A panel of experts at the Internal Affairs and Telecommunications Ministry is discussing ways to reduce mobile phone fees and is expected to issue its recommendations by the end of the year. The panel was created after Prime Minister Shinzo Abe called for reducing the burden that cellphone fees have on households, which may be a political gesture aimed at voter support for the Upper House election next year. But aside from his intention, the panel should explore ways to maximize consumer interests and lead to the introduction of a fee structure that is diverse, transparent and equitable.
At a September meeting of the Council on Economic and Fiscal Policy, Abe called the heavy burden of mobile phone bills on family expenses a “big problem” and instructed communications minister Sanae Takaichi to consider ways to cut such fees. According to the ministry, the percentage of fees paid for mobile phone services in household expenses has been on the rise as smartphone usage has increased. In 2004, an average wage earner’s family of two or more members paid a mobile phone bill of ¥8,200 per month, accounting for 2.5 percent of household spending. In 2014, the bill increased to ¥12,200, or 3.9 percent of the monthly family expenses.
As the mobile phone service market is effectively dominated by three major operators — NTT Docomo, KDDI and SoftBank — it is rare that charges are reduced even though rules for setting fees have been liberalized. Choices for consumers are often limited. At mobile phone shops, salespeople try to sell customers optional services that they may not need, and consumers who are not familiar with the functions of mobile phones can easily be persuaded to subscribe.
Fees for smartphone services are more or less the same from operator to operator. Usually, consumers who want to use the Internet and other data communications are offered a basic plan allowing 2 gigabytes or more of data per month at a cost of ¥6,000 to ¥7,000. But in the case of people who use the device only for simple functions such as making phone calls and emailing, the monthly total rarely tops 2 gigabytes. According to a 2014 survey by NTTCom Online Marketing Solutions Corp., 70 percent of the respondents used less than 1 gigabyte of data each month.
The prevailing contract practice means that consumers who use smartphones for simple functions pay for capacity they don’t use — a problem that the panel should look into. Some countries in North America and Europe offer cheaper plans for consumers who don’t need a large volume of data communication. The operators here should be induced to introduce fee plans that are fair and suitable for such consumers.
Another point that should be discussed by the panel is the business model the three major mobile phone operators are using — a system of automatically renewable two-year contracts, which result in charging relatively high fees for long-term subscribers. For consumers who newly subscribe to a mobile phone service or change to a different operator, the companies offer a two-year contract with substantially discounted fees, thus effectively enabling them to acquire an expensive smartphone device at a low cost. If the users cancel the contract before the two-year period has passed, they are required to pay a penalty. After the two-year period is over, a one month interval is provided for users to terminate the contract if they wish, but in most cases they are unaware of this period and a new two-year contract automatically takes effect. The monthly fees paid under the new contract enable the operators to offset the discounts given in the initial two years.
The problem with this system is that it benefits consumers who frequently switch from one operator to another more than the customers who subscribe long-term to a particular operator. Although the communications ministry has urged operators to rectify this situation, little progress has been made. The companies should take concrete action concerning this system even before the panel issues a final report. Mobile phone operators should also be aware that their fee structure in general is so complicated that elderly consumers have a hard time understanding it. They need to develop a simple and easy-to-understand fee structure.
Expanding the market for low-cost smartphone services should also be on the panel’s agenda. These operators, which provide services by leasing frequency bands from major operators, are rapidly increasing their customer numbers, though their market share remains small. Greater competition would serve to encourage the major operators to cut their fees.
Since mobile phones have become indispensable tools for most people for communications and access to crucial information, including in the event of natural disasters, the panel should do its best to introduce a system that eliminates the sense of unfairness arising from the fee structure and leads to reduced charges for all consumers.
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