TT-821 -- Telecoms Ministry Bares Teeth Over Mobile Costs, e-biz news from Japan

An Insider's comments on Japan's high tech business world
* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

General Edition Sunday, September 27, 2015, Issue No. 821

- What's New -- Telecoms Ministry Bares Teeth Over Mobile Costs
- News -- Deflation would be great, if only we didn't have to eat
- Upcoming Events
- Corrections/Feedback -- Internet realities in China
- Travel Picks -- Lake Tazawa in Akita, Bingoya craft shop in Shinjuku
- News Credits

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+++ WHAT'S NEW

Japan's telecoms ministry (actually the Ministry of Internal Affairs and
Communications) is an interesting government organ, in that they
unwittingly made huge changes to the fabric of Japan's society when they
decided in the early 1990's to remove mobile monopoly rights from NTT
and thus open up the sector to competitors. From this we saw a major
change in Japan's telecommunications sector, which has spawned many new
industries (both hardware and software) and more importantly has caused
huge consumer benefits. Softbank and Hikari Tsushin are two large
corporations that came into existence thanks to the changes. Softbank
has since driven down prices and brought Apple iPhones to Japan, and
both it and Hikari have injected massive amounts of venture capital to
create a new generation of start-ups that Japan so badly needs.

Three simple examples of how de-monopolized mobile communications have
improved our lives as consumers include:
1. You're at a store and you quickly check Kakaku.com to see if the
price is right. Online information means aware consumers.
2. You're getting ready to drive back from a ski field or countryside
hike, and you check the Japan Highway Corporation real time traffic map
to see where the congestion is and decide whether to wait at a local
cafe or start back to town. Online information means less choke points
in infrastructure.
3. You notice on LINE that a friend is feeling depressed, and set up a
meet-up to cheer them up. Online information means a healthier community
(although obviously it can cause opposite effects as well).

These are all things that today we take for granted, but which would not
have happened to the extent they have if there weren't competitive
forces at work to keep prices down and innovation up. So our kudos to
the ministry (and to PM Abe for instructing them) for once again shaking
up the status quo vis-a-vis the Big 3 (NTT DoCoMo, KDDI/AU, and
Softbank) who although they do compete with each other, are not
sufficiently hungry that they are bringing any significant new
services/benefits to the public. Instead, they seem to be stuck
wallowing in their profits.

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-----------------------------------------------------------

[...Article continues]

The ministry found that out of the top 7 most expensive cities for smart
phone services in the world, Tokyo users were the 4th most burdened with
charges. Further, mobile costs as a proportion of household expenses
have risen 20% in the last 10 years. The ministry is therefore going to
pressure the Big 3 to reduce costs and innovate to bring mobile services
back in line with consumer incomes. Whether this is a good reason for
the government getting involved we're not so sure, but to the extent
that such pressure causes more competitors to join the field and for the
Big 3 to offer better services, the effects will be the same and thus
beneficial for us the consumers.

There are many ways that the Big 3 gouge the consumer, both directly and
indirectly. The direct charges are pretty obvious and usually involve
making call plans so complicated that what appears to be cheap actually
becomes much more expensive once you step over the thresholds. Think the
exorbitant costs of international roaming as an example.

Indirectly, the gouging occurs through the many MNVOs and resellers now
active in the telecommunications sector. We found out recently that
although most cheap data SIM services use NTT DoCoMo as a supplier,
which is a good thing or there would be no such services (AU and
Softbank not seemingly interested in OEM business, so the ministry needs
to push them on this), a reseller/re-brander has to pay JPY3,000 as a
type of non-refundable security deposit to DoCoMo on every SIM sold.
This effectively means that any low-cost services at least come with an
extra JPY300/month (i.e., 1-year contract) buried in the cost structure.
There is no particular reason DoCoMo should be charging JPY3,000 for a
SIM that costs about JPY3-10 each to make (OK, maybe add JPY100 to
program each one), other than they do because they can.

Another example is on prepaid data SIMs, which are popular with foreign
tourists. These come with a minimum price that is at least 4-5 times the
cost of a post-paid SIM (i.e., you can get a 3GB post-paid SIM for
JPY600/month, whereas the cheapest prepaid one is about JPY2,800),
effectively providing the original OEM supplier (90% NTT DoCoMo) with
the equivalent of the same non-refundable security deposit. This,
despite the fact that the tourists buying these SIMs are paying with
credit cards that will also be charged if the SIMs are not returned. Of
course tourists are not Japanese voters or tax-payers, so no one is that
concerned with what happens to them, but at least we hope that the
telecoms ministry can imagine that more tourists with more internet
access means better experiences in Japan and thus more repeaters.

After the ministry made the announcement last week, shares in the Big 3
mobile carriers fell sharply. DoCoMo shares fell 10%, KDDI/AU's fell
8.6%, and Softbank's by 5.5%. Clearly the ministry's announcement has
some teeth to it, so it will be interesting to see what actions they
actually take. Our guess is that one of the first moves will be to
allocate low-cost/no-cost spectrum to some other players, as well as
providing "guidance" to the Big 3 on what they think the price points
should be. A 20% rate cut to the average consumer seems to be suggested.
We hope they also take a look at the indirect gouging on data SIMs as well.

