EDITORIAL: Unlocking cellphones

In 2008, a senior communications ministry official in charge of telecommunication policy published a book titled "Sekai-ichi Fushigi na Nihon no Keitai" (Japanese cellphones are the strangest in the world).

Japanese industries tend to depend on the large domestic market, developing products with unique specifications that are not intended for immediate sale overseas. This tendency is often referred to as "Galapagos syndrome" after the isolated islands in the Pacific Ocean, where species evolved in a unique way. Japanese cellphones offer a textbook case of the syndrome.

One of the factors behind the unique evolution of Japanese mobile phones is the practice of carriers that, figuratively, lock the handsets so that subscribers are unable to use them on the networks of their rivals. The Ministry of Internal Affairs and Communications plans to require carriers to unlock handsets.

This step will provide an incentive for cellphone manufacturers to develop handsets that meet the needs of overseas markets. Although it has certainly come way too late, the policy shift should be a first step for domestic cellphone makers to emerge from their Galapagos-like isolation.

In Japan, cellphone carriers program their handsets not to accept subscriber identity module (SIM) cards of users of rival services. SIM cards are portable memory chips holding information, for example, phone numbers. In most other countries, SIM cards can be used on any handset so that users can choose any combination of a handset and a service provider. In Japan, a system has been established in which carriers sell SIM-locked handsets exclusively for their services.

This system causes various problems.

First of all, it limits options for users in selecting handsets and service providers. The system also makes unclear the line between the prices of handsets and the fees for communication services.

The SIM-locking practice encourages carriers to adopt the business strategy of selling devices at deeply discounted prices to attract new subscribers and then covering the losses with subscription fees. This explains why cellphones once sold for just 1 yen.

The system generates even more serious problems from the viewpoint of international competitiveness. Handset makers have secured profits from guaranteed sales to carriers, but they have spent much of their precious resources on competition for new products developed only for the domestic market.

Japanese handset makers have failed to win significant shares in overseas markets even though they have clear technological advantages over foreign rivals.

Some observers say sales of highly sophisticated products for next to nothing undermined Japanese consumers' respect for manufacturing technology. The situation could eventually weaken the very foundation of the nation's industrial technologies.

Meanwhile, the global competitive landscape has undergone some rapid and drastic changes.

Nokia Corp. of Finland still maintains its status as the world's top handset maker with a global market share of more than 30 percent. But Samsung Electronics Co. of South Korea has risen to the second spot by establishing itself as an internationally popular brand for high-performance devices.

Smart phones, which are loaded with advanced capabilities, are becoming increasingly popular. Android, a free mobile operating system offered by Google Inc., is gaining ground.

The waves of change will also sweep Japan. Japanese market players have to brace for a tough battle. But it is clear that manufacturers cannot afford to remain content with catering only to the domestic market.

The only way for Japanese cellphone makers to carve out a viable future for themselves is to return to the tried and tested strategy for growth. That means developing products based on their strengths without being restricted by the demands of carriers and making efforts to sell them in overseas markets as well.

Cellphone makers are not the only ones facing the Galapagos syndrome. Japanese manufactures should take a fresh, hard look at their products and business strategies to see if they are not limiting the potential of their own technologies.

--The Asahi Shimbun, April 6