NTT docomo’s concerns over FTTH marketing

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NTT docomo announced the launch of docomo Hikari, a package plan combined with FTTH services by NTT East and West.
While the rivaling KDDI president, Mr. Takashi Tanaka, declared the scheme to be an “act close to law circumvention”, docomo’s president, Mr. Kaoru Kato, retorted that it is “an extremely open and fair” practice.

The scheme, in principle, is nothing more than a discounted sale by NTT docomo of NTT East & West’s FTTH network. As docomo must cover the underlying cost of discount, there is a prospect that its operation will suffer from the burden.

On the contrary, au’s Smart Value shares the discount cost among KDDI, K-Opticom (broadband provider), and CATV companies across the nation, so KDDI’s burden would not be that significant.
docomo Hikari is just a discount without a deliberate scheme behind it and therefore may render further blow to NTT docomo, currently struggling to make ends meet since the introduction of a new rate plan.
Another concern over the launch of docomo Hikari is the reduced packet income.
President Kato explains, “With docomo Hikari, users can enjoy better discount rate when they pick a higher rate plan from the new rate scheme”.

In other words, more expensive Packet Pack plans have higher discount rates. docomo’s marketing aim is to encourage users to opt for higher rate plans.
It is believed that, behind the current dramatic downturn of NTT docomo’s profit following the introduction of new rate plan, lies the acute profit fall in the packet sales.
In addition to the fact that heavy telephone users switched to the new rate plan and caused the drop in voice call income, it is said that households chose family plans to reduce the per-head spending, leading to the fall in packet sales much greater than the company originally expected.
Probably, NTT’s aim is to offer dramatic discount plans with docomo Hikari to lure users to more expensive packet plans.

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It is, however, just natural for the users to reduce the use of packet consumption as much as possible once they secure a smooth and stable wi-fi connection through optical network.
If they manage to save packet consumption at home, they can opt for an even smaller packet plan. Those who have used LTE connection under the 7GB plan will surely choose wi-fi connection under a new rate plan because the use of wi-fi means “cost saving”.

Due to the massive data traffic the networks have been experiencing recently, carriers have been aggressively distributing wi-fi routers to individual users to connect them with broadband and gain the “offload effect” in return.
However, under the new plan with progressive packet rates, it will no longer be necessarily beneficial for carriers to promote offload measures.

It may depend on how docomo Hikari would fix the discount rate, but there will be a risk that more families opt for cheaper packet plans, shrinking the company’s profit from packet sales even further.
At the moment, NTT DOCOMO is probably working hard to optimize the profitability in the given contexts, but the launch of docomo Hikari is unlikely to bring in a desired benefit in any case.