What is the actual total cost of signing a 2-year mobile phone contract in Japan? Gov’t to require carriers to tell you upfront

From October this year, Japan’s major mobile phone carriers will be required to inform consumers upfront of the total cost of signing a two-year mobile phone contract in a move to increase price competition and make it easier for people to compare prices between companies.

The Ministry of Internal Affairs and Communications is making the decision to require mobile phone companies to display the actual total cost of signing a two-year mobile phone contract in order to increase transparency and bolster consumer protection, according to a recent report by the Nikkei.

Currently, major mobile carriers in Japan offer a discount on communications charges only during the first year of a standard two-year contract. This makes it difficult for consumers to calculate the actual total cost of signing a two-year contract, in which monthly payments are made for the cost of buying the handset in installments plus monthly communications charges.

This new decision comes on the heels of a related decision by the government to require mobile phone carriers to limit the penalty fee for cancelling a two-year phone contract to ¥1,000 (currently, the average penalty fee is about ¥9,500). This new requirement will also come into effect in October and is meant to make it less expensive for people to switch carriers mid-contract.

New Requirements

Starting in October, mobile phone carriers will be required to inform users of the total cost of a two-year contract when they sign up for a new contract or renew their contract. Companies will be required to do so in writing or by email and will have to clearly break down costs to show people what they are paying for communications fees and what they are paying in installments for the actual handset.

Companies will also be required to show you the total cost for a two-year contract whether you sign up online or walk into a store and sign up in person. However, as we’ve discussed in other articles, mobile phone pricing places in Japan are extremely confusing and difficult to understand partly because of the various options and discounts offered. It’s not clear that this situation will change even with the new rule.

After the rule change, it is expected that many consumers who sign two-year mobile phone contracts (which include installment payments for the handset) will end up paying about ¥200,000 over the term of the contract. People opting for high-end models will, of course, pay much more.

However, observers have pointed out that the major mobile phone carriers have already gotten ahead of the rule change by offering various complicated discounts that will continue to make it difficult for people to calculate the real total cost of signing a two-year contract. Carriers will continue to be allowed to offer a dizzying array of voice and data options, handset discounts, and short-term discounts that expire mid-contract. (For useful tips on how to compare mobile phone price plans, please see: Mobile phone price plans are set to drop in 2019: Here’s what you need to know).

For example, in June, NTT Docomo started offering a monthly discount of up to ¥1,000 for new subscribers to its new Gigaho plan. This is a two-year term, family-based billing plan that covers voice calls and data communications combined, up to 30 GB a month without speed restrictions. However, the discounted amount varies depending on how many line subscribers who sign up in your Family Discount group. If you have three line subscribers in your Family Group, you will each receive ¥1,000 off your monthly communication charges (¥5,980 monthly); but if you have only two line subscribers, the discount is only ¥500. Observers point out that fine-line rules for receiving discounts, like this, may still be hidden by mobile carriers as they try to compete for new subscribers.

Nevertheless, as of October, mobile phone companies which fail to display and inform consumers of the total cost of a two-year contract may be subject to administrative guidance by the Ministry of Internal Affairs and Communication, which may also lead to official orders for improving their business practices.

Source: Nikkei, July 4, 2019

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