the official Yonhap news agency said, quoting industry sources.

They are also under investigation for poor 5G service quality.

The impending penalty should come as no surprise. The only question is why it's taken so long.

After months of dishing out hefty handset subsidies to build 5G customer numbers, the operators – SK Telecom, KT and LG Uplus – suspended hostilities in February.

They reportedly spent around 2 trillion won (US$1.2 billion) on 5G marketing after starting service in April last year, subsidizing up to 90% of the price of high-end phones like the Galaxy S10.

The Korea Communications Commission (KCC) will meet soon to discuss the subsidies and is reportedly considering fines of up to 70 billion won ($57.8 million) – well above the 51 billion won ($42.1 million) record imposed in 2018.

The law was introduced six years ago after years of repeat offending by the telcos. In one extreme example, all three were suspended for up to 90 days for excessive subsidies in 2013.

Aside from the subsidies, the Ministry of Science and ICT is now testing 5G network quality after a series of complaints, Korea Times reports.

The Consumers Union of Korea says it dealt with more than 2,000 complaints about 5G in the past year. One third of these related to the cancellation of service due to poor quality.

In nearby China, Asia's other 5G frontrunner China Unicom is copping bad headlines for its sharp 5G sales practices.

In one widely reported case, a Beijing customer found his home broadband service cut off after he failed to activate his 5G SIM card.

The user, Li Ming, had bought a 500Mbit/s broadband and 5G package in February for the princely sum of 166 yuan ($23.45) a month, according to Sina Tech. Li said he had only wanted the broadband service but couldn't find it anywhere on the Unicom website, so he ended up with the bundle.

The service was cut off in June because he hadn't used the 5G card. He added another 200 yuan ($28.26) to his account but Unicom said he could only reactivate the account by switching on the 5G service, reminding him it was in the terms of the contract.

In another case, a customer in Jiangsu was offered a free upgrade to a 20GB 5G buy, only to find it was a 49 yuan ($6.92) 5G subscription. Another customer was promised a free upgrade without penalty only to find it would cost 30 yuan ($4.24) to cancel.

Besides trying to force customers onto 5G, or to lock them in, Unicom is offering 5G upgrades for as little as 9.9 yuan ($1.40) per month.

It's clear that Unicom – not to mention its competitors – is engaged in the same mad dash for 5G subs that has possessed the South Korean telcos.

It is to no one's benefit if Chinese operators "upgrade" 4G customers to 5G but they remain on the 4G network with 4G phones. There isn't a remedy for this kind of idiocy, as the South Korean example shows, but some stiff fines might at least make people think twice.

— Robert Clark, contributing editor, special to Light Reading

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