It wasn't supposed to be like this! Trouble after buying a cheap smartphone - Confirm specific services and procedure, in addition to price.

Recently, more and more consumers use mobile phones including "cheap smartphones¹".² With the growing use of mobile services, inquiries about cheap smartphones received by consumer centers and other similar organizations in Japan are on the rise (Diagram 1). According to the inquiries, many consumers believed that they could receive same services as before at a lower price, but later they found out that some of the services were not available under a new contract.
Prices set by cheap smartphone companies are relatively inexpensive. Now there are more options for consumers to choose the most suitable contractor among many based on their actual usage. When using mobile services, it is essential to note differences between services provided by cheap smartphone companies and those provided by conventional mobile phone companies. Accordingly, NCAC has compiled sample cases of the recent inquiries and complaints as well as advice for consumers to provide information on this issue.

Number of inquiries received by PIO-NET³

Inquiries about cheap smartphones are increasing year by year. The number of cases in FY2016 was about 2.8 times of that in FY2015.

Diagram 1: Transition in the number of inquiries about cheap smartphones

Inquiries about cheap smartphones amounted to 20 in FY2011, 26 in FY2012, 46 in FY2013, 139 in FY2014, 380 in FY2015, and 1045 in 2016.

1. ¹ In this article, cheap smartphone services mean mobile phone services with voice calls (including SIM card only contracts, excluding mobile phone contracts without voice calls) provided by mobile virtual network operators (MVNO). MVNO providing cheap smartphone services are referred to as "cheap smartphone companies".
2. ² According to "Quarterly data on telecom service contracts and market share" (till the second quarter in FY2016, through the end of September) (http://www.soumu.go.jp/menu_news/s-news/01kiban04_02000117.html (written in Japanese)) released by the Ministry of Internal Affairs and Communications (Japan Corporate Number: 2000012020001), the number of contracts for mobile phones and PHS including cheap smartphones is on the rise, reaching about 12,000,000.
3. ³ PIO-NET is a database that collects information on inquiries concerning consumer affairs by linking the National Consumer Affairs Center of Japan with local consumer centers and similar organizations across Japan via an online network. This article uses data received by PIO-NET till March 31, 2017. Inquiries referred from local consumer centers, etc. are not included.

What is a cheap smartphone company (MVNO)⁴ ?

Cheap smartphone companies provide consumers with mobile communication services such as mobile phone services and wireless Internet services by using or connecting to telecommunications circuits offered by telecommunications carriers which have their own telecommunications circuit facilities. They provide services at relatively inexpensive prices by reducing operational costs in various ways (e.g. unnecessary to maintain their own communication facilities, mail order sale via the Internet, etc. without having physical shops, providing limited services).

Diagram 2: Contractual relationship between a cheap smartphone company (MVNO) and a consumer (example)

1. ⁴ According to "MVNO guidelines for applying the Telecommunications Business Act and the Radio Act", MVNO is defined as a telecommunications carrier which provides mobile communication services by using mobile communication services offered by MNO or connecting to MNO's telecommunications circuit, without establishing and running its own radio stations. MNO (mobile network operator) means a telecommunications carrier which established and/or runs its radio stations with license to provide mobile communication services as telecommunications services.

Characteristics identified based on inquiries and complaints (received date and inquirer's nature noted in parentheses)

Although a growing number of consumers enter into a contract for cheap smartphone services attracted by inexpensive prices, numerous inquiries and complaints about cheap smartphone services have been reported (e.g. problems triggered by differences between services provided by the former contractor and those provided by the new contractor, problems generated by purchasing a terminal and a SIM card separately, trouble over the usage start date).

Examples : Characteristics identified based on inquiries and complaints

Cheap smartphone companies (MVNO)

• Those with physical shops are still limited. Sometimes customer services are provided only via telephone and/or the Internet.
• Possible to make two different contracts for a terminal and a SIM card (communication service).
• If there is no physical shop, consumers have to make arrangements by themselves to enter into a contract and to start using services.
• Services provided free of charge by conventional mobile phone companies may be charged by cheap smartphone companies (e.g. web filtering service, a replacement for a faulty smartphone during repair period, etc.).
• Email addresses may not be provided by the companies (or provided for a fee). Consumers may have to seek for a new email address by themselves.
• Emails may not be delivered to the destination address depending on the email reception setting of the recipient.

Conventional mobile phone companies (MNO)

• Customer services are provided not only at physical shops, but also via telephone, the Internet, etc.
• Basically, a terminal and a SIM card (communication service) are offered in a package contract.
• All the initial arrangements are made with a shop clerk, and a terminal is made ready for use at the shop.
• In addition to communication services, various services are provided (e.g. web filtering service, a replacement for a faulty smartphone during repair period, etc.).
• Email addresses are provided by the companies (carrier emails).

