Proposals for realization of a free, fair and transparent information and telecommunications market
--Aiming for structural reform and economic rejuvenation--
| The pace of technological innovation is fast, and in the field of information communication, where forecasts about market trends are extremely difficult to make, it is desirable to promote competition among businesses and for businesses to develop freely creative methods based on the principle of self-responsibility of the individual in order to expand the market and increase convenience to users. In the future, policies to promote competition that will become models for foreign countries are anticipated, and at the government level, it will be necessary to promote deregulation, implement thorough explanation responsibilities to prevent and correct anti-competitive actions that use market domination, and to strengthen the establishment of rules and judgement functions. Support for efforts by Japanese communication businesses at overseas development would also be welcomed as an aid in global development of users. |
A general view of the market 13 years after the
liberalization of communications and the introduction of
competition in 1985 reveals that competition in the long-distance,
international and portable communications markets
is progressing steadily, and in these fields fees have
dropped greatly. For example, a telephone call (daytime,
three minutes long) between Tokyo and Osaka using NTT has
dropped to 90 yen from 400 yen at the time the market was
liberalized, and a telephone call (daytime, three minutes
long) between Japan and the U.S. using KDD has dropped to
450 yen from 1530 yen. During this time, the amount of
capital investment undertaken by Type-I telecommunications
businesses has expanded from 1.6473 trillion yen in fiscal
1985 to 4.1122 trillion yen in fiscal 1996, accounting for
nearly 10% of the capital investment undertaken in all
industries. On the other hand, even in regional
communication markets, competition is being introduced
thanks to the implementation of openness of the NTT network,
the determination of basic rules for interconnection, and
the development of new technologies such as portable
communications.
However, in Japan, good circulation, as defined by a
drop in fees stimulating demand that causes the market to
expand which promotes capital investment and further drops
in fees, cannot necessarily be said to be sufficient in all
markets. For example, the frequency of suburban telephone
calls increased 50% between fiscal 1989 and fiscal 1996, but
during this time the revenue from suburban telephone calls
decreased from 1.68 trillion yen to 1.42 trillion yen. In
addition, in urban communication markets, there is the
possibility that in the future portable telephones and the
like could compete with fixed telephones accompanying the
rapid spread of portable telephone technology, but in fiscal
1996, the percentage of telephone calls between portable
telephones was under 4% of total telephone calls. In the
future, it will be necessary to further promote competition
in urban communication markets and to expand and increase
activity in the market by accomplishing not only price
competition but also marketing competition in the
communications market as a whole, and by providing services
that meet user needs and services that give rise to new
communication needs.
In the government, efforts are actively being conducted
to compile detailed rules using the basic rules of
connection and reevaluation of individual regulations, and
these efforts can be highly appraised. However, the pace of
technology innovation is rapid, and in the field of
information communication, where predictions of future
market trends are difficult to make, fluid utilization of
the results of technological innovations must not be
suppressed in stopping at item-by-item deregulation measures
using conventional law as a foundation. Demonstrating to
the utmost the market principle so that business development
is possible which meets user needs without being caught up
in conventional concepts is desirable not only for
businesses but also for users. Hence, a change is needed to
government based on rules and ex post facto regulations
centered around monitoring of the state of competition and
preparations for competition rules along with arbitration of
disputes from the vantage point of policies promoting
greater competition and overhauling government based on
conventional discretion-based and in-advance regulations.
It is anticipated that information communication will
play a leading role in moving toward a vigorous economy and
rich lifestyles for the populace in the 21st century, and it
would be best if future information communication
administration always aimed to be an exemplary model for
other fields.
In business, competitiveness should be strengthened and
information development driven forward through joint
ownership of information, speeding up of decision making and
business processes, cost cutting, and precise responses to
customers. In order for companies' efforts to survive into
the 21st century to bear fruit, it is vital for businesses
to provide precise services that respond to user needs.
Through this, a high degree of information communication
utilization will be promoted, and an increase in information
communication demand and rejuvenation of the market can be
anticipated.
In this connection, according to the "Communication
Service Users Questionnaire Survey" conducted by Keidanren
in February 1998, corporate users anticipate from Type-I
communication businesses (1) lower fees for various
services, (2) expansion of discount menus, (3) precise
services in answer to needs on the user side, (4) some
shrinking of delivery times for dedicated lines, and (5)
service improvements for circuit installation.
