Good News: Telecom Prices Are Falling

What's happening? Among other things: The prices of local and domestic long distance phone calls are dropping. Wireless services are expanding - and their prices are dropping, too. Data services on PHS (personal handyphone system) and cellular networks will be widely introduced this year and usage will increase greatly. And the price of Internet services is dropping, especially leased line pricing.

What are the reasons for this? Lots. There has been a great deal of pressure on the government to permit the lowering of rates. Cellular and PHS services have proven attractive alternatives to NTT's local phone services. While we have seen some steps by NTT to enhance its service, like the introduction of telehodai (a fixed monthly price for unlimited off-peak calls to selected numbers), I think rate drops are coming, too. Domestic long distance prices have continued to drop due to active competition and, with NTT poised to enter the international services market, those rates are likely to fall as well.

Cellular services have continually dropped in price, with five competing network operators and more than 16 million subscribers. One of the best things to happen to cellular services was the introduction of PHS. An ensuing price war has driven cellular prices to less than half of what they were 18 months ago, and the selection of services and handheld units has never been better. Recently, NTT lowered the rates it charges to cellular network operators, which will pave the way for more rate cuts.

Telecom killer apps
One of the killer applications for 1997 will be wireless data communications. With more than 20 million mobile phone users in Japan, there is now an "economy of scale" for successfully launching data services. Established cellular providers are currently leading the pack, but slow and expensive cellular (DoCoMo is the cheapest, at ¥15 per minute for 9600 bps) will soon be under attack by the faster and cheaper PHS makers. (PHS is a digital format capable of transmitting at 32,000 bps using one channel.)

PHS data services are just now getting underway, and the popularity of PDAs (personal digital assistants) in Japan will lead to the development of PHS and possibly cellular functions directly built into the PDA. This is when PDAs will really begin to take off - not just in Japan, but worldwide. A completely self-sustained, wireless communicator is what we are all waiting for.

Another "killer app" for 1997 will be cheap full-time network connections. Currently, cheap leased lines are being led by no less than NTT - a big surprise from a company that is known more for its slow, bureaucratic ways than for cheap pricing. NTT's new OCN (Open Computer Network) service, launched on December 25, 1996, promises cheap leased lines bundled with IP (Internet protocol) service, effectively eliminating the need for an Internet Service Provider (ISP).

That is the theory, at least. In practice, however, phone companies have yet to prove the Death Star for ISPs that fear-mongers claim them to be. NTT's services are aimed at small business and home office customers. While cheap leased lines (¥37,000 per month for 128K bps) are great for businesses, individual dial-up pricing is still unattractive. Also, OCN is a "best-effort service," which means that the throughput of the entire network (affecting all customers) will slow down during busy periods. Customers needing guaranteed speeds are still better off with a dedicated ISP.

One thing is for certain, though: NTT's foray into the world of Internet services will drive prices down, increase the average level of value-added services, and shake out the weakest players. All-in-all, good news for customers. Will 1997 be the year that we can stop complaining about Japan's high prices and get busy doing cool things on the Net?

Average Internet access pricing
As of January 1997, the average price for 64K-bps leased line IP service was under JPY100,000 per month. Prices for 128K-bps services average less than JPY200,000 per month, and 256K-bps service goes for between JPY300,000 and JPY400,000 per month. This is a drop of roughly 50% from 18 months ago, and average prices will drop even more as OCN installations pick up.

Dial-up Internet access pricing has pretty much settled to between JPY2,000 and JPY3,000 per month, with most providers offering unlimited-use plans and 2MB to 4MB of webpage and e-mail disk space.

And the average local phone call? Cellular voice service is priced at JPY30 to JPY50 per minute, cellular data is JPY15 to JPY50 per minute, and PHS is now JPY13 per minute. A local call via NTT, for comparison, is JPY3.33 per minute.

The author would like to credit Newsbytes Pacifica (http://www.nb-pacifica.com/) as a source of information for this column.