(1) Problems triggered by differences between services provided by the former contractor and those provided by the new contractor

Services provided free of charge by conventional mobile phone companies (e.g. web filtering service ⁵, etc.) may be offered as options for a fee or may not be offered by cheap smartphone companies, although basic charges are relatively low.

i) Inquiry desk, response when a terminal is broken and during repair period

If there is no physical shop, customer services are provided only via telephone or the Internet. A replacement during repair period may not be provided free of charge depending on companies [Case 1 & 2]. If a terminal is purchased from another company, repair service is basically provided by the company which sold the terminal.
The Telecommunications Business Act states that a contract for a certain range of telecommunications services can be cancelled by a consumer within eight days starting from the date when a written contract is received by the consumer.⁶ However, contracts for mobile phone services with voice calls provided by cheap smartphone companies are not subject to the early cancellation system. If you cancel a contract for cheap smartphone services, a cancellation fee may be charged even if immediately after making a contract [Case 2].

1. ⁵ It is a function to block access from websites which are illegal or harmful to juveniles.
2. ⁶ With regard to contracts for mobile phone services provided by major mobile phone companies, confirmation measures may be applied. If the application is approved by Minister for Internal Affairs and Communications, a consumer can cancel the contract, including the terminal.
   (cf. "Do you know the Telecommunications Business Act has been revised? Carefully check details of a contract for optical communications, smartphone, etc." released by NCAC on May 19, 2016) (http://www.kokusen.go.jp/news/data/n-20160519_2.html (written in Japanese))

[Case 1] Helpdesk is accessible only via telephone. The line is always busy.

I entered into a contract for a cheap smartphone through the Internet. There is no physical shop, and customer support is provided only via telephone. The line is always busy and I cannot get through to them. I have used the smartphone assisted by my family and people around me. In the future, there may be something which can be handled only by the contractor. I wish the customer support will be improved in one way or another.

(received in November 2016, man in his 60s in Tokushima, unemployed)

[Case 2] No replacement is provided by the contractor during repair period. I cannot use a smartphone for a month.

I heard that a monthly fee for mobile phone services would be discounted if the optical communication services and mobile phone services are provided by a single telecom company. So I entered into a contract via the Internet for a cheap smartphone terminal and a SIM card including services of data communications and voice calls. Three days later, I received a terminal, but soon it became unable to be powered on. When I contacted the telecom company, they told me to contact the terminal manufacturer. The manufacturer said, "It takes one month to repair the smartphone. We don't provide any replacement during the period". Neither telecom company provided any replacement. It is very inconvenient if I cannot use a smartphone for a month. I requested to use the early cancellation system, but they told that the contract was exempt from the system.

(received in October 2016, man in his 30s in Tokyo, salary earner)

ii) Carrier email addresses

Email addresses provided by mobile phone companies are called carrier email addresses. There are many cheap smartphone companies which do not provide carrier email addresses. In that case, consumers use email addresses provided by other companies and exchange emails on the Internet. Although a limited number of cheap smartphone companies provide email addresses, these emails may not be delivered to the destination address depending on the email reception setting of the recipient. There are cases where the email reception setting of the recipient has to be changed [Case 3].

[Case 3] No email address was provided by a cheap smartphone company. I used another company's email address to send an email, but it was not delivered to the recipient.

Seeing a flyer, I got an interest in a cheap smartphone. I went to a nearby electronics retail store and heard an explanation of a cheap smartphone provided by a cable TV subsidiary. Then I entered into a contract there. I received the smartphone by express delivery next day. The salesperson at the store said "Free email application is useful", so I used it to send emails to my sister and cousin, but these emails were not delivered to them and I received error messages in English. Both of their phones blocked emails from non-carrier email addresses, so they needed to change the filtering settings to receive my emails. I want to send emails to others as well, but it is bothersome to ask them to change their filtering settings. I want to cancel my contract for the cheap smartphone.

(received in December 2016, woman in her 50s in Chiba, homemaker)

(2) Problems generated by purchasing a terminal and a SIM card separately

It is common for conventional mobile phone companies to sell a mobile phone terminal and a SIM card necessary for using communication services in a package. On the other hand, cheap smartphone companies do not always sell them in a package. It is possible to make a SIM card only contract with them. If there's no problem when a cheap smartphone company checks operation of a terminal which has been used or purchased at a secondhand smartphone store, etc., the terminal can be used with a SIM card provided by a cheap smartphone company. Consumers may need to unlock SIM lock ⁷ or to change the SIM card size depending on terminals.

i) Some terminals may not accept a new SIM card.