In order for free competition to be accomplished among
all businesses, it is necessary to keep regulations to a
minimum so that a large number of businesses can enter the
market and so that business development is possible which
responds swiftly to user needs and utilizes originality and
creativity.
On the other hand, in cases where market-dominating
forces exist, it is necessary to implement measures to
prevent and correct the bad effects of anti-competitive
actions that utilize this market domination. For example,
for services such as subscriber circuits where capital
investment outlays are large and it is difficult to recover
this investment in a short period of time, it is vital to
competition that businesses with ownership of the facilities
and all other businesses be able to utilize these facilities
equally and for a rational fee, and that connection at
technologically feasible arbitrary points be recognized. In
addition, for communication services for end users, in
fields where competition has not sufficiently developed,
standard regulations with time limits should be implemented
in order to prevent anti-competitive actions that make use
of market domination, and if competition develops, these
regulations should be swiftly reevaluated so that business
can be conducted under the same framework as other businesses.
The Japanese regulatory system has laws, government
edicts, ministry edicts and regulations, in addition to
numerous "hidden regulations" such as "notifications",
"interpretations", "directions", and "requirements" which
have very low transparency. In addition, it is difficult to
say that the various government decision making procedures
and council meeting contents are transparent, starting with
the council that studies the institutional framework of the
market desired in Japan in the future. In the future, it is
necessary to make government decision-making procedures
transparent along with making it possible for citizens to
readily see and easily understand the details of
regulations. When the government decides on a system or
policy in Europe and the U.S., generally a draft of this
decision is publicly announced in advance and a wide range
of opinions is gathered. Even in Japan, this same type of
procedure has been used and was highly regarded when
requests were made for basic rules regarding connections,
the formulation of policies on basic plans regarding the
reorganization of NTT, and applications for connection
agreements for specified telecommunication businesses. In
the future, it would be best to make this procedure standard
and to sufficiently explain the propriety of policies that
are decided on, in addition to openly conducting councils
relating to opinions from citizens.
Furthermore, in order to increase the probability of
forecasts, it is necessary to decide in advance the time
schedule for easing regulations and formulating rules to
promote competition. In addition, the state of competition
in the market should be monitored, and when conflicts among
businesses arise, a function should be in place to arbitrate
with strict neutrality on the basis of transparent rules.
The current government is centered around regulations before
the fact even in personnel assignments, but this needs to be
changed to a system emphasizing rule formulation and
monitoring and arbitration. Even with regard to bottleneck
facilities, appropriate information disclosure is necessary.
Japanese companies are informatizing and networking in
order to survive in the midst of fierce competition in this
global era. Even in information communication businesses,
global business development that responds precisely to user
needs is being sought. In this sense, making the
information communication market open and global is a major
trend across the globe.
With the WTO basic telecommunications service
liberalization agreement taking effect in February 1998, the
global communication market is entering a new phase. Of the
130 nations participating in WTO, there are 69 countries
that account for 90% of the world's telecommunications
revenues, and it is predicted that major businesses will
move into foreign markets because the conditions and
timetable for future opening of telecommunication markets
have been clearly stated. In order for Japanese users to
not be disadvantaged in the midst of this, it is necessary
for businesses to increase their own competitiveness on a
global scale through free competition under the principle of
self-responsibility of the individual, and it is also
necessary for the government to push policies that coincide
with globalization.
Creating a system that leads the world
In the information and telecommunications market,
borderless competition among businesses is becoming
more intense with the aim of providing better services
at lower cost. In order for this competition to bring
large benefit to users, some coordination of
competition policies should be undertaken by advanced
countries, and not only that, the government should
always strive for systems and policies that are ahead
of those of foreign countries.
In the Japanese government, the easing of
restrictions is being promoted, including creating a
report system in principle for fees, easing entry
restrictions and reevaluating duties and restrictions,
and in addition, and in the case of formulating basic
rules relating to connections, trends such as the
utilization of the so-called green paper method can be
seen with a draft having been publicly disclosed in
advance and opinions gathered from citizens, and this
has been highly regarded. In the future, it would be
nice to aim for realization of systems and policies
that set an example for other nations. From this
vantage point, it is necessary to change from a
government based on in-advance restrictions and
litigation to a government with ex post facto
regulations and rules, and to promote preparation of an
environment needed for more free and more equitable
competition, besides creating a system that responds in
a swift and transparent manner to the opinions of users.
