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Low-cost smartphone market heats up between newcomers, industry giants

With low-cost smartphone service giant Rakuten Inc. offering plans that are more user-friendly than existing cheap mobile services, other major players in the industry are pushing back with sub-brands and new bargain deals, making for market competition that continues to heat up.

    "We hope to realize a level of customer satisfaction that major (smartphone service) companies can't beat," said Rakuten Executive Officer Hiroto Ooka at a press conference introducing the company's new "Rakuten Mobile" low-cost smartphone plans on Aug. 23.

    Under current smartphone contracts, when a user goes over their allotted data usage, data transmission speed is slowed down. However, under Rakuten Mobile's new offering, regular data speed is maintained to some extent, with only image quality reduced. If calls are under 5 minutes, they are included as part of a flat monthly charge, which begins at 2,980 yen before tax. On average, low-cost smartphones are available around 40 percent of the monthly charge of major service providers.

    Other companies are also coming out with new plans and services. Internet Initiative Japan Inc. introduced a new plan offering a smartphone and its usage fees as a set on Aug. 24. With a system that lowers the cost of the plan at the end of the second year, the company aims to attract long-term customers. Tone Mobile Inc., a company under the Culture Convenience Club Co. umbrella, began sales in August of a smartphone for children that stops working during the night.

    In response, major smartphone service providers have pushed back with low-cost sub-brands like Softbank Group Corp.'s "Y! Mobile" and KDDI Corp.'s "UQ Mobile." NTT Docomo Inc. also lowered monthly fees by 1,500 yen in June for customers who used certain smartphones for a long period of time, and KDDI also introduced a new plan 20 to 30 percent cheaper than the previous ones in July -- all trying to curb customers from turning their backs on their services.

    In a Ministry of Internal Affairs and Communications survey, as of the end of March 2017, there were some 15.9 million low-cost smartphone service contracts -- a 25 percent increase from the same time last year. The ministry projects that the market will only continue to grow.

    Still, these contracts only make up roughly 10 percent of total smartphone contracts nationwide. As major service providers try to rein in the competition with low-cost providers, there appears to be a continuing need to carefully monitor the fairness of this competitive service market.

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