Business / Economy | YEN FOR LIVING

Phone users in Japan still paying for plenty of stuff they don't need

by Philip Brasor and Masako Tsubuku

Last fall, the Ministry of Internal Affairs and Communications set guidelines for “unlocking” mobile phones. Until now, in principle, a handset sold by one of Japan’s three main mobile communications companies — NTT Docomo, KDDI and SoftBank — could only be used for that particular service, meaning if you wanted to switch companies, you had to buy a new one.

The guidelines were to go into effect at the beginning of May. The changes will only affect new phones, and they can only be unlocked — at no charge if done online — for their original owners. Moreover, customers of each company will have to wait six months after purchasing their phones to get them unlocked.

Which manufacturers this will affect and how mobile phone fees and contracts will change isn’t clear at the moment, but it seems the guidelines were issued in response to complaints from consumers about the high cost of mobile communications in Japan, the idea being that unlocking phones will spur competition. The purpose of locking the SIM cards — those devices that determine which network the phone connects to — is to keep customers aligned to particular carriers, which mandate two-year contracts for services.

Last year, the ministry conducted a survey and found that Japanese households spent on average ¥112,453 a year for telephone land lines, Internet services and mobile communications. Altogether, the amount spent for such services accounted for 3.72 percent of all household expenditures, up from 3.28 percent in 2003. Telecommunications fees are higher in Japan than in most other countries, owing mainly to the steep fees charged by the “Big Three.”

Two years ago, the Nihon Keizai Shimbun published a report on how Japan’s mobile phone subscription model is a racket. The purpose of the scheme is to attract new customers with something that’s easy to understand — a free phone — and then get them to sign contracts with high monthly fees and options through the use of confusing terms that change from one carrier to another. The price of the phone is paid off in monthly installments, but if the customer is new, that monthly payment is waived as long as the customer signs up for two years. If the customer breaks the contract, then in addition to paying a penalty, he or she has to pay off the balance of the phone’s price, but since the phone can only be used for that carrier, the customer has to buy a new one if they switch to a competing service.

However, most mobile phone companies, and not just the Big Three, increasingly offer an “ikkatsu zero-yen” option, meaning the phone is free as soon as you sign the contract. This seems to be the reason for the unlock waiting period, since theoretically people could sign a contract, get a free phone, unlock the SIM card and resell the phone for a price higher than the contract-breaking penalty.

By now most consumers understand that the free phone gambit is a dodge, especially with the advent of the smartphone, which comes with more options and potential fees due to its main function as a data access/processing device rather than simply a telephone designed to make calls. Rakuten Research did its own survey of mobile phone users last year, with 40 percent saying they want to “review” their payment plans and 30 percent saying they are trying to save money by “using their phone less.”

One way of doing that is to change their “fixed-price plan” for telephone calls. All three carriers have fixed monthly fees for unlimited calls and, according to the Rakuten survey, 60 percent of users think fixed fees for unlimited voice calls “are not necessary,” because they don’t use their phones much for talking, or they use apps such as Line and Skype to make voice calls over the Internet.

This latter development was studied more closely by Mobile Marketing Data Laboratory, which found that 59 percent of the smartphone users it surveyed use Internet voice communication applications, and thus probably don’t need a conventional voice call feature. However, only 18 percent of those surveyed use Mobile Virtual Network Operators (MVNO), less expensive carriers that use other companies’ networks and stress data communications over voice communications. When asked by the researchers why they don’t switch to an MVNO if they don’t need the voice function so much, 38 percent say they don’t know much about it. In other words, it’s easier just to remain with your current carrier, even if you’re paying for services you may not need.

Our own informal survey of several dozen MVNOs found that the contract terms are no less confusing than those of the Big Three, but the fees are more competitive, and if, as the Mobile Marketing Data Lab survey shows, only a small percent of consumers subscribe to MVNOs, then at least the competition they provide seems to be paying off. For one thing, almost no one charges a fee any more if you want to keep your phone number when you change carriers, including the Big Three.

The main issue is paying only for what you need. When we went to Docomo to inquire about trading in our old FOMA cell phone plan for a smart phone plan, we found out that our monthly fees, for two persons on a “family plan,” would increase from about ¥5,000 a month to almost ¥12,000. We made the same inquiry to MVNOs such as OCN and Rakuten and most came up with cheaper plans.

However, the answers we received were different depending on who we spoke to, even within the same company. The problem, we discovered, is not so much price and terms, but employees who don’t seem to understand their company’s services and don’t know how to answer potential customers’ specific questions.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.