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The communications ministry is planning to lower penalty charges imposed by mobile phone service providers on early contract termination from the current ¥9,500 to ¥1,000 or less, it was learned Saturday.

The reduction is designed to make it easier for users to switch mobile phone carriers, encouraging competition.

The ministry will also propose to limit discounts on handset prices to ¥20,000, informed sources said.

The proposals come after the revised telecommunications business law was enacted in May. The new law, aimed at lowering mobile phone fees, requires changes to the current system, such as mandating the introduction of pricing schemes that separate handset purchase costs from monthly communications fees.

The proposed rules are part of the ministry’s efforts to revise a ministerial ordinance to reflect the new law. The ministry will present the proposals to an expert panel Tuesday and its discussions will be used for revising the ordinance.

The ministry plans to draft a new ordinance as early as this month and hopes to put it into effect around this autumn.

Under typical contracts by major mobile phone service providers, users are tied to a two-year contract in exchange for sharply lower basic monthly rates for smartphones and other devices. If customers terminate their contracts before a designated three-month renewal period preceding the contract expiration date, they must pay a penalty charge of ¥9,500.

Unfixed-term contracts are also available at many providers, but such plans set the basic monthly fees at a much higher level, usually ¥1,500 or more higher per month. The high rates effectively block users from subscribing to the plan, making it possible for companies to use the hefty penalties to keep customers from switching to competitors.

As for handset discounts, the ministry called for the ¥20,000 ceiling after major service provider NTT Docomo Inc. said at an expert panel meeting in May that “¥30,000 is reasonable” for the proposed limit.

The ministry is apparently pushing for a stricter limit in order to lower high communications fees, which are believed to have enabled companies to recoup the handset discounts.

However, this measure will only be in place for two years, after which it may be revoked if the ministry determines that the market prices for handsets have reached a suitable level.

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