Loading
Search
▼ Phone Carrier Price War Stifled
- Category:Other
By Katsutoshi Samata / Yomiuri Shimbun Staff Writer
A directive issued by the communications ministry on Tuesday to two of the nation’s major mobile phone carriers over excessive discounts highlights the difficulty of encouraging the firms to rectify their business practices in an industry that focuses on winning new customers.
The Internal Affairs and Communications Ministry issued an administrative directive to NTT Docomo Inc. and SoftBank Corp. based on guidelines that took effect on Friday. The aim is to stop them from effectively selling smartphones for free.
The directive was not issued to KDDI Corp., the nation’s other major carrier.
Docomo and SoftBank offer financial incentives to smartphone customers, and Tuesday’s administrative directive focused on their discounted monthly rates and device prices.
These extensive incentives are funded by the fees that all customers pay to the mobile phone carriers. This means only the handful of customers who frequently change smartphones can enjoy the financial incentives — not those who use the same device for long periods.
“We believed sharp rises in smartphone prices could confuse customers,” a Docomo official said.
A SoftBank official said the company decided its prices mainly by taking into account “a balance [in relation to] those set by rivals.”
A directive issued by the communications ministry on Tuesday to two of the nation’s major mobile phone carriers over excessive discounts highlights the difficulty of encouraging the firms to rectify their business practices in an industry that focuses on winning new customers.
The Internal Affairs and Communications Ministry issued an administrative directive to NTT Docomo Inc. and SoftBank Corp. based on guidelines that took effect on Friday. The aim is to stop them from effectively selling smartphones for free.
The directive was not issued to KDDI Corp., the nation’s other major carrier.
Docomo and SoftBank offer financial incentives to smartphone customers, and Tuesday’s administrative directive focused on their discounted monthly rates and device prices.
These extensive incentives are funded by the fees that all customers pay to the mobile phone carriers. This means only the handful of customers who frequently change smartphones can enjoy the financial incentives — not those who use the same device for long periods.
“We believed sharp rises in smartphone prices could confuse customers,” a Docomo official said.
A SoftBank official said the company decided its prices mainly by taking into account “a balance [in relation to] those set by rivals.”
To prevent the mobile phone carriers from engaging in a price cartel, which would violate the Antimonopoly Law, the guidelines stipulate that it is appropriate that they ask customers to “bear reasonable burdens.” However, there are no specific figures for what constitutes “reasonable burdens,” which is partly behind the the excessive discounts that are subject to Tuesday’s directive.
By applying the guidelines to the mobile phone carriers, the ministry aims to help end excessive discounts, such as selling smartphones effectively for free, and reduce customers’ monthly rates.
However, it is hard for the major carriers to stop offering discounts because they are engaged in fierce competition for customers.
All the mobile phone carriers offer the same device models — notably
Apple Inc.’s popular iPhone series — making it difficult to stand out among the competition based on the performance of those products. Therefore, the mobile phone carriers offer discounted device prices to encourage customers to switch from a rival.
There are some concerns in the industry over the ministry’s strict application of the guidelines. “There is no way for us to compete if we’re not allowed to offer discounts,” one source said. “That could halt the [growth of carriers’] market shares.”
On Tuesday, the ministry asked Docomo, SoftBank and KDDI to report by the end of this week on the financial incentives they offer to dealers. The aim is to look into “indirect discounts,” whereby the major carriers offer incentives to dealers, who will then offer discounts to customers.
This request, along with the administrative directive, aims to show the ministry’s tough stance and prevent the guidelines from losing effectiveness.
By applying the guidelines to the mobile phone carriers, the ministry aims to help end excessive discounts, such as selling smartphones effectively for free, and reduce customers’ monthly rates.
However, it is hard for the major carriers to stop offering discounts because they are engaged in fierce competition for customers.
All the mobile phone carriers offer the same device models — notably
Apple Inc.’s popular iPhone series — making it difficult to stand out among the competition based on the performance of those products. Therefore, the mobile phone carriers offer discounted device prices to encourage customers to switch from a rival.
There are some concerns in the industry over the ministry’s strict application of the guidelines. “There is no way for us to compete if we’re not allowed to offer discounts,” one source said. “That could halt the [growth of carriers’] market shares.”
On Tuesday, the ministry asked Docomo, SoftBank and KDDI to report by the end of this week on the financial incentives they offer to dealers. The aim is to look into “indirect discounts,” whereby the major carriers offer incentives to dealers, who will then offer discounts to customers.
This request, along with the administrative directive, aims to show the ministry’s tough stance and prevent the guidelines from losing effectiveness.
- April 7, 2016
- Comment (0)
- Trackback(0)