Japan's wireless carriers told to unlock phones starting next year

TOKYO (Reuters) - Japan’s wireless network providers are to lift restrictions on which network their subscribers can use, the government said, demanding that all smartphones and tablets to be sold with their SIM cards unlocked upon customers’ request starting next year.

The Ministry of Internal Affairs and Communications said on Friday that all smartphones and tablets are to be sold with their SIM cards unlocked if customers ask for it and at no cost to users, from May 2015.

That will free consumers from traditional two-year contracts and give users the option to sign up for alternative plans. Mobile Virtual Network Operators (MVNO), which do not own any wireless network infrastructure but rents bandwidth instead, generally offer cheaper data and voice plans.

The move will push the country’s three biggest mobile carriers network providers NTT DoCoMo Inc, KDDI Corp and SoftBank Corp to be more competitive with their pricing.

It will also give MVNOs such as Aeon Co Ltd and Rakuten Inc a chance to increase their market share, currently at less than 5 percent combined.

NTT DoCoMo, KDDI and SoftBank began selling earlier this year flat-rate voice and data plans that cost at least around 6,500 yen ($59). Users can make as many calls as they want under such plans.

But these plans are significantly more expensive than those offered by MVNOs. Rakuten offers a combined voice and basic data plan for an average monthly fee of 2,200 yen, excluding the cost of the phone, though calls are not unlimited.

“There will be a flow of customers going into MVNOs, as its share is currently very small but that will grow,” said SMBC Friend Research Center analyst Naoki Yokota. “However, they have to overcome hurdles to take a significant share from the big carriers, such as voice calling plans that are not unlimited and thus costing more than what the big carriers offer.”

The government has been criticizing the three carriers for giving consumers little choice over data plans, although they have held back from taking action until now.

“Carriers like SoftBank that don’t widely offer their network to MVNOs like DoCoMo may begin to do so more to prevent losing their customers to MVNOs,” said Mitsubishi Research Institute Inc chief consultant Naoki Nishikado.

Network providers lock the SIM cards of smartphones, often sold at a discount, to prevent subscribers from breaking contracts and hopping over to other networks after obtaining their handsets at reduced prices.

Reporting by Teppei Kasai; Editing by Ryan Woo