SIM lock is unlocked under certain conditions ⁸ by a mobile phone company which sold the terminal. Even when SIM lock cannot be unlocked and communication services are unavailable, a consumer will be charged for communications if a contract with a cheap smartphone company is concluded. Basically SIM lock of terminals sold on May 1, 2015 or after can be unlocked. Terminals sold before May 1, 2015 are in different conditions depending on mobile phone companies and models of smartphones.

1. ⁷ Some mobile phones are activated only if a specified SIM card is inserted. To unlock SIM lock means to remove such a technical restriction built into a mobile phone. In this way, another SIM card sold by a company different from the terminal seller can be used.
2. ⁸ According to "Guidelines for trouble-free SIM lock unlocking" in "Guidelines on terms and conditions of mobile communication services and terminals", companies shall accept requests for unlocking SIM lock of terminals they sold on or after May 1, 2015. Currently, SIM lock can be unlocked after 180 days from purchase. From August 1, 2017, it will be after 100 days from purchase if payment for a terminal is made in installments. From December 1, 2017, SIM lock can be unlocked when the seller confirms the full payment for a terminal in case of lump-sum payment.

[Case 4] Another company's SIM card was unable to use before releasing the previous SIM lock

My family of three thought about switching from a major mobile phone company to a cheap smartphone company. All three were using old model smartphones two generations ago, which we had bought three years ago. It was unclear on a website if the cheap smartphone company's communication services are available with the old model terminal, so I asked the company via telephone if the smartphone could be used. They told it was possible. Then, I applied for mobile number portability for the three terminals at a mobile phone shop. At a later date, my new SIM card was delivered, so I inserted it in my smartphone. An error message "SIM doesn't match" was shown and I noticed that the SIM lock was on. I went to the mobile phone shop to confirm the matter, but the shop clerk told that the model was not covered by their SIM lock releasing service. I made a complaint to the cheap smartphone company. Smartphones of two family members excluding mine were cancelled without conditions, because they had rejected receiving the new products. With regard to my smartphone contract, they insisted "A cancellation fee will be incurred. Sorry". At first the salesperson spoke incorrectly. Why should I have to pay a cancellation fee?

(received in September 2016, woman in her 40s in Nagasaki, salary earner)

ii) Second-hand terminals being sold may be restricted in future use.

Used terminals are sold via websites, online auctions and second-hand shops. Payment by a previous owner may be outstanding. If a consumer buys such a terminal, a request for repair may not be accepted. If the payment is stopped, network use will be restricted, and functions of voice call, communications, etc. may be unavailable [Case 5].

[Case 5] There was an outstanding balance on a used smartphone which I bought via the Internet. The contractor told me that they cannot accept my request for repair if the payment is outstanding.

I bought an unused second-hand smartphone by credit card from a dealer advertised at an Internet shopping mall. I used the smartphone with a SIM card bought from a cheap SIM company. Lately, the power turns off suddenly. The contract for the terminal did not include repair service, so I asked the original seller of the terminal to repair my smartphone. Then I found out that there was an outstanding balance on the smartphone. I was told that the company was unable to accept my request for repair.

(received in January 2016, woman in her 30s in Oita, occupation unknown)

iii) Trouble over the usage start date

After receiving a SIM card, which is necessary for using mobile communication services, consumers may have to make arrangements by themselves to start using the services and may have to adjust settings in case of online purchase. In this case, a consumer will be charged for communications after a certain period specified by a cheap smartphone company [Case 6]. When switching contractors and applying for "mobile number portability" to use the former telephone number for a cheap smartphone, the usage start date of the cheap smartphone will be the cancellation date of the previous mobile phone. A cancellation fee of the previous mobile phone may be charged by the former contractor depending on the usage start date.

[Case 6] I didn't know that the usage start date would be a few days after shipment of a SIM card.

I ordered a SIM card on a cheap smartphone company's website, but the SIM card was not delivered. When I contacted the cheap smartphone company via telephone, I was told that I should notify the police and the delivery company of the problem and that I was already charged for mobile communication services because a few days had passed after shipping the SIM card. I didn't know that the usage start date would come automatically in that way. I haven't used the services, so I don't want to pay for them.

(received in January 2017, woman in her 40s in Tokyo, salary earner)

Advice for consumers

(1) Confirm your current use of mobile phone and check services provided by cheap smartphone companies on their websites and brochures.

