SEOUL — In a decisive bid to alleviate household telecommunication expenses and cure long-standing structural flaws in the mobile communications market, South Korea’s Ministry of Science and ICT officially unveiled its "MVNO 2.0 Activation Plan" on Friday. Announced during a joint Ministerial Meeting on People’s Livelihood Prices and Economic Affairs, the comprehensive policy overhaul seeks to transition the nation’s Mobile Virtual Network Operator (MVNO)—locally known as Altteul Phone (Budget Phone)—sector from simple fee resellers into robust, technology-driven telecommunications providers.

Since its introduction over a decade ago, South Korea’s budget phone market has expanded rapidly to encompass 59 operating companies and surpass 10 million active subscribers. By offering plans at prices significantly lower than those of the dominant Mobile Network Operators (MNOs)—SK Telecom, KT, and LG Uplus—the sector has served as a critical pillar in curbing inflation and keeping household living expenses manageable.

However, the market’s rapid numerical growth masked underlying structural fragilities. The vast majority of MVNOs operate purely as simple resellers, relying entirely on MNO network configurations without owning independent switching equipment or billing systems. Consequently, operators struggled to design unique rates or customized services, faced persistent consumer complaints regarding substandard customer service, and suffered from weak overall market credibility.

To resolve these structural bottlenecks, the government is introducing targeted support measures across three primary domains: Price Relief, Innovation and Diversity, and Consumer Trust.

Direct Price Cuts and Wholesale Rate Reforms

The immediate core of the government’s plan focuses on directly lowering cost burdens for budget carriers, enabling them to pass savings on to mobile subscribers. Under the new guidelines, the MSIT has mandated reductions in the wholesale rates that MVNOs pay to primary MNOs to lease network capacity. Specifically, for revenue-sharing wholesale contracts, the rate has been cut by 1 to 3 percentage points across major price tiers.

Furthermore, to meet the surging demand for mid-to-low tier 5G services, the government is compelling the top three MNOs to provide wholesale access to their recently introduced low-cost 5G tariffs. These wholesale plans will include "Data Safety Options" with Quality of Service (QoS) capped at 400Kbps after threshold data exhaustion, addressing a major product gap for budget subscribers.

To bolster the financial health of small and medium-sized enterprise (SME) budget carriers, the government will expand radio spectrum fee exemptions and discount rates. However, in a major policy shift toward regulatory accountability, these fee relief benefits will no longer be distributed uniformly. Instead, a differential application system will link fee discounts directly to an operator's compliance with telecommunications laws and demonstrated levels of user protection.

Hardware Affordability and Digital Onboarding

Recognizing that affordable mobile service is ineffective without accessible hardware, the MSIT is taking direct measures to lower device acquisition costs. The government plans to actively expand the "Certified Pre-Owned/Used Phone Safe Trading Business" system to guarantee hardware reliability for budget phone buyers.

Additionally, a multi-stakeholder consultative body comprising government officials, smartphone manufacturers such as Samsung Electronics, and retail distributors will be established to expand the supply of mid-range and unlocked (self-provided) smartphones. On the digital infrastructure front, amendments to the official notification on embedded SIM (eSIM) activation will be fast-tracked to enable seamless, instant online registration, eliminating physical SIM card distribution bottlenecks.

Fostering Full MVNOs and Infrastructure Expansion

While price relief provides immediate support, the strategic highlight of "MVNO 2.0" lies in fostering "Service-based" (Partial) and "Independent" (Full) MVNOs that possess their own core network equipment, such as Home Subscriber Servers (HSS), Online Charging Systems (OCS), and switching gateways.

Under current regulatory frameworks, because MVNOs lack proprietary switching facilities, they are forced to resell tariff packages identical to MNO plans, albeit at discounted rates. The MSIT plan revises the Telecommunications Business Act to formally establish legal definitions and functional equipment specifications for infrastructure-backed MVNOs. This update allows tech-driven budget carriers to independently design custom tariff structures, bundle financial or IoT services, and engineer tailored customer experiences.

To facilitate this transition, the government is introducing three crucial institutional mechanisms:

Expanding Network Obligations: Wholesale network-sharing obligations, previously focused primarily on market leader SK Telecom, will now be formally expanded across all top three MNOs (SKT, KT, and LG Uplus), enhancing bargaining power for budget carriers.
Authorizing MVNE Models: The government will formalize Mobile Virtual Network Enablers (MVNEs)—specialized technical entities that build underlying network infrastructure and sublease it to smaller MVNOs, significantly reducing capital expenditure barriers for new market entrants.
Policy Financing Support: Policy-backed loan programs and financial guarantees will be linked to network infrastructure investments made by ambitious budget carriers.
The ministry explicitly set a target to nurture at least three competitive service-based or independent full MVNOs within the policy horizon.

Restoring Consumer Trust and Market Governance

The rapid expansion of budget carriers in South Korea has been accompanied by mounting consumer dissatisfaction regarding inadequate call center staffing, delayed customer support, and weak security protocols. To address these systemic vulnerabilities, the MSIT will enforce strict operational standards.

Minimum staffing requirements for customer service centers will be substantially raised, accompanied by mandatory periodic government performance evaluations. Crucially, the government is instituting a structured management and exit framework designed to deregister underperforming or sub-standard operators that consistently fail to meet basic service, security, and consumer protection criteria.

Industry Outlook and Legislative Roadmap

Industry experts view "MVNO 2.0" as a necessary evolution for South Korea’s telecommunications landscape. While primary MNOs may face intensified competition and lower wholesale margin returns in the short term, the growth of a healthier, infrastructure-capable MVNO tier is expected to drive innovation in IoT, specialized corporate mobile solutions, and fintech-telecom convergence bundles.

Beginning next month, the Ministry of Science and ICT will initiate formal administrative procedures to amend the Enforcement Decree of the Telecommunications Business Act alongside official notices on wholesale network supply. As regulatory hurdles are cleared, South Korea’s mobile market stands on the precipice of a structural transformation—moving away from simple price-war resale tactics toward a dynamic, multi-tier ecosystem powered by technical innovation and robust consumer protection.

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