Telecommunications

December 2001

The Fair Trade Commission of Japan on Dec. 25 warned NTT East Corp. and NTT West Corp. that they have been engaged in unfair trade practices in the field of ADSL service. The warning specifically points to replacement of surge arresters and to the change of optical fibers to metal cables. It was charged that NTT East and NTT West replaced the arrester equipment and cabling free of charge only for NTT's "Flet's" ADSL users. The Fair Trade Commission stated that such practices constitute "unfair attraction of customers" or "unfair interference of trade," and, therefore, warned the two companies not to engage in such practices from now on. (December 28, 2001, Nikkei Communications)

NTT DoCoMo Inc. has scrapped a plan to acquire an equity stake in SK Telecom Co., Ltd., Korea's largest mobile phone service provider, because the companies could not agree on financial terms. NTT DoCoMo has been in talks with SK Telecom for more than six months, hoping to buy a stake of about 15 percent. The companies tried to agree on a price, and SK Telecom had set aside 14.5 percent of its shares for sale to NTT DoCoMo by transferring them to another firm. NTT DoCoMo's investment would have come to 297 billion yen based on SK Telecom's Tuesday closing price. But the firms could not bridge the gap on a premium that would have been added on the price of each share. NTT DoCoMo apparently hoped the acquisition of a stake in SK Telecom would pave the way for it to launch in South Korea its third-generation cellular phone service, which offers i-mode Internet access and videophone services, and thus establish its leadership in the Asian mobile phone market. The top Japanese mobile phone service company will seek alternate ways to build a cooperative relationship with SK Telecom, such as through providing technology. (December 20, 2001, Nihon Keizai Shimbun)

The number of worldwide mobile phone users will increase by 190 million in 2001, which will likely bring the accumulated total number to 890 million, according to a worldwide mobile phone demand projection by the Japan Electronics and Information Technology Industries Association. While the spread of mobile phones has topped out in European countries, the penetration ratio worldwide will increase to a little short of 27 percent because demand in China, North America, Central and South America, will be going up. What is noteworthy is that the demand projection for a single year put demand in 2001 in the negative column, because the number of new subscribers dropped by 40 million from the previous year, and few have bought new cellular phones. (December 20, 2001, Nikkei Electronics)

The Japan Electronics and Information Technology Industries Association released statistics on Dec. 11 on domestic shipments of mobile phones, including PHS phones, in October 2001. According to the release, Japan's total shipments of mobile phones in October amounted to 3,275,000 units, showing a 28 percent decline compared with the same month of 2000. This marked a decline for the fifth consecutive month. The shipments of mobile phones in October were 3,047,000 units, a 28.6 percent decline from the same month of last year. The decline, according to the report, resulted from the slowing down of the number of new subscribers and of replacement demand. Moreover, the shipment launch of 3G mobile phones did not move strong enough to help add to the momentum in the overall shipments of mobile phones in Japan. The PHS shipments in October were even worse, showing a decline for eight consecutive months due to the slowing down of new subscribers. The total shipments were 228,000 units, a 19.2 percent decline compared to the same month last year. (December 18, 2001; Nikkei BizTech)

The Posts and Telecommunications Ministry plans to draft a guideline requiring telecom operators to disclose detailed service information. The directive will force telecom firms to indicate the times of day when users experience delays in accessing Internet sites due to communications traffic jams, transmission speed and other factors. More than 1.2 million households currently use high-speed Internet access services provided by digital subscriber lines. However, data transmission speeds sometimes vary according to the user's location and the degree of telecom traffic congestion. As a result, it takes some users a long time to download songs and video images. The ministry hopes such disclosure will lead to increased use of high-speed telecom services. (December 13, the Nihon Keizai Shimbun)

China's entry to the World Trade Organization (WTO) spurs Japanese firms to expand business opportunities. Many Japanese companies of automobile, communications, financial and retail industries have high hopes for new business opportunities there. The entry of the world's most populous nation, with 1.3 billion people, into the WTO is expected to lead to a significant liberalization of its markets, making them more accessible to foreign businesses. Lower tariffs, to be introduced in stages starting in January, as well as deregulation of auto sales and loans are likely to aid the sharp expansion of China's auto market. Competition will become intense, but China's automobile era is on its way. Japanese automakers are looking into setting up their own sales networks in China. Local production is also slated to increase, as evidenced by Honda Motor Co.'s plans to bolster a joint venture plant in the city of Guangzhou and Toyota's scheduled production of subcompact vehicles in Tianjin beginning in 2002. The sector is mostly focused on special auto duties that China imposed in June in response to the temporary import curbs on farm products Japan put in place. With China-bound exports grinding to a virtual halt since then, the Japanese automakers are hoping that the governments will hammer out a solution soon. In the communications sector, China is seen as an area of enormous potential growth. Mobile phone handset manufacturers, such as NEC Corp. are moving to step up their operations in China amid expectations of intensifying competition. NEC and Matsushita Communication Industrial Co. have begun negotiations with local communications firms to establish joint ventures to develop a 3G (third-generation) mobile phone handset. However, mobile phone service providers appear to getting a slow start. NTT DoCoMo Inc. has invested a total of 1.8 trillion Yen in mobile firms in the U.S., Europe, Taiwan and other regions, but has yet to tap into the Chinese market. In the financial sector, the gradual elimination of restrictions on yuan transactions by foreign banks will enable them to offer local currency loans and deposits in more areas. In fact, Sumitomo Mitsui Banking Corp. intends to apply for permission from Chinese authorities to handle yuan transactions at its Tianjin branch. Although many Japanese banks are scaling back their overseas operations, as part of their restructuring efforts, China is a clear exception. (December 11, the Nihon Keizai Shimbun)

An advisory panel to the Telecommunications Minister urged to establish guidelines for the communications market to protect consumers using telecom services. The Telecommunications Council believes that a special unit should be set up at telecom service providers and the ministry to handle complaints from consumers. The council also advocates a mechanism for responding to the complaints quickly. In light of recent progress in deregulation, communications services and fee structures have become more complex. As a result, the Telecommunications Ministry, consumer groups and others have received complaints from consumers about complex pricing structures and other problems in areas such as Myline pre-registration, high-speed Internet services and digital subscriber line services. Amid the belief that communications networks should be liberalized even further, the panel intends to decide by June 2002 the conditions allowing competitors use of Nippon Telegraph and Telephone Corp. lines. (December 8, the Nihon Keizai Shimbun)

A government agency dedicated to regulating and monitoring telecommunications firms should be established, according to a government report. The report also calls for the need to reconsider the roles of monitoring agencies and ways to promote competition in order to spread high-speed Internet access nationwide. The IT Strategy Council will officially release reform measures. In order to create an environment for offering a low-cost communications services under fair competition, the report suggests strengthening the role of the Fair Trade Commission to regulate the actions of companies with a strong influence on the market, as well as setting up an independent monitoring agency with expertise in the issues. (December 5, the Nihon Keizai Shimbun)