Let the Data Price War Begin

Low-cost plans set to launch in Japan in March and April

NTT Docomo’s announcement in December 2020 that it would cut the price of its mobile data plan marked the beginning of a much-needed Japanese price war. From mid-March 2021, consumers in Japan will be able to choose from a selection of much cheaper data plans offered by all the major mobile operators.

NTT Docomo has said its new 20GB monthly plan will be commercially available in March, priced at ¥2,980 (about $29). This is equivalent to ¥149 ($1.40) per gigabyte and is 37% lower than the operator’s 30GB monthly plan, which at ¥7,150 ($69) works out to be ¥238 ($2.30) per gigabyte. The new plan includes unlimited calls lasting up to five minutes each, and will launch under new brand ahamo. The operator is hoping the low-cost tariff will attract young people in their 20s, a demographic where NTT Docomo isn’t as popular as its rivals.

Boosting revenue from younger subscribers isn’t the only reason for the price cuts. In October 2020, the Japanese government announced plans to bring down the prices of mobile tariffs to put them on a par with those in other major markets. A recent survey carried out by the government showed that the monthly fee in Japan for 20GB of data was more than twice that in the UK and three times that in France.

Although the Japanese government doesn’t have the power to impose mandatory price cuts, it does have a major shareholding in NTT Docomo. It’s betting that the launch of the operator’s cheaper plan will encourage competitors to do the same, fearing that they will lose market share to a rival with a sweeter deal.

And so far, things seem to be going the government’s way: in January, KDDI, which operates under the au brand, and is Japan’s second biggest operator by subscribers after NTT Docomo, announced a 20GB plan that will cost ¥2,480 ($24) per month. The company will launch its new service, called povo, in March, with a view to phasing in access to 5G in mid-2021.

In February, the country’s third largest operator, SoftBank, promised to lower the price of its 20GB mobile plan to match that of KDDI from mid-March. The service, which is called Linemo, will offer an option to add unlimited calls of up to five minutes each, for an additional ¥500 ($4.80) per month.

Ironically, it seems like the imminent launch of two modestly priced data plans, each costing ¥2,480 ($24) per month, put pressure back on NTT Docomo. It responded by annoucing in January that it would further cut the price of its upcoming ahamo plan by 9%. This will now be available for ¥2,700 ($26) when it arrives on 26 March.

There’s an argument that an overhaul of the Japanese mobile market is long overdue, but a lack of inexpensive plans was only part of the problem. Prime minister Yoshihide Suga hinted that increased competition was also necessary to keep prices down and ensure that consumers get value for money.

Enter Rakuten, the latest player in the Japanese mobile market. Rakuten Mobile launched in April 2020 and less than a year later, on 9 March 2021, reported having more than 3 million applications for its Un-Limit mobile service (see Insight Report: Rakuten Could Form a Template for Future Mobile Launches). It’s still a relatively minor player, though, dwarfed by NTT Docomo with its 82 million subscribers, KDDI with 60 million and SoftBank with 47 million.

Entering such a mature market isn’t an easy task, but it seems like Rakuten is up for the challenge. It recently announced plans to introduce a new service with a simplified fee structure aligned with customers’ data usage. Starting from 1 April, customers will be charged ¥980 ($9.50) per month for using 1GB to 3GB, increasing to ¥1,980 ($19) for 3GB to 20GB, and to ¥2,980 ($29) for using more than 20GB. Subscribers who use less than 1GB per month will be able to do so free of charge.

In the run-up to Easter, Japanese data consumers will get some relief from the overinflated price plans of the recent past. The next big challenge will be building in 5G services. Many mobile operators in the US and Western Europe are using 5G as a value-added service designed to reduce churn rather than charging customers additional fees for it. In the light of recent price changes, Japanese operators need to tread a fine line between increasing their profit margins following heavy investment in 5G and ensuring Japanese data consumers get value for money.