|

CELLPHONES AT A CROSSROAD

Cellphone cease-fire signals change

What does end of incentive war mean for wallet, industry's future?

by

Staff Writer

The Japanese mobile phone industry recently came under fire from the government for using ambiguous price-setting schemes and excessive handset discounts that stole customers from rivals but penalized loyalty.

This has prompted the three major carriers — NTT Docomo Inc., KDDI Corp. and SoftBank Corp. — to roll out new monthly plans that are more affordable to infrequent users and rein in their outrageous handset discounts.

How is the system changing and how will it affect your cellphone payments? Below are some questions and answers on the new pricing schemes:

Why did the government intervene in the private sector on this issue?

It started in September when Prime Minister Shinzo Abe signaled that mobile phone fees accounted for too much of household spending.

After the communications ministry issued a report on the issue in December, minister Sanae Takaichi faced the presidents of the three carriers and told them to come up with cheaper pricing plans. She also asked them to tone down their customer-stealing campaigns, which were based on huge discounts or cash-back programs.

“Ideally, it would be best if the price plans fall under free competition. But the competition has focused too much on handset price discounts. I have to say it is unhealthy,” Takaichi said on TV in November.

The ministry is also planning to dispatch bogus shoppers to cellphone shops to check on the carriers discount plans. This has led some experts to question the government’s apparent decision to intervene, on the taxpayer tab, in free competition.

What are the new monthly plans being offered?

Basically, people who don’t spend much time surfing the Internet with their mobile phones will be able to lower their monthly charges by around ¥1,500.

SoftBank and KDDI, which runs the au brand, came up with a ¥2,900 data fee that allows smartphone customers to use up to 1 gigabyte per month. If voice calls are included, one’s bill might rise to around ¥4,900.

Before, the cheapest rate the two carriers offered was around ¥6,500 for joint data and voice call service, including 2 GB of data. KDDI’s new rate starts in March and SoftBank’s in April.

Docomo’s new plan, which starts in March, is slightly different because it caters to families. It charges a family of three ¥13,500 a month, including a ¥6,500 data-sharing plan that allows up to 5 GB to be used by the family in total.

Docomo, which has the largest market share in Japan, says this means the monthly fee for a family of three can average out to around ¥4,500 each if voice calls are included.

Will those who use more than 1 GB of data a month benefit?

The carriers have not announced changes for mid-level and heavy users. But Tomoya Tabata, director of corporate strategy and planning at Docomo, said more changes are on the horizon.

“It’s not that we are done with the price rate (revision),” he said.

What will happen to the handset discounts?

In February, handset prices effectively rose, especially for those who switch carriers.

Docomo, KDDI and SoftBank were battling fiercely to steal each others’ customers. This led to major incentives, such as bigger monthly discounts for defectors and even cash back schemes.

In some cases, they simply handed out phones for free and offered tens of thousands of yen in cash back, triggering what became known as the “cash-back war.”

This led the government to raise the red flag. It argued that such incentives, which only benefit new subscribers, were unfair to those who preferred to stay with one carrier.

Reducing cash-back offers and monthly discounts may ease the financial burden on carriers who use such incentives, but it is also expected to dent handset sales and make it harder to steal customers.

KDDI President Takashi Tanaka said earlier this month that traffic had dropped considerably at au shops since the discounts were stopped.

But Tabata of Docomo said the industry knew the excessive cash-back campaigns had to end sometime.

“(The intervention) is an opportunity for the industry to change the focus of competition,” he said.

How will competition change?

Tabata said cellphone carriers are still expected to offer bargains.

For instance, as mobile phone operators start selling electricity in April, when the power market is liberalized, they can be expected to offer discounts to those who opt to buy both their power and cellphone services from the same firm.

They have also been offering home fiber-optic Internet connection deals.

Tabata said more package deals for home-use services might be in the works.

“We were too preoccupied with taking users from rivals by (offering) huge discounts on handset prices in a saturated market,” he said. “But I think that the stage of competition (is set to) change.”

  • Joel Tucci

    How about instead of concentrating on my cellphone bill you actually tackle the real things that cost me money every month, rent and food. Oh right, that would challenge the sacred cow status of landlords and farmers. Yes, let’s focus on the 1000 extra yen I spend on my cellphone and ignore the 10s of thousands charged in spurious fees and inflated rent by my landlord… Typical Japanese government

  • Akuma

    Well after reading this explanation I’m still left wondering why the hell the government getting involved in any of this. If companies want to steal other companies customers, I just called that free market. Keep the governments meddling fingers out of a it.

  • Akuma

    Well after reading this explanation I’m still left wondering why the hell the government getting involved in any of this. If companies want to steal other companies customers, I just called that free market. Keep the governments meddling fingers out of a it.

  • Akuma

    Well after reading this explanation I’m still left wondering why the hell the government getting involved in any of this. If companies want to steal other companies customers, I just called that free market. Keep the governments meddling fingers out of a it.

  • http://www.an-chan.net/ Antoine B.

    The link between smartphone purchase and phone/data service should be made illegal. This way, the operators would be forced to focus on making their core offering more attractive (better coverage, quality, or lower price).

    The resell of the smartphone itself could still be done by the operators, but with separate and independent frameworks, proposing competitive sales prices (like any other electronic device), leasing plans, etc. They could even link this with their points programs on the voice/data side, to bundle together.

  • http://www.an-chan.net/ Antoine B.

    The link between smartphone purchase and phone/data service should be made illegal. This way, the operators would be forced to focus on making their core offering more attractive (better coverage, quality, or lower price).

    The resell of the smartphone itself could still be done by the operators, but with separate and independent frameworks, proposing competitive sales prices (like any other electronic device), leasing plans, etc. They could even link this with their points programs on the voice/data side, to bundle together.