While cheap smartphone companies provide services at relatively inexpensive prices, their services are not always equal to those provided by conventional mobile phone companies. Confirm your current use of mobile phone (e.g. frequency of using voice calls, data traffic via the Internet, etc.) on private pages of the current contractor's website. Based on the information, consider the extent of services you need. If you have any questionable points, check services provided by cheap smartphone companies in advance on their websites and brochures. Transmission speed may be restricted depending on usage of the Internet. Details of services differ depending on contractors and billing plans. Consumers may encounter unexpected service restrictions.
When you want to cancel a contract due to any trouble, you should note that a cancellation fee may be charged. Mobile phone services with voice calls provided by cheap smartphone companies are not subject to the early cancellation provisions under the Telecommunications Business Act.

(2) Check if you can keep using your former terminal.

You can buy terminals such as smartphones also from cheap smartphone companies. If you are going to keep using your former terminal, you need to confirm the matter with a cheap smartphone company and your former contractor.

i) Confirm with a cheap smartphone company (e.g. operation, SIM card size, etc.)

Even if you insert a SIM card of a cheap smartphone company into your old terminal, you may not be able to use the smartphone. A list of possible terminals may be shown on cheap smartphone company's website. Check it on the website or make inquiries. SIM card sizes may differ depending on terminals. Check the SIM card size for the terminal you are going to use before placing an order with a cheap smartphone company.

ii) Confirm with a mobile phone company which sold terminal (to unlock SIM lock)

Even if a cheap smartphone company checked operation of a terminal, SIM lock of the terminal may need to be unlocked. In principle, it is possible to unlock SIM lock on terminals sold on or after May 1, 2015. SIM lock is unlocked by the mobile phone company which sold the terminal. If a certain period has passed from the cancellation of a contract for communication services with the former contractor, it may not be possible to unlock SIM lock. Even if the terminal can be used, it may not be possible to keep using mobile applications and contents linked with the former contractor. Check these points in advance.

(3) Before buying a used terminal, check if network use is restricted.

Used smart phones and other terminals are sold via the Internet and second-hand shops. Payment of used terminals may be sometimes outstanding. If the payment is stopped, network use may be restricted, and voice calls, communications, etc. may not be available. If the product serial number is identified, it is possible to check on the seller's website if network use is or may be restricted due to circumstances of payment for the terminal. Before buying a used terminal, confirm the product serial number with the seller and check if network use is restricted.

(4) Check the procedure to start using cheap smartphone company's telecommunications circuit and the usage start date.

After receiving a SIM card, a consumer may have to make arrangements by themselves to start using the telecommunications circuit and may have to adjust settings in case of a contract with a cheap smartphone company. Even if a consumer did not make such arrangements, the consumer will be automatically charged for communication services after a certain period set by the cheap smartphone company. Confirm the usage start date with the company beforehand. If the mobile number portability is used when switching contractors, the usage start date of a cheap smartphone company will be the cancellation date of a former contractor. If the former contract was made for a fixed period, a cancellation fee may be charged by the former contractor depending on the date of cancellation. Check the usage start date and other key points beforehand.

(5) In case of trouble, consult your local consumer center.

A contract with a cheap smartphone company is different from that with a conventional mobile phone company. If you don't know the differences, you may get in unexpected trouble. If you feel uneasy about a contract with a cheap smartphone company or get in trouble, consult your local consumer center. *

1. ^* Consumer hotline: 188 (no prefix)
   The three digit phone number, which is common nationwide, will connect consumers to a nearby consumer center established by a local government.

Examples : Process for entering into a contract with a cheap smartphone company and points to confirm

1) Confirm your current use

• Do you often use voice calls?
• How about data traffic via the Internet?
• Do you mainly use carrier email address?

2) Choose a cheap smartphone company you want to sign up with

• Price plan
• Customer support at a physical shop, etc.
• Response when a terminal is broken, etc.

3) Confirm details about a terminal

(with a cheap smartphone company)

• Has operation of your potential terminal been checked?
• Size of the SIM card which you should place an order

(with a former contractor)

• Is it necessary to unlock SIM lock on your intended terminal?
• How to unlock SIM lock
• In case of a used terminal, is network use restricted?
• SIM card size for your terminal

4) Place an order with a cheap smartphone company (Cancel a current contract with a former contractor)

(with a former contractor)

• Cancellation date
• How to apply for mobile number portability

(with a cheap smartphone company)

• Usage start date
• How to make arrangements to start using

5) Make arrangements to start using the services

• Initial settings (e.g. procedure for initiating use)
• Data migration (e.g. telephone directory)

Request to industry association
Request to Telecom Services Promotion Conference

Inquiries and complaints about mobile phones provided by MVNO are on the rise. NCAC requests Telecom Services Promotion Conference to take industry-wide measures to reduce consumer complaints about mobile phones, in particular, to further raise consumer awareness (e.g. by detailed explanation on key points when entering into a contract and providing services, online description) so that more consumers can use these products safely and comfortably, regardless of purchasing methods.