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Japanese carriers losing out on handset subsidies

Michael Caputo

In the fierce world of wireless competition, companies fight tooth-and-nail for customers in a desperate attempt to raise ARPU (Average Revenue Per User). Customers are naturally looking for the best deal, and with multiple carriers selling the same or similar handsets, the consumer's decision carries a lot of weight. The same problem that exists here in the States is even more prevalent in Japan where the country's largest carrier, NTT DoCoMo, attempts to pack cell phones with such features as bar code scanners, TV receivers and gaming devices. All those goodies cause manufacturing costs to soar in excess of $600, requiring the carrier to discount the handset heavily to prevent customers from getting spooked at the store. Sounds like a steal, right? Not so much. All these subsidies end up costing the companies around $16 billion a year which in turn leads to higher plan prices to recoup the blown revenue from the devices. All in all, it's a vicious circle -- but hey, at least it's a technology-laden one.


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