Today, as we approach an era of massive
international competition, all systems and policies
should be reevaluated, stopping not at the information
communication system but also including tax policies
such as corporate tax rates and income tax policies, as
well as real estate and housing policies, and it is
necessary to promote individualistic and creative
development of companies and revision of Japan's high
cost structure.
Preparing an environment for overseas development of Japanese businesses
Japan's businesses are working to develop in
foreign countries and to enter the international
communication businesses on a global scale. Even in
foreign countries, liberalization of markets is
progressing, and opportunities for Japanese businesses
to freely enter these markets are being guaranteed, and
it would be desirable if business could be developed
under equal conditions with local businesses. At the
government level, work should be done with other
countries to see that entry restrictions and business
restrictions in the various countries are removed, and
when Japanese businesses receive unfair treatment,
redress of this should be strongly sought.
| In order to further promote competition in local telecommunications markets, it is necessary to make it possible for all businesses to utilize simultaneously indispensable facilities for rational fees at arbitrary points where technologically feasible, and to study how to make basic rules of connection more concrete and to reevaluate these in an open manner and from a standpoint of promoting competition. Furthermore, it is necessary to undertake reevaluation of agreement restrictions and to ease restrictions on Type-I and Type-II businesses in order to enable a variety of services to be provided. |
Furthering increasing the level of competition in local telecommunications markets, which account for around 50% of the telecommunications market as a whole, is integral in realizing effective competition in the telecommunications market as a whole. Recently, new businesses have been entering local telecommunications markets accompanying progress in technological innovations and the establishment of basic rules for interconnection, but the market share accounted for by these new entrants is insignificant. Local telecommunication service is important to users in the sense of providing access to the public telecommunications network, but at present, there are limited options for users to choose among. Introducing full-fledged competition into this sector is not easy even in foreign countries, and an effective method to accomplish this is being sought. In the future, it is necessary to further promote preparation of an environment to drive equitable competition in the local telecommunications markets in terms of both services and facilities. When this is done, it will be critical to link concretely the currently established basic rules of interconnection with promotion of competition, along with providing incentives for efficient management to businesses that own facilities without nipping competition in future facilities in the bud.
Equitable use of indispensable facilities
In local telecommunications markets, there are
indispensable facilities such as subscriber lines
without the use of which other businesses cannot
provide telecommunication services. Conditions are being
arranged for fair use of such indispensable facilities
through the recent establishment of the basic rules of
interconnection and the opening of NTT's network. From
the standpoint of further promoting competition in
local telecommunications markets, arrangements are being
made to allow connection at arbitrary, technologically
feasible points under rational conditions for anyone,
and when connection is denied, it is appropriate for
the owner of the facilities to bear the responsibility
of explaining such actions. In the future, it is also
desired that new entrants into the field possess
facilities and provide services in order to eliminate bottlenecks.
Concerning connection fees related to
indispensable facilities, the ABC (Activity-Based
Costing) method employed in fiscal '98 has greater
transparency from the cause-and-effect
relationship between various activities and the
generation of costs, but this amounts to nothing
more than more precisely apportioning expenses,
and there is also the indication that the
inefficiencies themselves will not necessarily be
erased. In the future, a study should be
undertaken to promote the lowering of connection
charges through utilization of a more transparent
cost calculation method, for example a long-term
incremental cost method.
New interconnection rules are gradually
starting to be employed, and action related to
details necessary in making these more concrete
will be necessary in the future. For example, in
the Telecommunications Council Report of March 20,
1998, a discussion was conducted from the
standpoint of promoting competition in the form of
opening to the public the discussions held at the
council, publicly announcing detailed council
content and utilizing the so-called green paper
format, for measures that should be devised by the
Ministry of Posts and Telecommunications
(establishment of the level of profit as a ratio
of self-owned capital, MDF connections, cost of software
development relating to network reorganization, fees
for different time zones and discount fees).
At present, connection agreements take the form of general licensing for the purpose of preventing inappropriate discriminatory treatment such as giving priority only to group companies. However, businesses must spend time and effort in licensing procedures for the connection agreements prior to the start of service, and additionally, there is an obligation to attach the basis for calculation of the connection fees, so that the burden on businesses relating to connection agreement licensing is heavy. The connection agreements should have a report format in general.
