New Regulation Could Alter Subsidy Models
Japan’s Ministry of Internal Affairs and Communications (MIAC) is expected to enact a proposal made earlier this year requiring operators to unlock SIM-locked phones and tablets for free when requested to by subscribers. The new rule would go into effect in May 2015. Japanese operators currently voluntarily unlock devices based on their discretion.
Operators in Japan may continue to sell SIM-locked devices tied to fixed-term contracts, but the option to unlock will provide subscribers with the opportunity to optimise plans and potentially prevent roaming charges by using local SIMs when travelling abroad.
One intention of MIAC’s decision is to spark activity among Japan’s mobile virtual network operators (MVNOs), currently holding only a small sliver of the market. Japan’s top-three wireless operators — KDDI, NTT DoCoMo and Softbank — have an approximate combined market share of 95%. Mobile number portability is an option for subscribers, but there’s been a very low level of subscriber churn and a high level of customer loyalty. About 98% of Japanese subscribers are on post-paid plans.
Average revenue per user of $65 in Japan isn’t exorbitantly high when compared with other highly device-subsidised markets, yet consumers have fewer price plans to choose from than in markets with more MVNO and prepaid activity. Casual mobile users in Japan tend to get locked into subscriptions with higher voice and data allotments than they need even though some MVNOs offer matching plans costing less than one third of that from the big three operators.
Subscribers will have to continue to honour their contracts with their current operators, but those who have been with an operator for more than two years might begin to explore their options. It’s too early to predict the effects this will have on the average revenue per user but, while casual mobile users could see a significant decrease in their monthly mobile costs, data-intensive users may end up paying more.
The Ministry’s decision is likely to cause Japan’s operators to evaluate their current models, potentially offering lower-priced plans with fewer device subsidies. This follows changes in other markets where traditional subsidy pricing models are coming under pressure as operators look to differentiate their plans or are feeling competition from local regulators. In the US, for example, T-Mobile began separating the cost of devices from the monthly contract, essentially financing phones to users.
We expect more changes to subsidy models and the unlocking of smartphones during 2015. As device costs of highly capable devices continue to fall and more highly-desired Chinese smartphones find their way to developed markets, subscribers could learn they don’t need to be locked in.