The number of mobile phones in use in Korea is about 52,510,000, outnumbering the entire population of Korea. This means that the mobile phone is a necessary tool for a Korean in modern life. In this situation, the Black List system of International Mobile Equipment Identity (IMEI), going into effect beginning May 1, has got consumers concerned about fees of using the phone, especially to undergraduate students. What is the Black List system and how will it change the mobile-phone market? Can the Black List system be good for our society and culture?
Enforcing the IMEI Black List System
IMEI, identification number of mobile phones
IMEI is an identification number system for mobile phones that goes into effect the instant a manufacturer releases a mobile phone. It is adjusted for three and four generation phones. It consists of 15 numbers, and every user can confirm the IMEI number. If users have cell phones from overseas, they could confirm it by calling ‘?#06#.’ However, if users have domestic mobile phone, they should check via downloading smartphone applications.
▲Consumers can easily fine out the IMEI number by calling ‘?#06#’ or downlaoding smartphone applications.
IMEI White List system VS IMEI Black List system
[The White List system]
In the White List system, which has been in effect up to now, users can use their phones only if telecommunication firms register the IMEI numbers. But if the telecommunication firms do not register the IMEI numbers, the phones cannot be used. This system exists on the premise that all mobile phones can create problems. So after the telecommunication firms verify whether their phones are legitimate or not, they register the IMEI numbers so that people can use the phones.
[The Black List system]
In the Black List, the IMEI number of the mobile phones that cannot be used is listed by Korea Association for Information & Communication technology (KAIT). It is different from the White List system in that its premise is that all mobile phones must be right, so do not need to be checked. Accordingly regardless of the registration of the IMEI number, with the Black List, people can use their phone only if they have a universal subscriber identity module (USIM)*. If problems occur or the user loses the phone, the IMEI number of the phones is then listed on the black list.
* USIM (Universal subscriber identity module)
The USIM is combined with a subscriber identity module (SIM) card that has information about the user and universal integrated circuit card (UICC). It can identify the phone user and make global roaming or e-commerce connections. It is loaded onto 3G and 4G phones.
▲ USIM is located at the back of phones. It could be replaced to another USIM.
Going from the White List System to the Black List System : What Are the Changes?
Changing the flawed distribution structure and hiding the bubble price
Until now, under the White List system, the telecommunication firms have had control in selling mobile phones, not the manufacturers that make the phones. This is because of the following reasons: the mobile phone manufacturers such as Samsung sold phones to telecommunication firms, such as SK Telecom. Then the telecommunication firm registered the IMEI number and sold the phones through its agents. This led to a bad distribution structure because the telecommunication firms usually exaggerated the price of the phones, providing subsidies at their customers’ expense. For example, even though there is a mobile phone that costs only 500,000 won, some telecommunication firms exaggerated the price, raising it to 1,000,000 won, and thus deceiving the customers. That is why each telecommunication firm suggests the price of the same phone differently. They then advertised to the customers that the telecommunication firm would discount this price with a subsidy by 300,000 won, resulting in the firms raking in an extra 200,000 won from the customer through this deception. In this situation, the customers believe they are getting a good deal but instead are having to pay a lot more.
When the Black List system takes effect, this practice of gouging the customers will come to an end and the customers will be able to buy their mobile phones at the prices suggested by the manufacturers. Therefore, it will also change the flawed distribution structure.
▲ Under the White List system, consumers often buy new mobile phone with subsidy the telecommunications provide. But there are usually bubble price of the phones and actually consumers could not have advantages on subsidies.
Manufacturers and telecommunication firms do their work more specifically
The change to the Black List system will regulate how the manufacturers and telecommunication firms do their work as well as change the flawed distribution structure. For manufacturers, under the White List system, they used to act according to the practices of telecommunication firms because if they could not sell their phones, they could not make profits. So they tended to release their products, adjusting to the communication firms’ dictates. However, the manufacturers can now sell their products directly to the customers and they can concentrate more on developing new products. Also, the telecommunication firms can concentrate on the quality of communication and other services, performing their own role better. So the telecommunication firms, under the Black List system, will now attract their customers solely by the quality of their communication and associated services, but not products.
Buying a mobile phone and paying for cellular charges separately, thus reducing the overall expense of mobile communication
Bringing these changes with the introduction of the Black List system will help the customers buy their mobile phones directly from the manufacturers just as they buy a TV or a camera at a department store. After they buy the products, they can then go to the agents of the telecommunication firms and decide how they will pay for their cellular charges.
With the Black List system, customers will be able to buy their mobile phones and pay their cellular charges separately. People will be able to choose what they want regardless of which telecommunication firm they go with. Also, the fees are not connected to the price of the phone, and this is economical and rational and good for the consumers.
Also, we can expect that this system will reduce the costs of mobile communication. According to the data collected by Lee Kyung-jae, who was the member of former Hanara Party, charges can be reduced by about 1,540 won per month if consumers register for the optimum fees program using same amount of text, data, and calling, standard with the ‘All in One 45.’ Among people who use flat-rate program, going with ‘All in One 45 (Table Ⅰ),’ someone used as follows: calls: 253 minutes, texts: 224 times, and data: 106 MB. And all of this costs about 56,000 won including surtax. However, due to the introduction of the Black List system, consumers could save 1,540 won per month because there will no longer be any restrictions about fees, which would allow them to choose the optimum fees for them. A Korea Communication Commission official said, “Separating the costs of the mobile phone from the costs of communication makes the costing system economical way to the users and will lower the burden of communication expenses.”