With regard to inspection of connection stipulations, opportunities should be established for a wide range of opinions to be submitted, and the Council should be opened to the public and a detailed record of the transacted business published.
With the increase in the number of businesses in the industry, it is forecast that the number of cases of connection not just between two industry members but between a large number of businesses will increase. Currently, when connections are made among a plurality of businesses, connection agreements must be concluded individually between all businesses related to the interconnection in order to clearly elucidate the responsibilities and obligations among the businesses in question, and this procedure is extremely burdensome. It is necessary to reevaluate the existing state of connection agreements among a plurality of businesses.
Responding to phone number problems
In order to promote competition in regional
communication markets, it is necessary to keep to a
minimum the burden on users accompanying change in the
communications business used. For example, it is a
burden for users if the telephone number and the number
of digits change when the business used changes. From
the standpoint of promoting competition, it is
desirable to select communication businesses so that
users do not feel this kind of burden. Hence, in order
to reduce the expenses the user encounters accompanying
a change in the business used, it is necessary to
consider introducing number portability (allowing the
user to continue using the same number even if the user
changes the telecommunications business to which he
subscribes) and priority connections (an arrangement
that enables calls to be made by omitting the business
identification number of the connection business if the
subscriber has selected and registered with the
business in question in advance).
In this connection, number portability has been
implemented in the U.S. with 800 number service, for
instance, and the applicable scope of this is being
successively expanded. The EU Committee is also
considering making providing of this service mandatory
by 2000. In addition, priority connections have
already been implemented in the U.S., and the EU
Committee is also starting to consider introducing this by 2000.
Establishing an environment for circuit line facilities
In the government, in order to support new
entrants into the field constructing their own circuit
facilities in advance, the preparation of public cable
accommodation space and the easing of exclusive
restrictions such as for roadways should be pushed, and
demands should be made for cooperation of owners in
opening conduit lines (power poles, concrete sewer
works, sewer lines, expressways, railroads, electric
power conduit lines, etc) as a premise for orderly use.
In addition, it is necessary to implement measures
needed in developing new frequency bands, effectively
utilizing underused frequency bands and fairly
appropriating frequencies.
In Article 6 of the Telecommunication Business Act, the
types of telecommunication businesses are differentiated
into businesses that establish telecommunication circuit
facilities on their own and provide telecommunication
services (Type-I telecommunication businesses) and
telecommunication businesses other than Type-I
telecommunication businesses (Type-II telecommunication
businesses). Type-I telecommunication businesses basically
must install circuit facilities, while on the other hand
Type-II telecommunication businesses cannot install major
circuit facilities. However, in order to promote further
competition, it would be best if each business could select
the most efficient network composition based on their own
management decisions and assuming responsibility for such.
In fact, there is a movement to establish the possibility of
providing services through resale. In order to promote
greater activity in the market and to further diversify the
state of market participation on the basis of the management
decisions of each business, consideration should be given to
competition on the basis of the facilities of Type-I
telecommunication businesses, and discussions should also be
conducted on providing services using methods other than the
circuit facility ownership and interconnection method.
In addition, for circuit facilities by Type-II
telecommunication businesses, it is necessary to enable
substantial ownership such as holding long-term authority to
use circuit facilities, for example, even in locations with
heavy traffic such as the Tokyo-Nagoya-Osaka corridor in
addition to access circuits.
What is desired is that the boundaries between Type-I
and Type-II be blurred so that the services provided by
Type-I and Type-II businesses become substantially the same,
by lifting the ban on government-exclusive connections; that
whether or not to own facilities be a decision based on the
basic strategy of the business and be left to the management
decisions of the business itself; and that in the future,
the distinction between Type-I and Type-II business be
reevaluated while considering the state of granting public
welfare business charters (the qualifications that
businesses engages in public welfare businesses such as
electricity, gas, water, railways, telecommunications, etc.
can take legal action in special cases under the Railroad
Act and the Sewer Act, etc.).
