News Analysis; Abrupt Ban on Handset Subsidies Sparks Dispute

Article excerpt

As the Ministry of Information and Communication decided Wednesday to ban the handset subsidies from June in the name of improving trade balance, manufacturers cry foul while mobile carriers struggle to hide their smiles.

CDMA (code division multiple access) equipment and handset makers, in particular, expressed dismay toward the ministry's abrupt about-face over the handset subsidies issue.

Sources of CDMA manufacturers said the new policy is feared to put a damper on the product development, an anachronistic idea that stifles the free market principle.

``Ordering for parts and productions are being made at least three months before the actual shipping, but the ministry just pushed through the policy without considering its adverse effect,'' an official at a CDMA equipment maker said, requesting anonymity.

He expressed displeasure at the ministry which followed the demand from service providers while ignoring the supply mechanism.

Consumers also appear disappointed at the policy which will hike the initial subscription fee as much as 300,000 won overnight.

The announcement for the abolition of the handset subsidies did not include any conditions to guarantee the benefit that consumers will receive in return for the higher initial subscription cost.

Adding confusion to the dispute is the notion that the government had attempted to reduce the handset subsidies last year but failed to force service providers to suspend the promotional tool altogether.

All the more confusing is that the ministry released a report on the record of export by the info-tech industry and praised its role in improving the trade balance.

In the report, the ministry argued that the increasing export of mobile handsets and CDMA equipment played a key role in helping the nation turn profits in the first-quarter of trade.

In the first three months of this year, the info-tech industry posted around $540 million in trade surplus, while other industrial sectors are fighting with sagging export volumes. …