Telecommunications Business

Law and
Pro-competitive Policies

Info Communication Policy Workshop

August 8, 2003
Tomoyuki TANUMA
Deputy Director
International Policy Division,
Ministry of Public Management, Home Affairs,
Posts and 　 Telecommunications (MPHPT), JAPAN
 Contents

Deployment of Competition
Dispute Settlement Commission
ADSL and Competition Measures
New Regulatory Framework in the era of
Broadband
Reference
Deployment of
Competition
Pro-competitive Policies in the Telecommunications Field in
Japan

Range of regulation

Progress in
competition
na noi ti t e p mo C

　　　　　　　　　　　　　　　　 　 1985 　 　　　　　　　　　 　　　　　 1995 　

　　 　　　 　　　 2000

Public monopoly policy Managed competition policy Free competition policy

ger dissues

Nationwide Fostering New Establishing

establishment of Common Carriers competition rules.
noi t al uPolicy

telecommunication companies.
network

4
 Public Monopoly Policy (~1985)
Ministry of Telecommunications ⇒ NTT Public Corp. (Domestic) & KDD(Int’l)
(1952)
NTT Public Corp. built and maintained telecommunications networks. 　　
Business operations and government administration were not separated.

Justifications for Public Monopoly

   To quickly build telecommunications networks nationwide(through intensive
capital investment).
To ensure technological uniformity (Telecommunications market had been
regarded as naturally monopolized market).
 To offer public service (ensuring universal service and fair use)

　 Background of Privatization and the Introduction of Competition Policies

Two major objectives were achieved (no backlog left and automatic switching
established nationwide).
　 Technological innovation 　　　 →　 The monopolistic nature was diluted.
　 Higher, more diverse demand 　→　 The limitations of the public corporation
business were recognized.
　 5
Management Competition Policy (1985~1995)
Policy issues – ensuring fair competition between NTT and
NCCs (new common carriers)

- Competition between the elephant and the ant

- Reliance on the NTT regional networks = unique market structure

　
Competition management policies

- Entry management ~ adjusting for supply and demand (preventing excessive

competition)
- Price management ~ tariff regulation (ensuring price competitiveness of
NCC companies)
- Connection management ~ connection interface (disclosing NTT
information)
Fostering of NCCs
　
- Support policies for NCCs in financial and tax-related fields 6
Free Competition Policy (1995) ~ Restructuring of
NTT
　Aim of NTT restructuring
- Promotion of fair competition (equal footing with new carriers)
- Finding an appropriate business scale, efficiency of business
- Reinforcing international competitiveness

　
Format of NTT Restructuring
Holding company

East regional Data company

Mobile
company
Long-distance Communications internet company
international company
company
West regional
company Software company

7
Free Competition Policy(1995~) Deregulation
Progress in competition transition in policy from managed
competition to free competition

 Easing entry regulations 　

- 　 Abolition of supply and demand adjustment (1997)
　 - 　 Abolition of foreign ownership regulation (1998)
 Easing tariff regulations 　
　 - 　 Approval system  notification system (1998)
　 - 　 price-capping system (applied to NTT regional telephone tariffs)
(2000)
 Easing of equipment regulations
　　　 - 　 Equipment ownership principle → Approval for IRU (indefeasible of
　　　　　　　　 users)(1997) 　　　　 → making circuits
possible to resale (2000)
        Revision of the Telecommunications Business Law (2001)
　　 Introduction of frameworks for wholesale telecommunications services
　 Expansion of the scope of business of NTT East/NTT West
8
 Free Competition Policies(1995 ～ ) Fair
Competition rules
Establishment of transparent rules related to market structure
 promotion of free competition below these rules

 Interconnection rules 　
　 - 　 Interconnection orders and duty for carries to consent to connections
(1997)
　 - 　 Stipulation of NTT regional network connection tariffs and connection
conditions (approval system) (1997)
　 - 　 Introduction of long-run incremental cost (LRIC) system for
calculating connection tariffs (2000)
 Telephone number rules 　
　 - 　 Carrier pre-subscription (2001)
　 - 　 Number portability (2001) 　　

       Revision of the Telecommunications Business Law (2001)

