More than eight out of 10 Koreans support cell phone subsidies, according to a survey conducted by Rep. Kwon Sun-taik of the ruling Uri Party. Plus, seven among 10 handset sales outlet owners favor the subsidies, which were outlawed three years ago with a deadline of early next year. Based on the poll, Kwon argues the entire ban on offering financial incentives for handset buyers should be discontinued beyond next year and alternative framework must be introduced like scrapping the regulation in stages. Among 1,573 respondents across the country, 80.9 percent prefer legalizing subsidies and 70.2 percent of 433 cell phone sales agents in Seoul and the surrounding Kyonggi Province showed the same stance. "The government should no longer try to forbid subsidies entirely with a law. For the sake of end users, it should allow mobile carriers to subsidize customers," Kwon said. In order to cool down cutthroat competition among wireless operators, which had provided huge incentives for handset buyers, the Ministry of Information and Communication (MIC) prevented such offerings starting March 2003. The embargo is basically a sunset regulation that will expire next March and the ministry is now reviewing whether or not to extend the three-year interim policy. Heated Disputes Regarding the extension of the subsidy ban, the MIC has yet to decide its stance as Information- Communication Minister Chin Dae-je said during last week's parliamentary inspection. "Pros and cons struck fast to their own opinions on the issue. We are checking the viability of various possibilities from entire ban of subsidies to overall permission," Chin said. "We will host a spate of hearings afterwards before finalizing our stance because we have time to consider. I promise the MIC will come up with proper way as soon as possible." Lawmakers are also split into two opposing camps with Rep. Kwon leading the critics against prohibiting the handset subsidy. However, even Kwon did not insist scrapping the prohibition across the board. "The government policy should be tailored toward catering for the needs of customers. In order to maximize benefit of practical users, handset subsidy ban should be eased," Kwon said. "But laggard wireless operators would struggle in a rivalry against cash-rich big players should we allow the subsidy 100 percent. So we must phase out the ban in stages." Lee Jong-kul of the Uri Party sides with Kwon. "Expensive mobile phones retail as high as 800,000 won ($779), which ordinary people hard to snap up. The MIC is required to ease the prohibition for enabling them to buy such models," Lee said. He also took issue of the subsidy bar's effectiveness by pointing out the snowballing fines triggered by the regulation. In fact, the three mobile competitors have constantly violated the anti-subsidy rules and SK Telecom has been tagged with a total of 101.6 billion won in fines for breaking the law. Smaller carriers also have paid substantial amount of fines for the same reason By contrast, Rep. Suh Hae-suk made an opposite point based on performance reports from the country's three mobile operators - SK Telecom, KTF and LG Telecom. According to the data, the smallest carrier LG Telecom carved out 16.6 percent of the mobile market as of the end of 2004, up roughly 1 percent from a year before. Runner-up carrier KTF also saw its market share rise 1 percent to 32.1 percent during the cited period while business bellwether SK Telecom's declined to 51.3 percent, the lowest since 2002. In addition to diluting SK Telecom's market dominance, Suh said the policy also enhanced the bottom lines of fry carriers as LG Telecom turned from a 442.4 billion deficit in 2000 to a 22.6 million won surplus last year. "The handset subsidy ban has helped mobile competition stabilize. Therefore, the policy needs to continue beyond next year until the market can automatically secure a fair rivalry," she said. Carriers Take Different Stance Mobile operators also take disparate positions. SK Telecom prefers abolition of the subsidy prohibition while KTF and LG Telecom want extension of the temporary regulation. "Now it is time for the government to make the market decide things. We are in favor of subsidies because the benefit of customers should come first," SK Telecom spokeswoman Kim Hye-jin said. She added KTF and LG Telecom now have big customer pools and improved its financial structures through the past three years that they have the leeway to grant subsidies. As of the end of last month, SK Telecom explained 51 percent of the market with 19.2 million clients followed by KTF with 12.2 million. LG Telecom was a distant third with 6.2 million subscribers. "Even if the government abolish the subsidy ban, the market will not tilt toward open-wallet marketing blitz as smaller carriers worry since we do not have any intention to spearhead uphill competition to draw customers from KTF and LGT. You know, our self-imposed market cap amply demonstrates our will," Kim said. In May 2004, SK Telecom chief executive Kim Shin-bae vowed the company's market share will not exceed 52.3 percent through 2005 and he prolonged the span of the market cap to 2007 earlier this year. In response, KTF and LG Telecom counter the fair competition in the mobile market will vanish with the annulment of subsidy ban since SK Telecom would pour money to attract lucrative customers. "Deep-pocketed SK Telecom would channel cashes but we have no luxury to follow it. Then SK Telecom would be sure to beef up its lopsided market dominance once again," LG Telecom spokesman Lee Yeoul-keun. Regarding the 52.3-percent market ceiling, Lee also insisted SK Telecom knows a way to sidestep it. "SK Telecom would jettison delinquent customers while drawing a high average revenue per user (ARPU)- clients from us on the back of heavy subsidies. Then the carrier will be able to keep the market ceiling while boosting its bottom line alike at the expense of our profitability," Lee said. Telecom analysts present an alternative of partially permitting the subsidies to boost such new offerings as mobile broadcasting or Internet-on-the-go services. "The government is required to give a nod to providing incentives to purchasers of new service- enabled handsets like WiBro or digital multimedia broadcasting (DMB)," Dongwon Securities economist Greg Roh said. He added only the subsidies would help the offerings to take off early by prompting folks to scoop up the servicescapable phones. WiBro is a homegrown portable Internet, which enables people on the road to remain hooked up to the Net at the speed of current fixed-line broadband. KT, the country's No.1 landline operator, looks to start the service next April. DMB is a mobility-specific broadcasting that allows people to savor seamless video, theaterquality audio and data via in-car terminals or handheld gadgets like cell phone. It is now available. Roh said the MIC has a shot at allowing subsidies for phones that sport the emerging services as it did to thirdgeneration wideband code division multiple access (W-CDMA). Currently, wireless operators can provide customers with subsidies amounting to 40 percent of W-CDMA phones, which will be rolled out in a fullfledged manner next year.