S. Korea’s 5G lead and invest under threat by massive fines and policy uncertainty

South Korea’s lead in 5G technology could come under threat as other countries are making fast progress whereas investment by Korean wireless carriers becomes stalled by fines and regulations.

A planned commercial launch of the industry’s pure 5G Stand-Alone (SA) network and 28㎓ services have been put off to next year amid stagnation in 5G subscribers amid the COVID-19 fallout.

Korean telecom companies sought aggressive partnership with various companies to discover 5G-based business opportunities, such as smart factories, but cannot pursue them due to uncertainties in the monetization model. An industry official noted even the most urgent project to build a nationwide 3.5㎓ network is burdensome for now, while demand for SA and 28㎓ services remains unclear.

Multiple setbacks hamper with 5G inroads. For one, 3G and LTE (4G) frequency band reallocation for which price evaluation will begin later this year as the 3G and LTE frequency bands currently used by the country’s three major telcos expire next year.

There is uncertainty over how to calculate their charges ahead of contract rewriting and it cannot be ruled out that the telcos may pay multi-billion dollars for band reallocation. Communication failures between government ministries over the 5G network infrastructure are also afflicting them. The land ministry is considering a shift from a flat sum system to a fixed-rate system for the expenses paid by telcos for their road occupancy with telecommunication facilities, reflecting an increase in land prices.

The industry also faces additional anti-market regulations. A revised bill to the 2014 act on the prohibition of discriminatory subsidy is expected to be tabled to the National Assembly within this year, raising concerns that regulations on the size and payment method of sales incentives and subsidies may be tightened. Last week the Korea Communications Commission, the industry’s top regulator, fined a total of 51.2 billion won on the three telcos for their illegal subsidy offers to attract 5G subscribers.

In contrast, China and advanced countries are speeding up in their 5G investment. The Chinese government, China Telecom and other smaller telcos are planning to set up 630,000 5G base stations across the country by injecting 30.8 trillion won this year alone. The Global System for Mobile Communications Association (GSMA) forecasts China would account for 70 percent of the world's mobile handsets accessing the 5G network later this year.

The United States is encouraging private enterprises to spend more to rival China in 5G technology. Japan’s No. 1 carrier NTT decided to invest about 11 trillion won by 2023 in the maintenance of 5G base stations.

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