Because of these reasons, the government introduced the IMEI Black List system. Especially, different from past years, this was discussed by a task force team consisting of members of the Ministry of Strategy and Finance, the Korea Fair Trade Commission, and the Korea Communication Commission, not just civil groups and the National Assembly.
However, considering the society and culture of Korea, is it a good decision to introduce this system? Can it bring the anticipated positive effects?
The Black List System, Can It And Will It Work?
So far, we see how the Black List system could be good for mobile phone customers, but let us examine how effective it will be, considering Korean society.
Could it accelerate the gap between the richer and the poorer manufacturers?
The Black List system can change the flawed distribution structure between manufacturers and communication firms. However, it could also create a bigger gap between manufacturers, especially between the rich manufacturers and the poorer. Samsung and LG have their own distribution systems and will not be burdened by this new system. They see it as a nice opportunity to sell their products directly to consumers. Samsung has distribution spaces such as Digital Plaza and Samsung Mobile where they handle all Samsung products, including mobile phones. LG Electronics, of course, has the Best Shop handling only their products. So both these companies can deliver their products through their established distribution channels.
However, Pantech, HTC Korea, Motorola Korea, and others do not have distribution channels, and this is potentially a huge burden to them. Under the Black List system, consumers go to the manufacturers to buy their cell phones. But the manufacturers that do not own distribution channels are not able to promote their products so easily, so they have no choice but to sell their products through another distribution company, such as Himart, and make a contract with them on marketing strategy.
It is hard to say right now that changing the distribution structure will actually harm the poorer manufacturers. For them, distribution is handled by other big distribution companies instead of the telecommunication firms. Since Samsung and LG Electronics have their own distribution channels, they could gain even more profit, causing a larger gap between the rich and the poorer manufacturers.
Appearance of new cell phones and the Korean appetite for rapid change
Under the IMEI White List telecommunication firms force consumers with flat fees program to keep using their services and fees for years, or face penalties. The Black List system will get rid of this irrational contracting fee system. If a new mobile phone is released, however, could this benefit consumers who like rapid changes in their cell phones?
According to a survey released by Recon Analytics, a market-research company, Koreans change their cell phones on average every 27 months. Compared with the Japanese who change every 36 months and Italians who change every 51 months, Koreans change their mobile phones faster than most people from other countries. Especially Koreans in their teens and twenties who are more concerned about new trends, change phones unnecessarily, regardless of whether they need to or not. Those who buy phones a lot under the White List system will probably change their phones more often under the Black List system when a new mobile phone is released. Park Jin-pho, team leader of LG U plus at HUFS station branch, said, “The introduction of the Black List system and disappearance of contracting charge system could make people think it is a useful and economical tool. However, looking at the final outcome, the disappearance of the contracting charge system could accelerate an excessive consuming culture.”
What will happen under the Black List system, if we lose mobile phone?
Koreans use mobile phones more often than citizens of any other country. Looking at table Ⅲ, we see that the average Korean is on the phone 320 minutes per month; three times more than the Germans and twice the Japanese. People who use their cell phones more have strong attachments to them, which would be terrible for them if they should lose their phone.
Under the White List system, when people lost their phones, they could cut off their services and stop others from using their phones by simply calling their telecommunication firm, because the telecommunication firms supervised and controlled the numbers and IMEI of the phones. Choi, a student at Sogang University, said, “Last winter vacation, I lost my cell phone while I was on an overseas trip. I did not know what to do. But after connecting with my telecommunication firm and reporting that I lost my phone, they blocked other people from using it. It gave me peace of mind, I can tell you that.”
Until now, when a person lost their phones or were robbed, they could report the missing phone by just calling the telecommunication company, even if they were overseas. Under the Black List system, it will be more inconvenient for people to report their missing phones because the telecommunication companies will no longer directly supervise the IMEI of the phones. If they cannot report that their phone is missing immediately and cannot list the IMEI number of the phone, it opens the possibility for other people to use the phone by merely changing the USIM chip. Even worse is the personal information of the person who lost the phone could be compromised.
It is time we look ahead to the introduction of the Black List system. It will bring changes in the distribution structure and will reduce charges in mobile communication. It is necessary to think, though, of what these changes could bring, and not just anticipate the good changes. The government should prepare guidelines to reduce and protect the bad effects of the system. Of course, the consumers should establish a healthy consumption culture. Lee Duck-hee, professor of Department of Management Science at KAIST, said, “I welcome the introduction of the Black List system, but to increase its utility, proper distribution channels for the poorer manufacturer could minimize adverse effects of the Black List system. Also, low price phones imported from overseas should be checked thoroughly to stop any possible damage to consumers.”
There are advantages and disadvantages with any new system. The Black List system promises a new era of flexibility and value for the consumers, yet let us consider all aspects of the new system so we can make it work to the best for all of us.