SoftBank: An introduction to those unfamiliar with Japan

We're already seeing dubious reporting on Softbank, as well as on Japanese mobile in general, that leaves the impression that the writers know nothing about either. Sometimes you have to wonder if they know anything about mobile at all. (No, Steve Hilton W-CDMA and CDMA-2000 are no more compatible than GSM and CDMA.)

What follows is a hasty effort to provide background to those looking for a better idea of what mobile is really like in Japan. "Analysts" are welcome – no, encouraged – to read. Bonus points for clicking links and learning more.

Softbank is generally considered to be the least reliable of Japanese carriers. As we suggested, this purchase, in addition allowing growth and creating more buying power, also provides Softbank the chance to shed a bit of their "shoddy" image, and we'd be pleased to see them do well in the US. Many cynical expats will likely remain skeptical, though. Softbank's poor reputation in Japan is not entirely their fault. They have been hindered by the special relationship between their competitors and government regulators. However, it's clear that Softbank could do better.

For example, Softbank's trade-in program resulted in a police investigation. The week following initial roll out saw about four revisions to their LTE business plan, which, according to CNBC, has already been successful, even though their world-standard FDD-LTE network has been live to customers for all of THREE WEEKS.

The purchase is a huge one for Softbank, which is essentially making a $20 billion gamble that it success in developing LTE wireless services in its home market of Japan can be translated to the U.S. Sprint, while the third largest wireless provider in the U.S., significantly trails the two market leaders, Verizon.

Besides most of that sentence not making sense, we're left wondering if success is measured by whether or not the network actually turned when they flipped the switch.

In the end, the terms of their LTE data service were essentially crowd-sourced from twitter. Listening to customers is a good thing. Looking like you got things completely wrong the first time is not.

Fighting unfair spectrum allocations

The Tohoku earthquake and resulting tsunami that wiped out the backup generators at the Fukushimia Dai-ichi power plant revealed to the world the cozy connections between the Japanese government bureaucrats and the industries they are supposed to regulate. Traditionally, favors are given and blind eyes are turned in exchange for easy, post-retirement industry positions.

This system has not favored Softbank Mobile, who has relatively few ties to government.

Until recently, they were the only one of the big three Japanese carriers to lack a low-frequency allocation and had even sued, unsuccessfully, the government to receive the spectrum absolutely necessary to provide continuous coverage in Japan. Due to attenuation, higher frequency bands are not suitable for servicing either the rural, mountainous areas or the vast, sprawling, multilevel underground below many large cities. Lacking the penetration of a low-frequency band, SBM was forced deploy an army of femptocells. Their network coverage was (is) still substandard.

In a turn away from the traditional, the MIC awarded Softbank the 900 MHz "platinum" band, based not on favors and jobs offers, but strictly on need. This was a huge blow to Emobile (eAccess), the smallest and most spectrally challenged Japanese carrier. We wondered how'd they survive, and, as it turns out, they can't.

Following the announcement of SBM's purchase of eAccess, the Nikkei reported that the MIC would reconsider the joint spectrum allocations of the two, combined carriers, ostensibly just to keep things fair.

Relationship with Apple

There's a reason that the iPhone tends to appear on the number 2 or 3 carriers in each market. These carriers need Apple and have an easier time accepting the stiff terms of the one-sided negotiations.

Former NTT Docomo CEO Yamada previously hinted that, if they were to have carried the iPhone, they'd be required to offer corresponding data plans at a lower price point than for other smartphones and to push the iPhone to account for over half of their handset sales. This is exactly what SBM did (to the detriment of HTC), and exactly what has propelled them in recent years.

I can only imagine how poorly any initial negotiations between Docomo and Apple would have gone - the world's most arrogant hardware maker versus the world's most arrogant mobile carrier. Now Apple makes the most desirable products and Docomo developed the network technology that makes it work (and is used by the entire world). But then, Apple was irrelevant in Japan, not only in mobile but also in computers.

If Docomo execs both 1) had a sense of humor and 2) had ever read Dave Barry, they probably would had fed Apple's proposal to a goat, and Apple spites them for it to this day, locking out their compatible Band 1 LTE network even from unlocked iPhone.

FDD-LTE: Robbing Peter to pay Paul

When Softbank acquired PHS carrier Wilcom, they obtained an XGP network using Band 41 (2500 MHz). This year, they then converted this to a TD-LTE network based on the standard developed by China Telecom. Softbank only uses this for data dongles and mobile routers. The rest of the world uses FDD-LTE.

Softbank's FDD-LTE network went live to customers on September 21, 2012 - about three weeks ago. Known as Softbank 4G LTE, this FDD-LTE network was created by taking one of their four Band 1 (2100 MHZ) channels from their 3G service and dedicating it to LTE. This has exacerbated the 3G network congestion in crowded corridors of Tokyo, such as the Yamanote Line between Shinagawa and Shinjuku. Lack of capacity was the reason for not initially offering tethering for the iPhone 5.

To tether, or not to tether: Ever changing LTE terms

Both iPhone 5 carriers, Softbank and KDDI, offer the same service at the same price, though each uses slightly different math to get to the same answer. This is typical in Japan. For example, the value attached to 7 GB of LTE data with free tethering is ¥5,985 ($75US) per month, a price originally set by NTT Docomo and followed by first KDDI, then Softbank. (The two smaller carriers will add an extra 500 MB for that price.)

Given what appears to be obvious collusion, the initial lack of tethering by Softbank was a surprise, almost like the two carriers hadn't actually gotten together to discuss in advance their respective offerings. The number of customers porting numbers out of Softbank and into KDDI tripled during September as a result, and both @masason and @softbank were flogged.

In response, Softbank's Chief Technology Officer explained during a press conference that it was simply not reasonably possible. He admits what we already know, that their network is taxed to the limit along crowded stretches of Tokyo. But of course, Softbank had no choice but to offer tethering, even if they can't support it.

So the first amendment to the Softbank FDD-LTE data plan was made: a 7 GB limit was added and tethering would be allowed from next year.

Next, the second change to the LTE data plan was to silently (and very sneakily) add an effective 1.2 GB cap to their "unlimted," non-thethering FDD-LTE data plan. This was also met with a public twitter flogging and resulted in Mr. Son backtracking - that is the third change to FDD-LTE data service. This is all in the one week(!) since SBM FDD-LTE data service went live to customers.

Finally, the start date for tethering was moved up to 12/15/2012 (change number 4 - in half as many weeks of LTE service).

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"Analysts" and western media hacks, please consider the above your "Softbank and Japan Mobile for Dummies" guide. It is presented for your benefit "as is" with no warranty or guarantee and is believed to be, for the most part, correct (we think).