　 Preparation of asymmetric regulations
　 Preparation of a legal scheme pertaining to universal service
　 Set up of the Telecommunications Business Dispute Settlement
Commission
9
 Conceptual figure of interconnection
Long distance/
international carriers’ Network
IP
Interconnection
charges
Interconnection
charges
Network
A Prefecture
NTT East / West’s B Prefecture
NTT East / West’s Network
Network

Tandem Switch (ZC)

　 4.78Yen/3min
NTT’s
Building
Local Switch (GC)
　 4.50Yen/3min IP
Main
Equipment
Distribution
Frame

・・・ Point of interface

10
Competition Policies by the Telecommunications Business
Law
and other Measures
Asymmetric
Asymmetric
Regulations
Regulations Deregulation
Deregulation
・・prohibition
prohibitionof
ofpractices
practices
・ Approval of newbusiness
・ Approval of new business

Interconnection DisputeSettlement
Dispute Settlement
Interconnection Development of
Rules Mechanisms
Mechanisms
Rules Competition Policies
1 Diversification of services
2 Reduction of charge
3 Ensuring liability and security

・ Pre-selection
・ Pre-selection(Myline
(Myline))
NTT
NTTreorganization
reorganization Numberportability
・Number portability
・
UniversalFund
Universal Fund

11
Dispute Settlement
Commission
 Telecommunications Business Dispute
Settlement Commission
Telecommunication Business Law (Revision in 2001) established
Telecommunications Business Dispute Settlement Commission

Special Body for settling dispute over issues such as interconnection

between telecommunication carriers.

Inside of MPHPT, but Independent of the department in charge of

issuing permits and approvals

Consists of five commissioners appointed by the Minister, MPHPT with

the consent of both the House of Representatives and Councillors

Secretariat under the Commission’s direct control

13
 Telecommunication Business Dispute Settlement
Commission Functions
　 When one telecommunications carrier requests the conclusion of an agreement for interconnections, and the other
carriers declines to negotiate or no negotiation are arranged, the first carrier can request to the Commission to mediate the
matter
 Mediation and Arbitration  
           Both mediation and arbitration are expected to be useful in settling disputes
between telecommunications carriers fairly, simply and promptly.

Inquiry and Report
           The Minister of MPHPT shall inquire the Commission before making administrative
dispositions, such as orders or arbitrations concerning interconnection of
telecommunications facilities.
The Commission will deliberate the matters and submit a report to the Minister.

Recommendation
           The Commission is able to make recommendations on new competition rules
to the Minister of MPHPT based on knowledge gained in dealing with actual
disputes.
 

14
 Telecommunication Business Dispute
Settlement Commission Functions

Telecommunications Minister for Public

Management, Home Telecommunications
  carrier Business Dispute
  Affairs, Posts and
  Telecommunications Settlement Commission
  
  Request,
  mediation,
  arbitration
  Mediation
 
Request,
adjudication
Adjudication Inquiry
Dispute arising Arbitration
among
Request,
telecommunicati
directive
ons carriers
Directive to Report
commence
negotiations Deliberations

15
 ADSL and
Competition Measures
 Growth in Broadband Internet Access
9 , 0 0 0 ,0 0 0
420,000
400,000
380,000
8 , 0 0 0 ,0 0 0 360,000 Optic Fiber(FTTH)
340,000 458,293 8,257,118
320,000 （ for general users ）
300,000
280,000 ○Subscribers ：
7 , 0 0 0 ,0 0 0 260,000
240,000
458,293 ＤＳＬ
ＤＳＬ
220,000 ○Operators ： 13 ○Subscribers ：
200,000
(End-Jun. 2003) 8,257,118
6 , 0 0 0 ,0 0 0 180,000
160,000
140,000 (End-Jun.2003)
120,000
100,000
Wireless ○Operators ： 44
5 , 0 0 0 ,0 0 0 80,000 　○ Subscribers ： 34,000 (End-Jun. 2003)
60,000
40,000
20,000
　○ Operators ： 21
4 , 0 0 0 ,0 0 0 0 (End-May. 2003) 34,000
00- 9 00- 12 01- 3 01- 6 01- 9 01- 12 02- 3 02- 6 02- 9 02- 12 03- 3

3 , 0 0 0 ,0 0 0
00- 1201- 0301- 06 01- 09 01- 12 02- 03 02- 06 02- 09 02- 12 03- 03
2 , 0 0 0 ,0 0 0 FTTH 500 1400 3500 9,300 26,400 68,600114,608206,189305,387
Wire le ss 450 900 1,100 2,400 4,200 8,000 18,500 25,000 30,000 33,000

