A Strategy to Lure Mobile Users to 5G Service?
As South Korea`s three major mobile carriers have all released unlimited data plans, market watchers are expressing concern that the quality of LTE communication would drop due to a rapid increase in data usage. Considering that LTE frequency bands are limited, a considerable amount of users who have subscribed to low to mid-priced rate systems can suffer slower communication speeds due to heavy users who use unlimited data without speed limits.
According to the Ministry of Science and ICT (MSIT) on July 22, the top 1 percent users in terms of LTE data usage accounted for 14.99 percent of the total data consumption in March, while the top 10 percent took up 60 percent. Such concentration of data usage is more likely to get worse with the rollout of the completely unlimited data plans.
The three mobile carriers have prevented a sudden rise in data usage until now by providing 15 to 35 gigabytes for a basic package and additional 2 gigabytes a day when the daily data limits are all consumed. However, there is no limit in data usage for users of the unlimited data plans.
In addition, demand for these new plans is highly likely to grow as they are priced at 88,000 won to 100,000 won (US$76 to US$88). The existing uppermost rate plan of the three firms is priced at around 110,000 won (US$97). In fact, LG U+, which launched an unlimited data plan in February, saw the number of new users subscribing to the new rate system increase by 9 times in the first quarter of this year compared to the previous quarter.
The problem is that the three mobile carriers have a limit in accommodating growing data usage. This is why they had refrained from releasing unlimited data plans for the past seven years after the launch of the LTE service in 2011.
Concerns over worse lower communication quality are growing as the three mobile network providers haven’t considered the introduction of the unlimited data plans in their communication network investment plans. SK Telecom Co. invested 1.98 trillion won (US$1.75 billion) in network and system extension last year and plans to make an investment of 2.1 trillion won (US$1.85 billion) this year. LG U+ Corp. invested 1.14 trillion won (US$1 billion) last year and plans to invest 1.25 trillion won (US$1.1 billion) this year. KT Corp. invested 2.4 trillion won (US$2.11 billion) in network management last year but it will invest 2.3 trillion won (US$2.03 billion) this year. KT has also reduced its investment in wireless networks from 700 billion won (US$616.47 million) last year to 604.2 billion won (US$532.1 million) this year. Given the situation that LG U+ experienced network failures twice last year and SK Telecom once this year, the current level of investments can repeat network failures.
An official from the telecommunications industry said, “The three mobile service providers decided to release unlimited data plans because they want to lower the burden of the LTE network by encouraging a large number of customers to change their rate system to the 5G and secure a new profit source when they roll out the 5G service in March next year. However, SK Telecom and KT must feel pressured as they have jumped into the unlimited rate system market as a defensive measure after LG U+ launched the new rate system in February and they have less amount of frequency bandwidth securement compared to the number of subscribers.”