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Late last month, the Japanese government announced it would start holding hearings about a new law requiring all mobile operators to unlock their mobile phones, loosening up the tie that binds cellphones with their services.

As I expected in my earlier post, carriers are not letting this one pass without a fight.

Hideki Francis Onda reports, in his new CNet blog, that Masayoshi-san, CEO of Japan’s number 2 operator, SoftBank, held a press conference to hammer some points down.

The future of prices

According to him, handsets are bound to become more expensive if unlocked, especially because of a reduction in handset subsidies due to the loss of customer loyalty.

Even in a country that knows a very high customer retention, this threat might find some resonance in a saturated market where sales already saw some disturbances after a new regulation came into force in 2008 providing that subsidies had to be clearly disclosed for the full contract length.

The future of services

More bluntly, Masayoshi implies that the subsidy-free model is the reason why the number 1 handset maker in the world, Nokia, flat-out failed in the country and pulled out.
The incurred money loss would force SoftBank to curb on both services and quality.

This echoes a similar threat made by NTT DoCoMo at the end of March: if the law becomes reality, the company said, special internet and networking services, amongst them the well known i-mode, would be limited.

The mess of frequencies

The different frequencies used by Japan operators are also mentioned by SoftBank’s CEO as a major hurdle that would require investment in order to offer transport between carriers.

The detailed law was not made public yet, but I find it hard to believe operators would actually offer such service if not mandated to. It would obviously shield bankrupt Willcom which uses the incompatible PHS technology from having customers defecting –and, reversing the logic, would lock these customers in for this particular operator.

The silence of handset makers

Recent headlines of the HTC Desire release by SoftBank or Sharp’s ISO1 communicator by KDDI might be showing that Japanese operators are getting into a more internationally compatible foray, but they’re hiding a simple fact: the vast majority of keitais are made by specific manufacturers with specific specs for specific services.

We have yet to hear from them. It would be interesting to see if they’d consider a SIM free Japan as a challenge –a large share of their marketing currently being done by the operators, or as a new opportunity both locally and internationally where they are basically inexistent.

The protection of the iPhone market

Coming back to SoftBank’s case, Hideki Francis makes a good point: the iPhone, successfully sold by SoftBank –estimates put sales at 2.5m, might be an important reason why Masayoshi stepped up his game.

Added to the (somewhat far-fetched) rumor that NTT DoCoMo plans to sell an unlocked micro SIM for the iPad, the thought of having its biggest competitor reinforcing its position and -with recurring chatter of Apple changing its mind on CDMA for Verizon in the US- having KDDI breathing down its neck, is not going down well with SoftBank.

Let’s see how this plays out. This is just getting started.

Image by Danny Choo, CC by nc sa
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