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Preliminary Recommendations on
the Restructuring of the Legal System Governing Telecommunications
to Propel the IT Revolution

From a System of Business Regulation to the Promotion of Competition

(executive summary)

March 28, 2000

(Japan Federation of Economic Organizations)

I. The Current State of the Information and Telecommunications Market and the Need for Reform

  1. Adapting to the Internet Era
  2. The Internet Protocol (IP) allows various applications to be run in networked environments. This capability is reflected in the increasingly important role played by information and telecommunications networks as a social infrastructure. However, business users of IT services have raised a number of issues, including the need to reduce charges and diversify services. There is enormous latent demand for information technology, especially in relation to the Internet. Explosive growth, including the development of entire new industries, can be expected if services can be made more accessible. The market is now reaching the critical mass needed for demand-led growth.

  3. Adapting to the Convergence of Telecommunications and Broadcasting
  4. Advances in technology, including digital technology, are leading to the integration of information transmission channels and terminals. Services that combine telecommunications and broadcasting are already starting to emerge, and this trend is likely to accelerate in the future. However, government systems have failed to keep pace with these changes. For example, separate administrative procedures are still required for communications and broadcasting, even though these activities can no longer be considered separately.

  5. Encouraging Competition in the Telecommunications Market
  6. The establishment of rules for the fully competitive market that is expected to evolve in the future and the development of transparent administrative systems that give priority to user interests are vital so that service providers can apply their ingenuity and creativity to the development of diverse, low-cost telecommunications services that meet user needs and benefit the public and the business sector. Moreover, the Japanese government should approach other governments to take the necessary steps, including the removal of restrictions on foreign investment, to facilitate the development of overseas activities by service providers.

II. Directions for Reform: Enacting a New Telecommunications-related Law

  1. New Legal Framework to Promote Fair Competition
  2. The various existing laws relating to information and telecommunications should be integrated into a comprehensive new telecommunications-related law based on fair rules of competition so that users can benefit fully from the Internet era and the convergence of telecommunications and broadcasting. Opportunities should be provided for wide-ranging discussion in order to form a national consensus on the development of a new telecommunications-related law.

  3. Advancing User Interests Through a Competitive Environment:
    From a System of Business Regulation to a System of the Promotion of Competition
  4. The structure that is now needed must be based not on business regulatory laws that impose prior requirements on providers but rather on laws that are designed to promote competition and advance the interests of users through competition. In particular, the new law should state explicitly that its purpose is to advance user interests through the achievement of free and fair competition. In addition, it should charge the government with responsibility for maintaining and promoting effective competition. Also, a clause should be inserted stipulating that the law must be revised at regular intervals to guarantee a flexible response to new technologies and market changes.

  5. Integrated Approach to Telecommunications and Broadcasting
  6. To accommodate the increasing convergence of telecommunications and broadcasting, the new legal structure should allow an integrated approach to these areas so that information channels and content can be combined freely to create new services. Information channels should be covered by a common administrative framework encompassing both telecommunications and broadcasting, while content should in principle be free of government regulation and left to self-regulation by the private sector. However, the present framework should be maintained for the time being in relation to basic broadcasting. Consideration should also be given to the rules governing terrestrial TV broadcasting, including the principle of avoiding concentrations of control over the mass media. These rules should be reviewed to allow the development of a wide range of business activities.
    The treatment of copyright is another area in which rules that reflect the realities of the networked society need to be established. This is important both to advance user convenience through the reliable and efficient distribution of software and the effective utilization of existing software and also to facilitate market expansion.

III. Creating Systems to Promote Free and Fair Competition

  1. Transition to a Regulatory Framework that Reflects Progress Toward a Competitive Environment
  2. To create an environment of free and fair competition, the administrative framework covering the IT infrastructure should consist of regulations differentiated according to the level of competition. It should also include mechanisms to prevent anticompetitive behavior. Existing systems, such as the connection agreement approval system, the contract approval system, and the service category change approval system, should be abolished and replaced with ex-post-facto checks so that providers are able to develop their activities flexibly.
    In the case of markets in which competition has failed to evolve over long periods of time, it will basically be necessary to maintain retail charge ceilings and connection rules. Restrictions on providers that exert a major influence in the telecommunications market should be eased in step with the growth of competition.
    The NTT Law should be abolished so that NTT can operate on the basis of self-responsibility. Those provisions of the NTT Law that are essential to the achievement and maintenance of fair competition should be absorbed into the new telecommunications law.

  3. Creating Systems to Promote Competition
  4. Service providers should have the freedom to make their own decisions to establish facilities and combine reselling with unbundling, based on their own business strategies. When installing facilities, they should be able to acquire rights that enable them to build their networks flexibly, subject to network interconnection obligations. To encourage the development of facilities, restrictions on the exclusive use of roadways should be eased, and voluntary rules should be established regarding the disclosure of information about the space available in conduits and telephone tunnels. Other priorities include the reform of radio wave administration.

  5. Prevention of Anticompetitive Behavior
  6. The prevention of anticompetitive behavior is essential to the promotion of fair competition. The various government agencies involved should work together in this area. For example, government ministries should coordinate their activities with the Fair Trade Commission to develop the necessary guidelines.

  7. Reinforcement of Government Monitoring and Arbitration Functions Relating to Competition
  8. The government is expected to monitor fair competition in the IT market from a neutral standpoint and to arbitrate fairly and appropriately in disputes between service providers. It is likely that the authorities will increasingly be called upon to review policies and issues relating to charges and services. A petition system should be established to allow individuals, businesses, and service providers to make direct requests to the government concerning existing systems and policies. Mechanisms should also be created to facilitate the prompt settlement of disputes.

  9. Securing Transparency in Government Administration
  10. Government administrators must be under a clear obligation to explain their decisions to the public and to businesses. The prior disclosure of proposed measures for public comment should be a fundamental rule for decision-making. Government decision-making processes should be transparent. For example, related councils sessions should be open to the public, and detailed minutes from such meetings should be published. There should also be an electronic disclosure of information.

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