...The information janitors/

***------------------------****-------------------------***

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***********************************************************

+++ NEWS

- Still running competitively at 105
- Humanities studies cut in favor of sciences
- Uh-oh, Abenomics 2.0 is on the way
- Deflation would be great, if only we didn't have to eat
- Japan Tobacco to buy Reynolds business

=> Still running competitively at 105

Amazing centenarian runner Hidekichi Miyazaki has the doctors confounded
over his robust fitness. At the age of 105, last week he officially
became the world's oldest competitive sprinter by running in an
over-100's event here in Japan. Actually, Miyazaki holds several other
world records, after wins in the over-100's 100m and 200m races in
Beijing last month. He says it all when he is quoted by the Guardian as
saying his fitness and longevity are due to "daily exercise and eating
in moderation". ***Ed: Miyazaki is an inspiration and pretty much
defines a revolution in expectations by Japan's elderly -- many of whom
are not ready to get old yet. We love the quote where he says he took up
running at the age of 90, after friends he used to play Go with all died
of old age. Never too old to try something new.** (Source: TT commentary
from theguardian.com, Sep 25, 2015)

http://bit.ly/1NUXhRH

=> Humanities studies cut in favor of sciences

Apparently a badly worded order from the ministry of education has
faculty academics around the country up in arms. The ministry appeared
to have ordered that all 86 national universities around the country cut
their faculties of liberal arts and move staff to teach something more
"socially useful". The ministry has since denied that the order referred
to such a broad pruning of the university system, and instead insists it
was referring to cutting obsolete teacher programs. ***Ed: It's hard to
say (we don't have access to the original order) whether the problem
really was miscommunication or rather a trial balloon by the Abe
government to control what national universities teach. Either way, the
government has discovered that Japan's academics don't take kindly to
right-wing government interference. No demonstrations outside the Diet
this time around, though...** (Source: TT commentary from ft.com, Sep
25, 2015)

http://on.ft.com/1Vh2w48

=> Uh-oh, Abenomics 2.0 is on the way

In what seems to be a tacit admission that Abenomics isn't working [Ed:
mostly because the government is misallocating funds and distrustful
companies are not trickling down their earnings to employees], PM Abe
has announced a new initiative dubbed by the press as Abenomics 2.0.
This will supposedly create a JPY600trn GDP economy, although the PM
didn't give a date for when this target would be reached. Abe gave three
new "arrows" of policy as: developing a strong economy through monetary
policy and selective publicly-funded investments, a better environment
to have families, and better social security. He also said that he wants
to stabilize Japan's population at 100m over the next 50 years and to
increase the birth rate to 1.8 kids per mother. ***Ed: Yes, well, and
pigs can fly. The fact is that the government is loading up the country
with ever-more debt, transferring wealth away from consumers by
increasing consumption taxes, and encouraging companies to keep
full-time staff levels low by pushing up social security contributions.
Yes, of course people want to have a better future, but it's obvious
that the needs and expectations of older citizens are forcing younger
ones to carry an economic burden that can't continue. Instead, some hard
decisions need to be made. Specifically, pensions need to be means
tested and the pension age increased to 70, life-prolonging medical
services for the elderly need to be optional and charged at least at the
same cost everyone else has to pay (first 30%, not 10% as now), and
young families need to have tax breaks to encourage child rearing. Or,
you could start letting in underpaid immigrants in, in sufficient
numbers that they refloat the economy... :-)** (Source: TT commentary
from usnews.com, Sep 24, 2015)

http://bit.ly/1LHoB5O

=> Deflation would be great, if only we didn't have to eat

Japan's Consumer Price Index (CPI) omits fresh food, which kind of
explains why, when deflation is revisiting Japan (the CPI fell 0.1% in
August vs. a year ago), consumers are still not spending the extra money
that should be in their pockets. The reason, of course, is the elephant
in the room -- being the rising cost of food. Right now many consumers
are simply struggling to deal with the 2.7% increase in food costs in
the last 12 months, due to the weaker yen and the fact that more than
60% of food sold in Japan is imported. Many food companies have lifted
their prices 4-10% for the first time in several decades, which truly
highlights how strong the pressures are. In comparison, real wages were
up just 0.5% July (as compared to the same period last year). (Source:
TT commentary from nikkei.com, Sep 26, 2015)

http://s.nikkei.com/1h04Zgd

=> Japan Tobacco to buy Reynolds business

Insiders say that Japan Tobacco is in discussion with Reynolds American
to buy some cigarette brands from the firm. In particular, JT appears to
be interested in acquiring the Natural American Spirit tobacco brand for
around US$5bn. JT is on an M&A binge at present and has designated 2015
as its "Year of Investments". The Natural American Spirit brand is owned
by Reynold's Santa Fe Natural Tobacco Company, and is reported to be
doing about US$658m in revenue in FY2014 -- so it's a decent-sized
business. ***Ed: We guess that the leverage that JT has in these
discussions is that while there is no doubt that tobacco is still a
profitable business, being a Japanese company, JT is ultimately spared
the costs of class action lawsuits against its parent -- unlike their
U.S.-based competitors. Yes, there may be some risk in each of these
individual investments and to the local operating companies that run
them, but the parent will continue to survive and thrive under the
protection of the Japanese legal system and patronage of its largest
shareholder -- the Japanese Ministry of Finance.** (Source: TT
commentary from bloomberg.com, Sep 24, 2015)

http://bloom.bg/1KGUHJB

NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.

