South Korea Overhauls Budget Phone Market After 15 Years, Aims to Foster 3+ Independent Carriers

South Korea's government is set to implement a significant reform of the budget mobile carrier (MVNO) market, aiming to move beyond the current model of simply reselling plans from the three major mobile network operators. The initiative seeks to foster a more competitive landscape by nurturing new players with their own infrastructure, capable of offering a wider array of plans and services.

The Ministry of Science and ICT announced the 'Plan to Promote New Competition and Innovation in the Mobile Communication Market.' This plan envisions a transition to an 'MVNO 2.0' era, characterized by maintained price competitiveness alongside enhanced customer service and user protection. A key component is the institutionalization of MVNOs that possess their own facilities. Regulatory changes are planned for August to establish legal statuses and facility requirements for 'service-type MVNOs' (partial MVNOs) and 'independent MVNOs' (full MVNOs), differentiating them from the existing resale model.

Service-type MVNOs will be required to own some infrastructure, such as subscriber identification and authentication systems, or billing and payment functions, enabling them to design unique plans and services. Independent MVNOs will go a step further by also managing traffic. The government aims to foster at least three such service-type and independent MVNOs by implementing tiered wholesale rates based on the level of infrastructure owned, thereby incentivizing investment in self-owned facilities. The market will also open to new entrants by allowing virtual network support providers (MVNEs) to offer MVNO infrastructure to other companies, facilitating easier entry for non-telecom firms in sectors like finance, retail, and leisure.

Since its launch in 2011, the South Korean MVNO market has grown primarily through the resale of network and plans from the three major carriers, leading to a proliferation of 59 companies and over 10.48 million subscribers by April. However, this has resulted in intense, often unprofitable, competition among smaller players, with insufficient investment in customer service and security. Some have even been criticized for facilitating fraudulent activities. To address these issues, the government will also introduce measures to maintain price competitiveness, including providing wholesale access to new data-saving options and reducing wholesale rates for some 5G plans. Additionally, a management and exit system for underperforming MVNOs lacking adequate user protection will be implemented, alongside efforts to enhance customer service quality and facilitate mergers and acquisitions without disrupting subscribers.