Carriers Resist Handset Subsidy Regulations
Not surprisingly the battle over proposed new handset regulations is starting to heat up. According to a brief article, KDDI Corp’s President Tadashi Onodera reacted angrily to the recent government report calling for the cellular industry to terminate the practice of offsetting handset discounts with higher service charges. Onodera criticised the plan stating that Japanese mobile operators must be allowed to continue offering rebates. “Amid free competition among three carriers.. I feel odd about the government-backed decision.” We commented on this issue Here in June.
KDDI warned that if rebates were abandoned, handset sales could decline resulting in the possible closure of many retail outlets. “We need to avoid such a vicious circle,” Onodera said. He went on to cite the experience of South Korea where a similar initiative ended in failure and resulted in a return to a subsidies system where service providers pay rebates to retailers in exchange for heavy discounts on handsets.
We expect DoCoMo and SoftBank, let alone the handset makers, to also plead their case in this matter over the coming months. As stated many times here on WWJ, controlling the device has been on of the key factors to successful roadmap deployment of new service offerings in this market. In order to maintain the upgrade cycle the current carriers model of selling sim-locked phones for a low upfront cost, with higher monthly fees over the contract term, has been one of the main drivers for innovation. The final outcome is pretty much anyones guess at this point.. but we certainly wouldn’t bet against the companies who have the most significant vested interest in this space.