Korea's unlimited LTE not all that unlimited (update)

Metaratings
19 Apr 2014
00:00
Article

Recently I posted about South Korean cellcos launching unlimited LTE plans at the start of this month, which seemed unusual given efforts by cellcos in other markets to put an end to unlimited mobile data plans, which were unsustainable in the post-iPhone/phablet age.

Wondering if this was either the vanguard of a move back to unlimited data or a reflection of specific market circumstances, I put that question to Ovum analyst Nicole McCormick, who advised cellcos early on to avoid the unlimited data trap when pricing LTE.

Her answer – it’s a Korea thing.

"This is an idiosyncratic move based on a specific market situation that involves a government that is involved in tariff setting and wants to encourage greater market competition (eg through MVNOs and tariffs, but not handset subsidies)," she told your reporter by email.

The breakdown goes like this:

1. SK Telecom actually introduced unlimited LTE a year ago as a response to the inauguration of President Park Geun-hye, who actually included unlimited LTE as part of her campaign platform to lower telecoms costs for consumers.

2. As with the plans introduced this month, they were not “unlimited” in the strictest sense of the word – users choose a data cap and are charged an extra monthly fee if they exceed it, and their data speed is throttled down to as low as 400 kbps.

The difference between those plans and the new plans, McCormick said, is that the new ones are “more consumer friendly for big data users (eg 2GB daily limit once the user has surpassed their monthly data allowance)”. But in both cases, trends in data consumption suggested that the majority of subscribers to unlimited plans were unlikely to exceed their data caps anyway, making the extra fee and throttling a moot point for everyone except the really heavy data users.

3. The “unlimited” plans are part of a shift in strategy by South Korea’s cellcos to compete on tariffs instead of handset subsidies, which has gotten them into repeatedtrouble with the KCC.

4. McCormick adds that while the plans give cellcos an opportunity to upsell heavy data users to a higher monthly plan, “The issue is where do these consumers go from here? The point of good tariffing is to monetize data by encouraging the upselling of users. Truly unlimited data plans do not do this, nor do they align revenue with costs.”

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