Japan's mobile phone carriers brace for further intervention by Suga

New Prime Minister Yoshihide Suga has apparently been welcomed by the general public, with recent polls by local media showing approval ratings of over 60 percent.

Expectations are high, but not everyone is quite so happy.

Major mobile phone carriers are holding their breath, as the prime minister has put them on notice over high-priced phone bills.

From the beginning, Suga has wasted no time in setting out his agenda.

During his inaugural news conference last month, he slammed the three telecom giants — NTT Docomo Inc., KDDI Corp. and SoftBank Corp. — for raking in vast sums of cash from use of public radio waves.

“I’ve always thought there are still a lot of things that are beyond the pale from ordinary people’s view,” Suga said.

He added that the three carriers enjoy an oligopoly with a high operating profit rate of around 20 percent, but phone bills remain expensive by international standards.

In fact, this is not Suga’s first attempt to intervene in the mobile phone industry — he meddled with industry competition as chief Cabinet secretary under the Abe administration.

Will the carriers grovel to the new prime minister?

A sign that they will has already appeared, with NTT Docomo announcing Tuesday that it will become a 100 percent subsidiary of its parent firm Nippon Telegraph and Telephone Corporation (NTT), a move believed to be partially motivated by Suga’s pressure.

NTT denied that the deal was linked to the government request, but stressed that NTT Docomo will be more competitive through closer collaboration with NTT group firms, which will enable the carrier to offer cheaper plans.

The following are questions and answers regarding Suga’s attempt to lower the cell phone fees.

Are Japan’s mobile phone fees really expensive?

They are not cheap, but the matter is not quite so simple.

The government has said that the phone bills in Japan are high compared with some other developed countries, but they are “medium level,” according to an international comparison compiled by ICT Research & Consulting, a Tokyo-based research firm.

The six-country comparison — involving Japan, the United States, the U.K., France, Germany and South Korea — shows that Japan’s price was the third highest for 2GB, 5GB and 20GB monthly plans costing ¥4,021, ¥5,121 and ¥7,135, respectively, as of March.

U.S. users were paying ¥6,188 for their 2GB plan, the highest among the six nations, while the most costly plans for the 5GB and 20GB plans were in South Korea, at ¥6,787 and ¥8,388. France saw the lowest fees for all the three plans: ¥2,010 for 2GB and 5GB and ¥2,322 for 20GB.

The study compared average prices of the top three carriers in each nation.

Although Japan’s fees are not cheap, the quality of 4G communication networks turned out to be better than the other countries.

Japanese users were connected to high-speed 4G networks 98.5 percent of the time when their phones were connected to the mobile internet, while it was 86 percent in France.

Considering the quality of the network, some experts say that smartphone plans in Japan are not necessarily expensive.

“The countries with high-priced phone fees tend to have higher quality mobile communication networks. Some industry observers say that it’s not about simply lowering the prices and I agree with that point,” said Kazu Saito, the head of ICT Research and Consulting.

Moreover, the major wireless carriers run a large number of physical stores nationwide to provide wide-ranging support for customers while also needing to invest hundreds of billions of yen in network infrastructure.

Didn’t the government pressure the carriers before?

The government has indeed been nagging them about phone fees for several years.

In 2015, then-Prime Minister Shinzo Abe said that phone bills were becoming a heavy household burden and asked the Internal Affairs and Communications Ministry to look at the issue.

According to annual household spending data compiled by the ministry, mobile phone fees had increased to ¥91,306 in 2015 from ¥79,918 in 2010. In 2018, they were ¥103,343.

The carriers responded by introducing plans with lower prices for users who use a small amount of data.

But in 2018, Suga revisited the issue, surprising the public by saying that the carriers could cut phone bills by 40 percent.

It was believed that the Abe administration wanted to find a way to reduce the financial burden on households before the 2 percentage point sales tax hike in October 2019.

Have phone charges dropped since then?

The carriers have introduced some new plans in the past few years and data fees have generally become cheaper.

But a raft of users may not be seeing a clear difference, as discounts are subject to certain conditions. For instance, NTT Docomo, KDDI and SoftBank offer monthly discounts of ¥1,000 or more for users if they have at least two other family members subscribed to the same carrier.

Also, gadget lovers who frequently purchase cutting-edge smartphones may have seen increased costs, as the government has imposed a ¥20,000 cap on handset discounts.

Previously, the telecom firms offered some tens of thousands yen in cash to motivate users to switch from rivals. But the government urged them to refrain from giving excessive benefits to switching users, as those incentives were effectively funded by other users who were loyal to certain carriers but received hardly any discounts on their data fees.

How will the carriers react this time?

They will probably have no choice but to take some action, as the Suga administration appears adamant over the issue.

“I will do it for sure, 100 percent,” said Internal Affairs and Communications Minister Ryota Takeda last month. “(Mobile phones) are not luxury goods. They are now critical infrastructure for people’s lives.”

NTT has already said that NTT Docomo will be able to offer more price-competitive plans after turning NTT Docomo into its wholly owned subsidiary.

KDDI, meanwhile, said the firm will take the request from the government seriously.

“We humbly understand that we are privileged to use public radio waves,” said KDDI President Makoto Takahashi during a news conference last week.

“(The government) is asking us to set prices that will stand up to international comparison and we understand that very much. But we also must strive for sustainable growth as a company.”

If the government really wants to lower the phone charges, wouldn’t it be better to promote the use of low-cost carriers?

Some experts have brought up this point.

They say that pressuring the top carriers to come up with cheaper plans contradicts the government’s policy to spur competition and provide more options for users by fostering low-cost carriers or mobile virtual network operators (MVNOs).

These budget carriers borrow mobile communication networks from the mega-carriers, so that they can provide cheaper data plans.

“If the major carriers really cut their phone fees by 40 percent, MVNOs would have to lower their prices; otherwise, there would be no price difference. I’m a little concerned that it would backfire as a competition policy,” said Saito of ICT Research and Consulting.