2G Phone Users Create Dilemma for Telecom Carriers ahead of Beginning of 5G Era

Domestic 2G subscribers stood at 2.45 million as of January, accounting for 3.8% of all 63.84 million subscribers in South Korea.Domestic 2G subscribers stood at 2.45 million as of January, accounting for 3.8% of all 63.84 million subscribers in South Korea.

 

With 5G commercialization less than a year away, 2G services in the telecommunications industry is emerging as a ‘hot potato’. One side claims that the government should create an “exit strategy” for ending 2G as the telecommunication service has limited resources of frequencies and the other side argues that users should be guaranteed the right to use the telecommunication service.

According to the ICT industry on March 26, domestic 2G subscribers stood at 2.45 million as of January. The figure accounts for 3.8% of all 63.84 million subscribers in Korea. SK Telecom has 1.38 million 2G subscribers, the highest, followed by LG U+ (930,000) and mobile virtual network operators (MVNOs) (150,000). KT does not have any 2G subscribers because the company put an end to its 2G service in 2012 to secure an LTE frequency band. Currently, 2G subscribers are decreasing by 70,000 to 80,000 users per month. If this trend holds, the figure is expected to fall to less than one million in June 2021 when 2G frequency allocation will come to an end.

Wireless telecom carriers have to shoulder heavy burdens of maintaining 2G. Currently SK Telecom uses 800MHz and LG Uplus 1.8GHz as their 2G frequency bands. Of 30MHz bandwidth allocated to the 800MHz frequency band, SK Telecom is using 20MHz for LTE and 10MHz for 2G.

According to SK Telecom’s financial statements, the one-year fee to use the 800MHz frequency band is 141.9 billion won, which means that the company spent KRW47.3bn annually only for the use of the 2G frequency. In addition, considering the cost of network management and line maintenance, it is estimated that it will cost hundreds of billions of won to use the 2G frequency.

SK Telecom announced that the company will support cell phone replacement for 590,000 users of 2G phones which cannot receive disaster warning messages for six months. This move was said to be made based on such profit and loss calculation. SK Telecom expects that the free replacement of 2G phones will cost at least 150 billion won but is planning to cover all related expenses.

The problem is core 2G users. The number of users who do not give up using 2G services due to ’01X’ numbers like 011 or 017 hovered around 970,000 as of the beginning of last year. They do not want to abandon 01X due to their business or attachment to their numbers. When switching to 3G or LTE, they must use 010 numbers.

The wireless telecom industry expects that if the number of 2G users drops to 100,000 per company, it will be possible to force the termination of 2G services. In fact, KT received conditional approval to force the termination of 2G services from the Korea Communications Commission (KCC) in November 2011 when the number of its 2G users slid to the 159,000 level. Work to terminate 2G has been underway. For an example, LG U+ announced that it will offer a program to offer discounts of charges by up to 10,000 won when 2G subscribers switch to LTE in 2015. But it is not easy to drop to 100,000 without government support. But it will be quite a challenge to pull down the figure to the 100,000 level without support from the government.

Content retrieved from: http://www.businesskorea.co.kr/news/articleView.html?idxno=21284.

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