Telecommunications

June 2002

Government administrators of telecommunications firms are shifting priority from protection and growth to greater competition, as in the U.S. The Ministry of Public Management, Home Affairs, Posts and Telecommunications will revise the Telecommunications Business Law during the ordinary Diet session next year to deregulate market entry. Critics point to the possibility that the ministry's discretionary powers will increase. The central thrust of the revision by a ministry advisory group is lifting the requirement that companies other than Nippon Telegraph and Telephone Corp. (NTT) acquire permits to enter the telecom market. New carriers will no longer have to report to the ministry when starting new services, and will only have to produce written reports. Strong concerns remain within the industry, such as a possible increase in ministry discretion. The ministry conducts research every 1-2 years to determine the extent of competition, and will increase deregulation if competition is strong; it will also have authority to make new rules on competition when problems emerge. NTT DoCoMo Inc. is particularly sensitive to trend. Criticized by a software company that it determines all business conditions, like software delivery charges related to the cellular-phone Internet-access service (i-mode), DoCoMo is watching the ministry's moves to open up the i-mode rate system, customer information and telecom facilities to other companies. In the U.S., Japan's deregulation model, the Federal Communications Commission has the authority to impose market controls, like opening the telecom network, without Congressional approval. While the appointment of the five FCC commissioners who discuss and make such decisions requires Congressional consent, in Japan the minister alone has this decision-making authority. Even the government doubts that the same level of transparency can be maintained. Another concern, held by the new carriers, is that deregulation for NTT may receive priority. It is likely that NTT will no longer need approval to change services or prices where its market share is about 40%, as in digital subscriber lines. While the U.S. increased control over dominant companies along with deregulation, new carriers fear that NTT will abuse its political influence and pull the teeth from any such control measures, such as the mandatory opening of telecom networks. (June 25, the Nihon Keizai Shimbun)

The government plans to deregulate the communications market next fiscal year, bringing its levels of openness in line with those of the U.S., but a lack of anti-piracy measures may discourage people from releasing content over the Internet. If the government's deregulation plan is implemented, the communications market in Japan will see similar results created by U.S. deregulation six years ago. Japan's fees for high-speed Internet access are already lower than those in the U.S. The monthly fee for digital subscriber lines here is less than 3,000 Yen, one of the lowest in the world, thanks to the government's effort to open up communications network of Nippon Telegraph and Telephone Corp. and spur competition. Under the deregulation plan, telecom carriers other than NTT will no longer have to inform the government of changes in their prices and services. This puts the level of regulation on a par with that of the U.S. However, Japan's effort to create a structure for distributing various content has only just begun. The government's plan includes creating by fiscal 2004 a system in which authorized users can legally reuse broadcast programming over the Internet, but it fails to mention the method how to do. Such programs involve the copyright of the TV station, cast and crew, making it difficult to negotiate every party's interests. Although there is a need to establish a business rule for distributing copyright fees, the negotiations are long way to go. The spread of pirated copy also discourages parties from agreeing to distribute their work online. While anti-piracy measures are crucial, the government has again failed to indicate how to do. Even if the fees are lowered, without a workable framework, there may not be much content to distribute. (June 19, the Nihon Keizai Shimbun)

The government will deregulate the communications market in fiscal 2003 to spread the use of information technology in society. A government panel has drawn up five basic goals for creating a favorable IT environment, including establishing a world-leading communications infrastructure, promoting online trading and training and educating the general public. It will also consider introducing corporate tax breaks in fiscal 2003 to encourage businesses to invest in IT. To nurture the world's most advanced communications infrastructure, the government will deregulate the communications market allowing participants to be able to enter the business and set their service charges freely. The step is aimed at promoting competition in order to keep fees for high-speed communications services among the lowest in the world. The government plans to send relevant bills to an ordinary Diet session next year. To encourage online commerce, the government positions that the most important challenge will be to create a copyright-protection system. The system that makes piracy difficult would help copyright holders feel more comfortable distributing their images and music on the Internet. A system will also need to be created to ensure that copyright holders, broadcasters, music software companies and other concerned parties receive the profits they were guaranteed in their distribution contracts. For training and educating people in IT, the government plans to install high-speed communications networks in all classrooms of the some 40,000 elementary, junior and senior high schools nationwide by the end of March 2006. The step is intended to not only increase the number of IT-literate citizens but also to close the gap with the U.S. in Internet services available at schools. The government will also consider a special tax break for corporate that invest in routers and other IT equipment. Such tax breaks are also seen as a way to stimulate the economy, as corporate IT investment has slowed sharply. (June 19, the Nihon Keizai Shimbun)