This article is based on an article from the Japanese edition of Engadget and was created using the translation tool Deepl.
On September 2, Yoshihide Suga announced his candidacy for the presidency of the Liberal Democratic Party (LDP), which will decide who will succeed Prime Minister Shinzo Abe.
At a press conference, he said, "There are many things happening in the world that we don't take for granted, and we need reforms that will enrich people's lives and grow the country," he said. Along with adjusting the volume of water in dams to prevent flooding, one of the key issues discussed was lowering mobile phone rates.
"Mobile phone rates. Despite the fact that the public airwaves are provided to the public, which is the property of the people, the top three companies maintain an oligopoly of 90% of the market and make about 20% of the operating profit at globally high rates. It is also because of my awareness of the problem that I announced the year before last that there was room for a 40% reduction in rates. We want to create an environment of solid competition among operators," he said, reiterating his willingness to lower mobile phone rates.
The stock market reacted to Suga's comments on March 3.
As soon as the market opened, shares of NTT DOCOMO, KDDI, and Softbank fell sharply. On the other hand, shares of Rakuten, the fourth carrier to enter the market, and Japan Communications, an MVNO that has just launched an unlimited call plan as an MVNO, rose.
Suga has solidified his overwhelming support within the LDP and the birth of "Suga Prime Minister" is insight.
One carrier insider angrily commented, "I don't see how it is possible for a democracy to have the prime minister of a country meddling in a particular industry."
After Suga said in the summer of 2018 that "Japan's mobile phone rates are too high compared to the rest of the world; there is room for a 40% price cut," the Ministry of Internal Affairs and Communications (MIC) has been forcing mobile phone operators to change a range of regulations and rules.
The government amended the Telecommunications Business Law to set a limit of "up to 20,000 yen" on device discounts as part of the Complete Separation Plan. Ignoring discussions at a panel of experts, the government conducted an online survey and reduced the termination fee from close to 10,000 yen to around 1,000 yen.
The government is also trying to make it easier to unlock a SIM by revising the 2-year contract, and now they want to waive the MNP fee.
The reality is that the "40% price cut" statement is rather profitable for the carriers
However, we Japanese citizens rarely feel that our smartphone bills have become cheaper. Rather, the only negative impression we get is that we are less likely to buy a new phone because the discounts no longer apply to the devices.
Suga has criticized the mobile phone carriers are too profitable, but the only reason for the even more lucrative structure is the failure of the policies that the Ministry of Internal Affairs and Communications has implemented over the past two years.
For example, NTT DOCOMO's Q1 FY2020 results show that it sold 2.15 million handsets, a decrease of nearly 1.3 million units compared to 3.44 million units in the same period last year. This resulted in a 77.7 billion yen decline in revenue for NTT DOCOMO, but handset sales expenses were down 84.9 billion yen YoY, resulting in a 7.2 billion yen increase in revenue.
In other words, the spread of the coronavirus caused shops to shorten their opening hours and the revised Telecommunications Business Law regulated discounts, which resulted in a structure in which sales of smartphones were down, but sales promotion costs were down because they no longer had to be discounted, and as a result, the companies were profitable.
The only reason for this "too profitable" environment is the fault of the Ministry of Internal Affairs and Communications.
The 'churn rate' that the carriers put out in their earnings materials also shows that the MIC's policy is headed in the wrong direction.
If you look at NTT DOCOMO's handset churn rate, it was 0.34% in the first quarter of 2020. In the same period last year, it was 0.45%. KDDI's handset churn rate was 0.51% this quarter and 0.75% in the same period last year (includes non-smartphone). SoftBank's smartphone churn rate was 0.53% this quarter and 0.81% in the same period last year, with all carriers experiencing a decline in churn rates.
In other words, most people continue to use their contracted carrier without leaving it. The financial results of IIJ, a low-cost smartphone company, show that they have been struggling with a decline in the number of lines for its personal service, IIJmio, from the previous year.
The past two years have seen the Ministry of Internal Affairs and Communications (MIC) do a lot of work, but the "environment of competition between businesses" that Suga talks about has not happened; in fact, the competition for customers has come to a halt because of the MIC.
If Suga, who will be prime minister in a few days, is serious about creating competition in the smartphone market, he will need to reset everything the MIC has done in the past two years and redesign the competitive environment policy from scratch.
Carriers are likely to be swayed by Suga's comments in the future, but one carrier source said coolly, "He's just showing that he wants to cut fees, he's not looking for results. He's not looking for results. If he can show that he's on the side of the people by repeating that, he'll be happy".
After all, if he can get popularity with the public by blaming the carriers and encouraging them to "lower their rates," that might be a good result for Suga.
This article is based on an article from the Japanese edition of Engadget and was created using the translation tool Deepl. The Japanese edition of Engadget does not guarantee the accuracy or reliability of this article.