The recent announcement by NTT Docomo Inc. to cut its mobile phone charges “by 20 to 40 percent” starting next year — followed by moves by the two other major carriers, KDDI Corp. and SoftBank Corp., to also consider cuts to their service charges — came amid tightening pressure from the government on the mobile phone industry. In an unusually direct remark on the operation of private sector businesses, Chief Cabinet Secretary Yoshihide Suga said in August that there is room to lower mobile phone charges by 40 percent, citing the major carriers’ generally higher profit margins than other sectors. The Internal Affairs and Communications Ministry has also set up an experts’ panel to discuss the issue.
The government has no regulatory powers to guide mobile phone service charges. Whatever the background to the moves by the carriers, reduced rates on mobile phone services is good news for consumers, especially given that mobile phones have now become indispensable tools in people’s daily lives. Media reports indicate, however, that Docomo’s move to cut the service charges by offering new plans that separate service charges and handset payments may not result in significant cuts to users’ overall expenses.
The mobile carriers should offer service plans that are simple and easy to understand — so customers can choose the service they need — and substantially reduce the net cost on the part of mobile phone users. The government, for its part, needs to keep up efforts to spur greater competition in the market in ways that improve services and cut costs.
The service plans mainly offered by the major carriers so far package handset payments and service charges. Under a typical plan based on a long-term service contract, the user pays for the handset in monthly installments — for which the carrier offers a discount by reducing the monthly charges. This makes it easier for people to buy the latest — and increasingly more expensive — smartphones. However, there has been criticism that such plans make mobile phone charges opaque and prevent charges from coming down, and the carriers have begun to offer new plans that separate handset payments and service charges.
Industry leader Docomo says it will seek to reduce its customer payments by up to some ¥400 billion a year by reconfiguring its service plans that are deemed “complicated and hard to understand” into “simpler and easier-to-understand” ones. Details of the new plans to be offered by Docomo beginning next April are not yet known. Under a plan that separates handset payments and service charges, however, discounts offered on handset prices are expected to be scaled back or ended, and there are reports that cuts to monthly service charges may not result in substantial reductions in the overall payment by mobile users.
In calling for price cuts, Suga said the charges in Japan are “way too high compared with other countries” and added that the major carriers should not be making excessive profits out of services that use public radio waves. According to an Internal Affairs and Communications Ministry survey released in September, Tokyo came out on top in an international comparison of six major cities in terms of smartphone service charges for a 20-gigabyte monthly data plan — ¥7,022 compared with ¥6,975 in New York, the second-highest, and ¥2,460 in Paris, the lowest. But Tokyo came in third in a comparison of a 2-GB data plan — at ¥2,680, less than half the ¥5,990 charged in New York. Meanwhile, in the year to last March, the combined net consolidated profits of the top three mobile carriers exceeded ¥2 trillion, and their ratio of operating profits to sales ranged from 14 to 20 percent.
Whether mobile phone charges in Japan are “way higher” than in other economies may be debatable. Mobile carriers say they need to keep making large investments to keep up the quality of their service and develop newer-generation, bigger-data mobile communications systems. But whether or not Docomo caved in to government pressure, its move appears to indicate that it can afford to cut its charges — which is welcome since mobile phone services are now a basic infrastructure that people cannot do without and, given its usefulness in times of emergencies such as big disasters, are fairly public in nature.
The carriers need to continue their efforts to improve their services while reducing the charges for consumers through more efficient operations and use of their resources. The current industry landscape where the three top carriers dominate the market is not an optimum environment for competition. E-commerce giant Rakuten Inc. will join the market in October next year, but the government, for its part, should take further steps to encourage more new entrants to the market and spur competition in ways that serve the interests of consumers.