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Due to the resignation of Prime Minister Abe, Mr. Suga, who was the Secretary General of the Secretariat, became the new Prime Minister. New policies have been launched such as the establishment of the Digital Agency and administrative reforms, but one of the most outstanding aspects is that “the profit margins of the three large companies (NTT Docomo, KDDI, Softbank) account for 20% and the rates There are 4 mobile phones. There is room for a percentage reduction, “he said.
In fact, communication charges represent household expenses and are increasing year over year, and there is no doubt that mobile charges are putting pressure on households. If it can be reduced by 40%, it is expected to have an effect comparable to a substantial tax cut.
This time, I would like to consider the impact of Mr. Suga’s appointment as Prime Minister on the mobile industry.
A loop of “introduction of new measures → activation of competition → price reduction” that does not work
In October 2018, the Ministry of the Interior and Communications launched the “Study Group on the Competitive Environment of the Mobile Market” and, following discussions by experts, the following measures were decided.
・ Cancellation penalty reduced from conventional 9500 yen to 1000 yen
・ The price difference of monthly charges based on the presence or absence of period restrictions was reduced from the current 1500-2700 yen to 170 yen
・ The maximum discount amount for terminals that do not require the continuous use of communication contracts is up to 20,000 yen.
・ Prohibition of discounts on the prices of terminals subject to the “continuation” of communication contracts
・ Long-term user discounts are limited to one month of discounts.
Recently, in principle, the 3,000 yen fee required to switch mobile phone companies with the same phone number is being released.
In response to the previous recommendations, NTT Docomo, which did not support the plan for the separation of terminals and lines, introduced new rates (Gigaho, Gigalight) that will be up to 40% cheaper than in June 2019, and in October the fourth company Rakuten mobile has made a new entry.
First of all, the issue of lowering mobile rates is not a recent history. Discussions have been held in a study group led by the Ministry of the Interior and Communications since around 2007, but all the failures continued and the term “government-caused recession” was coined.
Source: MCA
So, how was the series of measures introduced in this “Study Group on the Competitive Environment of the Mobile Market”?
Handset sales volume decreased because the amount of handset discount provided by mobile companies was reduced to 20,000 yen at the time of handset sale. On the other hand, the profits of the mobile telephony companies increased due to the decrease in sales support payments due to the decrease in the volume of handset sales. Ironically, it has become a factor in increasing operating profit margins.
Source: MCA
It does not lead to the expected liquidation of the market. The abandonment rate of each mobile telephone company has not changed since before the introduction of the measures and has remained at around 0.5 points.
So far, the situation has largely deviated from the plan to “introduce new measures led by the Ministry of the Interior and Communications” → “activate competition” → “reduce prices”.
Source: MCA
New measures that require a balance between reducing consumer burden and industrial policy
In the mobile business, the government has the right to license frequencies, which is common property of the people, and there is one aspect that the mobile company has to obey. However, on the other hand, it is also a private company and has the mission of maximizing sales and profits based on the principle of competition. In fact, with the birth of Prime Minister Kan, the share prices of telecommunications companies have fallen and have already been affected.
The Ministry of Internal Affairs and Communications will reinforce pressure to reduce mobile rates in the future. However, it must be more important that the competition principle works with the measures that originally led to the “revitalization of the mobile market” and, as a result, a virtuous cycle is created in which the charges of mobile companies are reduced.
There is concern that simply lowering the price will make it impossible to make sufficient capital investment before the full-scale period of 5G investment, or lag behind other countries. While 5G is expected to serve as the foundation for all industries in the future, delays in infrastructure development will have a major impact on national industrial development.
One direction of the new measures is the allocation of frequency exclusively for MVNO and the management of operations by MNO, further reduction of the connection fee between MNO and MVNO, institutionalization of the introduction of eSIM, reception of MVNO in the MNO store, etc. Not even more geared towards supporting MVNO?
The mobile phone industry is called the “managed competitive market” and has developed with mobile phone companies at the top, but by switching from garage kits to smartphones, domestic terminal providers responded to rapid changes in the market. environment at that time. I couldn’t do it and was almost forced to withdraw. The situation is the same in the field of communications infrastructure. Now, without the existence of providers abroad, the terminals, infrastructure and platforms would not be possible.
Lowering the usage fee is important to reduce the burden on users, but isn’t it necessary to reconsider from an industrial policy perspective, including history so far? I would like to wait for the government to take further steps to stimulate competition.
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