Business

Japan plans to cut mobile phone contract penalties to ¥1,000

Kyodo, JIJI

The government plans to impose new regulations on mobile phone operators to cut cancellation penalties by about 90 percent to ¥1,000 ($9) or less to make it easier for users to switch mobile carriers and spur competition, officials said Tuesday.

The move is expected to lead the country’s major mobile operators to further reconsider their price plans. They have already decided to offer plans with reduced communications fees amid pressure from the government, but the cancellation penalty charges had been left unchanged at ¥9,500 for users who quit in the middle of a two-year contract. The charge has been criticized as being too expensive.

Low-cost providers effectively impose similar charges by setting minimum contract periods.

On Tuesday, the Ministry of Internal Affairs and Communications presented to a panel a draft ordinance revision that would set a cap on cancellation charges at ¥1,000.

The ministry also proposed a plan to limit discounts on handsets to a maximum ¥20,000. The ceiling would effectively end operators’ discounting of mobile devices in exchange for relatively high data usage fees, a long-held practice criticized as keeping communications fees high.

The two caps are due to enter into force in autumn, affecting not only the top firms of NTT Docomo Inc., KDDI Corp. and SoftBank Corp., but also major low-cost mobile service providers with over 1 million subscribers.

Subscribers will see an increase in new handset prices, but overall costs are likely to drop as monthly fees are projected to fall, according to a member of the panel.

The three major mobile phone operators have recently been targeted by the government over what are deemed relatively high mobile phone charges compared with other countries.

The discount limit will be a temporary measure over a two-year span. The ministry will review the limit if handset sales practices are normalized.

Last month, the Diet enacted a revision to the Telecommunications Business Law aimed at lowering mobile phone fees, banning them from offering plans that cover both the price of a mobile phone and connection fees in one package.

Consumers and government officials have said the plans make it difficult to compare the fees charged by carriers.

The ministry plans to revise the ordinance around this fall in tandem with the implementation of the revised Telecommunications Business Law. E-commerce giant Rakuten Inc., which will enter the market in October, will also be covered by the new regulation.

The ministry is also discussing a revision to the calculation method for fees that low-cost providers pay for leasing mobile communications networks from carriers.

The change would help lower monthly communications fees for low-cost services. Cuts in the fees are expected to revitalize the mobile phone market as a whole.