***------------------------****-------------------------***

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-----------------------------------------------------------

+++ UPCOMING EVENTS/ANNOUNCEMENTS

----------------- ICA Event - October 15th ----------------
Speaker: Jonathan Hope - Partner, Fusion Systems Japan
Title: " Secure Corporate Data and Messaging on the Cloud: What are the
Commercial Risks?"

Details: Complete event details at http://www.icajapan.jp/

Date: Wednesday, October 15th, 2015
Time: 6:30 Doors open, Buffet Dinner included with charges and pay as
you go cash bar.
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign
ups at the door!!!!!!!
RSVP: By 1pm on Monday October 12th, 2015. Venue is The Foreign
Correspondents' Club of Japan

http://www.fccj.or.jp/about/access.html
-----------------------------------------------------------

+++ CORRECTIONS/FEEDBACK

=> In Terrie's Take 820 we discussed the problems of connecting to
Google and other internet services from locations inside China. A reader
had this feedback to offer:

*** Reader: VPNs and logging on from China... A subject close to my
heart! I have been in China for over eight years and this is something
we deal with every day. When there is a national crisis or major event,
even the best VPN services do not work well. Nowadays my old i-phone 4
simply cannot connect to the VPN server, they have us checkmated. For
work it is a pain. We are a manufacturing company and although we have
our own domain it is actually on the Google platform and has been for so
many years that there is no way to transition it easily to anything more
workable. There is a cost to the Chinese economy, but it is hard to
quantify. For us I would say the added cost amounts to 30 minutes a day
of lost time per office employee -- because of speed and access issues.
If you multiply that across the entire Chinese economy it comes out to a
very big number.

As far as you comments about the staring and whispering about seeing a
foreigner in China, this is something you get used to. It is not
malicious, so no big deal, but sometimes it can get wearing. Trips to
Shanghai and a feeling of anonymity (Oh, and the food) are a welcome
change. Although I have to say, trips to Japan are even better!

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Cycling and Boating on Lake Tazawa, Akita
A meditation on renewal and growth

When was the last time you rode a bicycle in the open air? Was it
through a forest of ferns, leaves swaying in the soft dancing shadows in
the late afternoon sun? Maybe it was in the still surrounds of an Alpine
lake, looking into the horizon framed by snow capped mountains, the
silence punctuated by your laughing and the shrill sound of a rusted
metal bell?

At Lake Tazawa (Tazawako in Japanese), indulge in your memories and
fantasies by the lake, in a sightseeing boat, a swan shaped paddler or a
bicycle around the aptly named Shirahama, famous for its squeaky white
sand. With cherry trees, snow capped mountains, a walkway lapped by
gentle waves and an lake whose mercurial face mirrors the elements, from
inviting translucence in the sunshine to brooding grey in a storm. All
you need is a slowly playing violin or piano to complete the picture...!

The famous Japanese poet Basho once said "How lucky I am to be in this
bright spring in Tohoku, where the trees have just begun to bud all at
once, giving a beautiful fragrance!" Poets from ancient times through to
today sing the joys of the region's cherry blossoms. I can't find of a
better way of experiencing this than from the shores of Lake Tazawa,
with a picnic and a glass of sake or champagne.

http://bit.ly/1LVlpzj

=> Bingoya Craft Shop, Shinjuku, Tokyo
Authentic Japanese creations

Just a short way away from Shinjuku Station, there is a large craft shop
where you can find a variety of high quality handicrafts sourced from
around Japan. Bingoya's collection is spread over a standalone
five-story shop. Inside there is a mix of creations, such as glassware,
metal work and pottery.

The nearest station is Wakamatsu-Kawada on the Toei Oedo line. Just a
short few minutes' walk, and you will be able to see the store standing
prominently beside the main road. While I was inside, quite a few people
also popped by to browse and admire the craftsmanship that went into
making the products on sale.

The first floor has a mixture of handicrafts, including woven fabrics,
glass, ceramic ware, and high quality paper products. For foreigners who
might not be familiar with traditional Japanese methods and products,
there are handy descriptions and flyers in English explaining the
product or the technique's history, production process, and significance
of the art on display. The store is well prepared for tourists as well,
and offers to ship larger products overseas for you.

http://bit.ly/1LeR3ND

***------------------------****-------------------------***

***********************************************************
END

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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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