Journalist Tsutsumu Ishikawa posted an interesting article covering the May 17 Ministry of Internal Affairs and Communications (MIC) industry workgroup meeting examining fair competition in the Japanese smartphone market. Specifically it was a review of the effects from the October 2019 rule changes that eliminated JP carrier subsidies.

What other media outlets didn’t pick up was that Ann Rollins, Senior Director of Government Affairs at Apple attended the meeting and gave a presentation. Rollins pointed out that the MIC rule changes eliminating carrier locked devices and 2 year contracts, haven’t helped the industry (Rollin’s comments translated from Ishikawa san’s Japanese article):

Since the October 2019 rule changes, customer MNP switching between carriers has (seriously) declined instead of increasing, contrary to the objective of the rule changes…

While the smartphone penetration rate is rising, the number of shipments is sluggish. This is due to various factors, such as the lengthening of the handset replacement cycle and the use of used handsets, but from the perspective of the new handset market, despite the big event of switching to 5G, the situation is stagnate…

Unfortunately, the penetration of 5G devices accounts for only 3% of the total number of (Japanese) mobile phone subscribers. For example, there is official data that the penetration rate in South Korea is 17%. In order for customers to actually enjoy the benefits of new technologies and services through 5G, the spread of compatible devices is indispensable, but at present, the spread of 5G is generally sluggish…

Infrastructure and devices can be said to be two wheels. No matter how much you build a highway, it doesn’t make sense if you don’t have cars running on it. Now that the separation of mobile carrier contract plans and smartphones has been achieved, it may be necessary to make an exception for 5G purchases from the viewpoint of promoting the growth of 5G smartphones…

Measures are needed to prevent delays in the growth of 5G. What is important for users is the total cost of mobile phones. Now that complete separation has progressed and low-priced plans have appeared, it is desirable to leave what should be left to market competition to market competitively, which can be expected to further reduce total costs. We request that you (MIC) scrutinize the need to maintain a uniform device purchase subsidy and consider exceptions for 5G in order to provide users with a variety of options.

In other words Apple is asking Japan to let carriers subsidize 5G smartphone contracts…a little. I suspect Rollins was also there to discuss getting the MIC My Number ID card digital initiative coming to Osaifu Keitai devices by 2023, on Apple devices.

Unfortunately the MIC 2019 rule changes came just in time…for the COVID pandemic. iPhone 12 was not even a upgrade consideration for me because NTT docomo switched to 3 year contracts. My iPhone 11 Pro will be paid off by October 2022. When my partner upgraded his iPhone in December, the docomo representative said a lot of customers were taking a wait and see approach. The 5G network is still building out and there is the Face ID with face mask problem. He went with an iPhone SE2 because of price and the ease of Touch ID, the SE unfortunate success factor. I think lots of people did the same which matches another finding of the MIC workgroup: high-end smartphone upgraders have migrated to the middle range.

While there no guarantee MIC will consider Apple’s suggestion, allowing carriers to discount ‘up to ¥20,000’ would help the 5G transition. The market is still repositioning with recent carrier ‘budget brand’ initiatives like NTT docomo ahamo KDDI povo and Rakuten Mobile gaining 1st tier iPhone carrier status. Things are in flux but Apple asking MIC for 5G carrier subsidies does say something about the state of things.