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Stop ‘corralling’ of mobile phone users, encourage competition

The Yomiuri ShimbunIt is important to continue to tenaciously reduce burdens on users by promoting low communications charges — which are still high — with a review of mobile phone fee systems.

The Internal Affairs and Communications Ministry has compiled a draft of a new ministerial ordinance on contracts and sales of mobile phones. It will set an upper limit of ¥1,000 for penalties on terminating contracts before their expiration.

This level was reportedly determined based on a survey of users.

Major mobile phone companies charge ¥9,500 as penalty when a two-year contract is terminated before its end. It is understandable to aim at significantly lowering the hurdle for switching carriers and correcting the excessive corralling of users.

The new system under the draft ordinance is scheduled to start this autumn, and it will be applied to contracts concluded after that. Around the same time, Rakuten Mobile, Inc. will enter the market with lower prices.

NTT Docomo, Inc. and KDDI Corp. just started lower fee plans in June, but mobile phone companies will be forced to further lower their fees.

With major companies, communications fees for two-year contracts are ¥1,500 to ¥2,700 lower per month than contracts that have no term commitment. The draft ordinance calls for this margin to be “¥170 or less per month.”

There will be fewer benefits for users who choose a “two-year contract commitment” in which communications fees are discounted on condition the user stays in the contract for two years. It is highly likely that the business model centered on two-year contract commitments will collapse, and it is significant for consumers to have a wider range of choices.

Vital form of infrastructure

Needless to say, it is not desirable for the government to intervene in the process of deciding fees in the private sector.

However, mobile phone communications are important infrastructure. The percentage of users who terminate contracts has remained below 1 percent for the three major carriers, and they have continued to monopolize the market. Their profit margins are around 20 percent, much higher than those of such companies as leading manufacturers. Isn’t there room for more competition? It was unavoidable to review the rules.

During the current Diet session, the revised Telecommunications Business Law was enacted to basically ban discount plans combining handset prices and communication fees as single units. The revision was made in response to criticism that large discounts for handsets are covered by rather expensive communications fees.

The draft ordinance allows a maximum discount of ¥20,000 for a handset if there is no contract term commitment. Nevertheless, the burden on people who frequently replace expensive smartphones will become heavier.

In contrast, people who use the same handset for long periods of time will benefit from lowered communications fees. Handset prices are expected to increase temporarily. Handset makers are urged to work to keep handset prices down through such measures as introducing wide ranges of products at low and mid-range prices.

Mobile phone companies, which will see a significant impact on their business from the draft ordinance, have said it came out of the blue. The ministry has to thoroughly explain the grounds and aims of the regulations.

(From The Yomiuri Shimbun, June 19, 2019)Speech



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