New competition is coming to Japan's mobile phone market, with the promise of cheaper services for its long-suffering callers. On Wednesday, the Japanese communications ministry said it would grant unused bandwidth to three new entrants -- Softbank, eAccess and a start-up, IP Mobile -- allowing them to offer wireless services as early as next year.
Hopes are high that the new carriers will shake up the nation's US$70 billion cellular market, now divided among three big carriers -- NTT DoCoMo and KDDI of Japan, and Vodafone of Britain. The decision announced on Wednesday was the first time in 11 years the government had opened bandwidth to new providers.
Analysts said this could upset the often-restrained competition among the incumbents. And as the new entrants seek to reduce rates, they may also open Japan's market to foreign makers of handsets and network equipment, which frequently offer lower prices than the dominant Japanese electronics giants.
"We're trying to change Japan's mobile market from a totally Japan-centric one to one that's much more international," said Sachio Semmoto, the founder and chief executive of eAccess, which plans to offer low-cost voice service. "We are inviting in international vendors because we want to find the best equipment at the best price."
Analysts say the government had two goals in opening bandwidth. One was relief for Japanese callers, who pay the world's highest prices for mobile service -- about four times as much a minute as cellphone users in New York. The other was a desire to use market forces to keep Japan at the forefront of new wireless technologies.
Japan has been a trendsetter in cellphones, with highly advanced handsets and a third-generation high-speed wireless network, installed in 2001. But in areas like mobile broadband, which gives computers Internet access without their being tethered to a cable, Japan is in danger of falling behind other countries, analysts say. The new entrants have promised to help close this gap, offering part of their bandwidth for wireless Internet access.
Kazuyo Katsuma, telecommunications analyst for JP Morgan Securities Asia, wrote in a report on Tuesday that the government wants to "uphold Japan's reputation as an advanced broadband nation," adding that it planned further allocations of bandwidth by 2007 for technologies like WiFi and WiMax. WiMax is considered a successor technology to WiFi in its ability to deliver data transmissions over longer distances.
The newcomers say they plan to spend up to US$3 billion each building wireless networks, with a big part of that going to foreign equipment makers. Likely suppliers include South Korean handset makers like Samsung and LG Electronics and Western manufacturers like Lucent Technologies and Nortel Networks. Until now, Japan's market has been dominated by domestic producers like Fujitsu and NEC.
Semmoto said eAccess had lined up financing to build its low-cost service from a range of backers including Goldman Sachs, which eAccess said would provide more than US$200 million.
Softbank, a big Japanese Internet provider, plans a similar voice service. IP Mobile said it intended to offer mobile broadband service nationwide by 2010.
Analysts say the newcomers stand a good chance against giants like NTT DoCoMo that still do not offer cheaper services. That failure "creates a big opening for the new market entrants," Katsuma wrote.
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