Telecommunications

March 2003

A Government advisory panel approved a controversial plan to increase the interconnection fees NTT charges other firms to use its fixed telephone lines for fiscal 2003 and 2004. The hike in the interconnection fees will reduce the profit margins of other telephone carriers. The panel also suggested changing the way in which access charges are set to deal with the continuing decline in fixed-line telephone traffic, which is a major reason behind the increase in the access charge. The panel made the recommendations in a report to the Ministry of Public Management, Home Affairs, Posts and Telecommunications. The fees' average will consequently rise about 5%. NTT East Corp. and NTT West Corp. maintain the fixed telephone lines and are paid the access charges by carriers using their infrastructure. The advisory panel also said that interconnecting carriers should pay adjustment fees to the NTT firms to cover the costs of managing the infrastructure for local calls if the volume of fixed-line traffic falls more than 15% from the previous year. According to the panel, access charges the two NTT units demand should remain unchanged, as there is no social consensus to differentiate in the rates between the two units. The Telecommunications Ministry will revise a ministerial ordinance in line with the report in mid April. Since the release of proposal by the ministry, interconnecting carriers, consumers and foreign governments have expressed strong opposition, that the hike will hinder competition in the telephone industry. However, NTT East and NTT West claimed that there is a huge gap between the actual costs they incur in managing fixed lines and the amount they receive from other carriers. (March 29, the Japan Times, the Nihon Keizai Shimbun)

Telecom companies are strongly opposing a proposal released by the Telecommunications Ministry that allows the Nippon Telegraph and Telephone Corp.(NTT) group to raise its connection charges. The ministry plans to permit NTT East and West to boost the fees that other phone companies pay to use the local phone networks of the two NTT regional carriers. The U.S. and U.K. are also criticizing the ministry's plan, claiming that connection fee increases may hamper competition among phone companies. The issue may develop into a trade matter, depending on the ministry's handling of the fee increases. Rivals of NTT group companies have also expressed concerns. The Telecommunications Ministry unveiled a draft plan to raise NTT's fees last month. The ministry judged that connection fees need to be raised on the grounds that communications traffic volume of fixed-line phones has been falling as mobile phones and asymmetrical digital subscriber line services become more popular. These new types of telecom services do not use switchboards of the fixed-line phone services. According to the ministry's plan, the connection fees will be raised by an average 5% from fiscal 2003, although some such charges may be reduced depending on the connection method. NTT's local network connection fees have been falling sharply since fiscal 2000, when the two NTT regional phone units started using a strict charge calculation model, which factored in an expected fall in cost in the future, as a result of negotiations between Japan and the U.S. in summer 2000. Before that, the NTT companies had set their fees as they wanted. The sharp cuts since 2000 have been designed to reduce charges on users by encouraging competition among phone companies through lowering the connection fees. The NTT group, however, has been insisting on raising the connection fees, that the present level is not profitable enough. Other phone companies have started expressing their dissatisfaction with the ministry's claim. They are insisting that the fee model used has not been examined closely and that switchboard costs and other data more favorable for NTT was used. The ministry does not want the NTT group to become weakened due to excessive competition. But local network connection charges in Japan are 100% higher than in the U.S., the U.K. and other European countries. If NTT's fees are indeed raised, the higher charges may discourage other companies from entering the telecom sector. Washington expressed strong opposition to fee hikes, arguing that raising the fees may violate World Trade Organization rules. The Telecommunications Council will approve the fee hike proposal, a controversial move likely to trigger strong criticism by the U.S. and Europe. (March 25, the Nihon Keizai Shimbun, the Japan Times)

KDDI Corp will open a research institute dedicated to working on advanced mobile communications technology, including one related to fourth-generation mobile phones capable of transmitting data at fiber-optic speeds, at the Yokosuka Research Park in Kanagawa Prefecture, company sources said.
The telecom company plans to solicit rival NTT DoCoMo Inc. and a Chinese university to join the studies, with a view to making their technology the global standard. The institute will have an initial research staff of just over 10, and plans to double the number in two to three years. It intends to develop related technologies for so-called 4-G mobile phones that will be able to transmit data at 100mbps. The phone is expected to be commercialized possibly by 2010. The lab will also study an intelligent transportation system using high-speed radio communications. The 4-G mobile phone is expected to employ a new radio technology, dubbed MC-CDMA, when a user is moving at a fast speed, but then switch to a lower-fee system, such as a wireless LAN, when a user is at a standstill or moving at a low speed. Technology that enables such switches between radio transmission methods has not yet been developed. The ability to develop global-standard technology is seen as determining the competitive edge of telecom operators and equipment manufacturers. (The Nihon Keizai Shimbun; March 31, 2003)

Japan's Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT) completed a proposed amendment to the Telecommunications Business Law and NTT Law (laws regulating Nippon Telegraph and Telephone Corp).
The proposed amendment is to be submitted to the ordinary session of the Diet now convening upon Cabinet determination on March 14. If concluded, this will be the most substantial revision after the telecommunications liberalization in 1984, comprising drastic deregulation in this area including the liberalization of communication service fees with some limited exceptions. The proposed amendment is meant to (1) abolish the system of classifying the carriers by whether or not they have network facilities, and new applicants for entering the telecom industry will be admitted, as a general rule, simply by filing a report with the authorities; and (2) to abolish the rule to make reports of communications fees imposed on Type 1 telecommunications carriers with network facilities and liberalize the fee-charging systems. Through (1), the telecom carriers will be able to construct their networks freely regardless of whether the facilities are their own and by (2) the carriers will be able to decide on service charges through price negotiations with each user. However, the draft still drags on some portions of the conventional regulations. With regard to (1), carriers with large-scale telecom facilities will need to apply to the MPHPT for "registration" for screening. As for (2), NTT East and NTT West as well as other telecom carriers will only be able to offer local call services referred to as the "universal services" at rates reported to the authorities. In addition, NTT East and NTT West, which are monopolistic carriers, will continue to be obliged to open their telephone facilities to other carriers. On the other hand, the proposed amendment to the NTT Law includes a system to maintain uniform telephone service fees between NTT East and NTT West by fixing telephone connection charges to be paid by the carriers. More specifically, the idea calls for NTT East, with lower connection fees, to subsidize the balance to NTT West. The subsidy will be exempt from taxation. (Nikkei Communications, March 31, 2003)

Japanese telephone carriers joined hands with consumers and the U.S. government to express opposition hikes of access charges by Nippon Telegraph and Telephone Corp. (NTT). The alliance was formed at a gathering in Tokyo to discuss the telecommunications ministry's plan to allow NTT's regional phone units to raise the interconnection fees by an average 5%, effective in fiscal 2003. Interconnection fees are charged to other carriers to access NTT phone lines. Representatives of the carriers, including KDDI Corp. and Japan Telecom Co., urged NTT to reduce the fees, which are higher than prices in other countries. Representatives of consumer organizations, including the Japanese Consumers Cooperatie Union, also voiced opposition to the plan. (March 5, the Japan Times)