The Internal Affairs And Communications Ministry Will Start Reviewing A Policy On Competition In The Smartphone Services Market

The Internal Affairs and Communications Ministry will start reviewing a policy on competition in the smartphone services marketThe Internal Affairs and Communications Ministry will start reviewing a policy on competition in the smartphone services market, given that the growth of independent budget smartphone services (see below) is stagnating in the face of popular rival brands launched by leading carriers such as KDDI Corp., which offers mobile services under the "au" brand, and SoftBank Corp.

If independent carriers cannot achieve growth, competition will remain stagnant, and it is feared this may cause phone bills to remain high. Observers are paying close attention to how the ministry will stimulate the market.

Well-funded low-cost smartphone services offered by major mobile carriers have established a presence through their generous discount campaigns and frequent TV commercials.

The number of SoftBank’s Y!mobile subscribers is about 2 million, far ahead of the other budget providers. In December the company launched a discount plan targeting students that waives their monthly basic charge for up to four months.

SoftBank executive officer Hiroyuki Terao, who is in charge of Y!mobile’s business promotion, said, "We do business only to achieve the goal [of reducing data charges]."

KDDI-affiliated UQ mobile increased the number of its subscribers by 70 percent to about 600,000 in the six months from March last year.

Meanwhile, independent providers of budget smartphone services are struggling to increase their subscribers. According to the ministry, the net increase in such subscribers from July to September was about 500,000, down by about 300,000 from the same period in the previous year. Independent carriers lease access to the cellular networks of NTT Docomo Inc. and other major cell phone companies, but such a system has provoked frustration. Connection fees can be set too high, and there have been complaints that "leading mobile phone companies use faster transmission speeds for their own budget services than for independent ones."

The communications ministry has expressed concern that leading cell phone carriers are cementing their grip on the low-cost smartphone services market. The ministry’s expert panel held a meeting in late December to discuss how connection fees should be set for budget carriers and also check whether leading mobile carriers are giving preferential treatment to their affiliated budget brands.

Meanwhile, the market leaders are taking advantage of the "two-year commitment" system, under which subscribers’ contracts are automatically renewed every two years, corralling their customers.

If independent budget smartphone carriers were to be edged out, it is feared an oligopoly would result, thus keeping phone charges high. To avoid this situation, the panel was to discuss improvements to the current two-year contract system.

Most old smartphones that leading cell phone companies take as trade-ins go overseas, with only a few distributed in Japan. The ministry will discuss measures in the belief that more customers would choose to subscribe to services with low fees if secondhand smartphones were widely available in Japan. The ministry will then draw up its policy for systematic revision in March 2018.

Rakuten Inc. has launched its bid to become the country’s "fourth mobile carrier" with its own communications infrastructure. Rakuten Chairman and Chief Executive Officer Hiroshi Mikitani tweeted on Dec. 17 that "if [entry to the market is] approved, we’ll do our best to provide a more comfortable, cheap service," hinting at a drastic price cut.

A market watcher said Rakuten "may launch a monthly charge of less than ¥4,000." However, becoming the fourth mobile carrier may require hundreds of billions of yen per year in capital investment, and some observers have expressed skepticism about Mikitani’s goal.


■ Budget smartphone services

Smartphone services provided by operators that offer a cheaper data charge than major cell phone companies. Operators can reduce their business investment by leasing access to cellular networks that belong to leading companies. The ministry currently has arrangements in place allowing major cell phone companies’ communication networks to be used by budget smartphone service providers, in order to encourage new entrants to the market.