Business / Corporate

Japan enacts bill aimed at lowering mobile phone fees

Kyodo

The Diet enacted a legal revision Friday aimed at lowering mobile phone fees and spurring competition in the country’s saturated telecoms market.

Amid criticism that Japan’s carriers charge too much compared with those in other countries, the bill passed by the Upper House to amend the telecommunications business law bans carriers from offering plans that cover both the price of a mobile phone and connection fees in one package.

For many years, carriers have discounted mobile device purchases in exchange for relatively high data fees — a practice that consumers and government officials have said makes it difficult to compare the fees charged by different firms.

The issue captured the spotlight in August last year when Chief Cabinet Secretary Yoshihide Suga said the three major carriers — NTT Docomo Inc., SoftBank Corp. and KDDI Corp. — could reduce their fees by around 40 percent, as their rates were higher than in other countries and they generally log higher profit margins than firms in other industries.

The three carriers control nearly 90 percent of the domestic mobile phone market.

The new law will take effect as early as this fall after the Ministry of Internal Affairs and Communications compiles guidelines for fee plans.

The government’s call on carriers to lower service fees has already borne some fruit.

Industry leader NTT Docomo unveiled a new plan in April that will cut mobile phone charges by up to 40 percent, and also offered to separate handsets and service charges.

NTT Docomo is looking to counter low-cost wireless service providers UQ Mobile and Ymobile, launched by domestic rivals KDDI Corp. and SoftBank Corp., respectively. Docomo does not have a budget service brand.

Two of the country’s three major carriers — SoftBank and KDDI, which operates the au mobile service — say they already comply with the new rules and that they are also considering lowering fees.

More than 60 percent of Japan’s population owned smartphones in 2017, with the figure rising to 84 percent if all mobile devices such as tablets are included, according to the ministry.

The nation’s households spent an average of ¥100,250 on mobile fees in the same year, about 4 percent of their overall expenditures, according to data released by the ministry.

Japan’s mobile fees are relatively high compared with other countries, with 20 gigabytes of data usage costing about ¥7,000 per month in Tokyo — the highest among comparable cities including New York, London and Seoul.

Other changes made in the law include a registration requirement for mobile phone retailers that would give authorities greater oversight, and new penalties for companies that use misleading sales tactics.

In April 2018 the government granted approval to e-commerce giant Rakuten Inc. to enter the business this October, a move expected to spur greater competition.

The three big carriers have responded to past government calls for lower prices by offering new low-capacity plans, while focusing marketing efforts on luring heavy users away from rivals by making it easier to pay for more expensive smartphones that have the latest features.

The focus has also turned to contracts that lock in users for multiple years, deterring defections to mobile virtual network operators that use leased capacity and offer significantly cheaper services.

The government has exerted pressure on some longer-term contracts as well.

In June 2018, the Fair Trade Commission said mobile phone contracts by KDDI and SoftBank may conflict with antitrust laws.

The contracts in question allow customers to forgo paying the balance of a previous contract if they agree to buy a new phone and extend their contract for another two years, the FTC said.

The warning to the companies was a follow-up to a report two years earlier admonishing them against misleading and complex service agreements.

Information from Bloomberg added