In Article 31-2 of the Telecommunication Business Act,
the stipulation is made that Type-I telecommunication
businesses must conclude a contractual agreement and receive
the approval of the Minister of Posts and Telecommunications
as conditions to provide telecommunications services. The
objective of this regulation is to protect the rights and
interests of users who receive services provided on the
basis of contracts, but in service sectors where competition
is thriving, it is possible for users to change with ease to
another business from a business that is establishing unfair
conditions for providing the service, thereby making this
approval system unnecessary.
On the other hand, because the contracts are subject to
approval, the businesses cannot quickly provide new
services, and there is also a problem in that the cost of
obtaining approval is onerous in terms of time and manpower.
It is necessary to ease regulations such as those that
prevent the expansion of the scope of reports and to limit
services that are subject to approval to those that are
basic provisions (necessary provisions relating to the
rights and obligations of users) in services where
competition has not yet developed.
At present, guaranteeing universal service is the
obligation of Nippon Telephone and Telegraph Corp.
Presently, service is provided under a fee schedule that
covers the entire country uniformly due to NTT management
improvement efforts and fee rebalancing, but on the other
hand, because user fees and interconnection fees are
calculated on the basis of total costs, there is also an
indication that "universal service" costs are included.
In the future, it will likely be difficult to place the
cost burden of universal service on NTT if the plan is to
develop more competition and reevaluate interconnection
rules. Presently, consideration is being given to universal
service in the research committee of the Ministry of Posts
and Telecommunications, but the debate relating to the scope
of universal service and the expenses and burden necessary
in guaranteeing this service must be conducted on a national
level with appropriate information disclosure relating to
NTT's regional network. In determining a concrete policy
for guaranteeing universal service, a policy should be
selected which does not distort competition among businesses.
| It is necessary to reevaluate current telecommunications business laws and to convert to a framework based on rules and ex post facto regulations the objective of which is to improve convenience by promoting competition. When this occurs, it would be best to prepare a structure that responds through swift and transparent procedures to the opinions of users. |
In order to promote the approached described above, it
will be indispensable in the future to reevaluate the
framework of the current Telecommunication Business Act.
Under the existing Telecommunication Business Act, the
government aims for improvement in user convenience and
smooth providing of telecommunication services by making the
operation of businesses reasonable and rational, but it is
necessary to change from a business law based on in-advance
regulations to a rule and ex post facto regulation format
and to convert to a framework that aims to secure user
benefit not through the government but through the promotion
of free and fair competition in the marketplace, similar to
communications laws in the U.S. and Europe.
In this connection, Article 1 of the U.S.
Communications Act presents the purpose of the law as
"making it possible for all citizens of the United States of
America to use communication services efficiently and
swiftly to the extent possible with sufficient facilities
and for reasonable fees", and in Article 10, it is
stipulated that "when it is decided to promote competition
among providers of telecommunication services by moderating
regulations, the decisions of the Federal Communications
Commission shall be based on claims by the Commission that
implementation of such measures will bring about public
good" and furthermore, in Article 11 a biennial reevaluation
of regulations is stipulated, and when this occurs the
Commission must "decide if as a result of effective economic
competition, said regulations are no longer necessary for
the public good".
On the other hand, in the Telecommunications Act of the
UK, in Article 3 "promoting the benefit of users
(particularly including pensioners and people with
disabilities) and consumers of telecommunications facilities
and telecommunications services within the United Kingdom
with regard to the price, quality and types of
telecommunications facilities supplied and
telecommunications services provided" and "promoting the
continuation of effective competition among entities that
engage in commercial activities relating to
telecommunications in the United Kingdom" are cited as
obligations of the Telecommunications Office Chairman.
In addition, in the German Communications Act, the
purposes of the act are listed as securing the good of the
user, promoting effective competition and protecting
universal service.
In the future, it is desired that in the government, a switch will be made to a system based on rules and ex post facto regulations, that free and fair competition among businesses will be promoted, that the marketplace will be monitored from the standpoint of the user, and that when intervention is necessary accompanying the appearance of problems, this can be accomplished using transparent procedures. In addition, it is vital that procedures and provisions be established to facilitate users of communication services reporting opinions and reporting problem resolution to the government, and that a system be prepared which responds fairly and in a transparent manner. From this viewpoint, the following kind of framework should certainly be set up. Because this enables businesses to undertake independent business development on the basis of their own management decisions, and in addition allows users to freely select businesses, further awareness of the principle of self-responsibility of the individual is needed among both businesses and users.