It’s official: the switch to flat rate for packet communications by NTT DoCoMo starts on June 1 at 3,900 yen per month—300 yen cheaper than KDDI. Is this the start of a new era of price wars that rapidly commoditize 3G services—reminiscent of what happened on Japan’s ADSL market a few years ago? Not if DoCoMo president Keiji Tachikawa can help it. Our first observation today was how few subscribers the flat rate will apply to—only heavy users who are used to price plans starting at 6,700 yen. The second point was DoCoMo’s opinion that perhaps only a third of heavy users might take advantage of the flat rate option this year.
We were glad that DoCoMo presented a lengthy explanation of its reasons for going flat rate, but Keiji Tachikawa’s press conference today came out with a series of very mixed messages.
First of all, as we said in the opening paragraph, flat rates will only apply to very heavy users. If you check DoCoMo’s press release, you can see that they’ve also rustled up some cheaper price plans for other customers, proving that the company is determined to launch a spring counterattack on KDDI on as many fronts as it can. For the record, DoCoMo is calling the service Pake-Houdai, which is a real slick piece of marketing. Houdai means “all you want,” or “unlimited,” in Japanese. If you mention the word houdai to most Japanese people, their thoughts will most likely spring to cheerful drinking shops and restaurants that offer nomi-houdai or tabe-houdai (drink all you want or eat all you want) at very reasonable prices. (The author tackled one of these on a skiing trip in Hokkaido a few years back at the headquarters of the Sapporo Brewery and managed to consume 9 jockies (pints) of beer and 1.1 kilograms of lamb in 150 minutes….)
And that’s the point: houdai brings on happy memories of carefree excess in the minds of Japanese people. And, not uncoincidentially, houdai slots are used by restaurants to grab punters, hoping they’ll come back and use the restaurant more regularly.
As with KDDI, it appears that DoCoMo might have pulled a fast one. When KDDI introduced its 4,200-yen flat rate late last year, we noted that 4,200 yen was significantly higher than the packet ARPU of its customers—in fact, about 1,000 yen higher—guaranteeing the company more than just a bit of chump change in additional revenues. This time round, with DoCoMo, tacking on 3,900 yen for customers used to paying 6,700 yen may mean those subscribers end up paying more than they would have without flat rates. Or so the question was raised. Not so, said Tachikawa, because you have to factor in the other discounts that are coming as well.
Talk about paying a price! It’s clear that DoCoMo is only targeting flat rates, at least initially, to those who are used to, or have their company pay, about 10,000 yen a month anyway! By announcing flat rates, the company is only going for a very narrow band of its customer base and not the whole lot as KDDI did. Still, it’s a start.
Again, it is obvious that DoCoMo has been dragged kicking and screaming into flat rates by the success of KDDI in beating the socks off DoCoMo over the last 6 months in net adds.
And it emerged that when the networks get crowded as the data flows, the “flatters” will not be flattered with access—in fact they will become second-class citizens. To wit: For all the warm and fuzzy talk about surging data and brand new paradigms that DoCoMo has been putting out of late, it’s also been busy setting up network level software controls. By golly if the network is at the point of overload, and the busier things get, the the higher the chances that those paying flat rate will be downgraded as the company prioritizes customers paying packet-by-packet.
“Flat rate will have a lower priority. The priority will be given to non-flat rate users,” he said.
Note the other caveats too (and we quote from the press release):
The flat-rate plan will be available to users of all 3G FOMA handset models. Network congestion may affect transmission speeds for flat-rate users.
The rate does not cover other packet communications, such as browsing the Web via devices connected to a DoCoMo 3G handset. Discount plans for basic monthly charges and voice communications (family, one year, and two-month carry over discount plans) will apply.
The next important thing Tachikawa was at pains to point out was that he is very reluctant to spread flat rates to second-generation PDC customers, and is holding out strongly about flat rates for other devices too. We wonder how long these dams are going to hold? On the other hand, to be fair to DoCoMo, it’s a good way to encourage people to shift to FOMA and the message will probably get across in the public mind that DoCoMo is playing the good guy offering flat-rate services, even if it is (for now) highly restricted.
There is also some hint now that content providers will be allowed to put their own dams across the data flow. Tachikawa refused to deny the possibility that content providers will be allowed to switch to paid models in the future. Good for them, choice or a pain in the FeliCa for others, depending on whose side you are taking.