1 , 0 0 0 ,0 0 0 2,224,000

Cable
Cable Internet
0 　　○ Subscribers ：
9 9 - 3 2,224,000
9 9 -6 9 9 -9 9 9 -1 2 0 0 -3 0 0 -6 0 0 -9 0 0 -1 2 0 1 -3 0 1 -6 0 1 -9 0 1 -1 2 0 2 -3 0 2 -6 0 2 -9 0 2 -1 2 0 3 -3 0 3 -6
　　○ Operators ： 301
(End-Jun. 2003)

99- 03 99- 06 99- 09 99- 12 00- 03 00- 06 00- 09 00- 12 01- 03 01- 06 01- 09 01- 12 02- 03 02- 06 02- 09 02- 12 03- 03 03- 06
DSL 211 1,235 2,537 9,723 70,655 291,333 650,796 1,524,348 2,378,795 3,300,926 4,233,216 5,645,7287,023,039 8,257,118

CATV 32,000 66,000 92,000 154,000 216,000 329,000 463,000 625,000 784,000 967,000 1,151,000 1,303,000 1,456,000 1,626,000 1,800,000 1,954,0002,069,000 2,224,000

17
 Market Share of DSL Service Providers

Others
about Others
NTT 10% about KT
Others about 40% RBOCs 25%
about about about 75%
60% 90%

Japan US Korea
Source: MPHPT Source: FCC “Data on High- Source: MIC “2002
Speed Services for Internet Korean Internet White
Others Access” Paper
Others
about 7% about
　　　 BT
3%
about DT
93% about 97% Source: RegTP
“Annual Report
Source: OFTEL 2001”
“ADSL
UK Factsheet –Sep
Germany
2002”

18
ADSL Access network using existing subscriber
facility
Telephone office House A
MDF ADSL A company
GC splitter
switch
ADSL
DSLAM Modem
DSLAM
Unbundling of
subscriber line
router router
Co-location in
House B
Telephone office
ADSL B company
ISP A ISP B
ADSL
Modem

PSTN

Internet

19
 Co-location

“Co-location” refers to the installation of equipment necessary for

interconnections by interconnection carriers in buildings or other property
owned by telecommunications carriers setting up category I designated
communications facilities.

The following rules have been established in order to facilitate matters for
interconnection carriers making co-location arrangements.

(1) Information must be posted regarding available space and the like

(September 2000).

(2) Procedures are established for interconnection carriers’ own

construction

and maintenance activities (September 2000).

20
 unbundling

“unbundling” refers to divide the telecommunications facilities that make

up networks into segments and providing only those facilities necessary to
the carriers making interconnections.

Reference:
Rules Fiscal
established for2002
unbundling related to subscriber lines
interconnection
NTT East:charges
¥168/month NTT East: ¥1,829/month
(September 2000)
NTT West: ¥176/month NTT West: ¥1,950/month
<Line sharing> 　
<Dry copper>
  Rules established for unbundling related to optical-fiber equipment

(April 2001)

Reference:
NTTFiscal
East: 2002
¥5,213/month NTT East: ¥2.627/m
NTT West: ¥5,221/month ＋ \139/month
interconnection charges NTT West: ¥2.751/m21
 New Regulatory
Framework in the era of
Broadband
 Changes in Network Structure 
Conventional PSTN
Internet
Long-distance
communication
s network

Toll switch router

Tokyo Osaka
Regional Regional
communicatio communicatio
ns network ns network
The Internet is a
network that
transmit
Local switch information, by
Wireless dividing the Wireless
information to a Fiber-optic 
Fiber-optic unit of data
DSL
DSL CATV suitable for CATV
transmission
without setting
transmission
routes.
Calling party Called party
Broadband
Broadband(large
(largecapacity)
capacity)platforms
platformsenables
enables
Voice-centric simultaneous
simultaneous transmission of large volumeofofinformation,
transmission of large volume
Voice-centriccommunications
communications information,
such as video, sound, data, etc.
such as video, sound, data, etc. 23
 Change to IP Network

1. Fee               
Fee
               Metered Rate Flat Rate
(traffic sensitive for time length and distance)              
2. Access to Connection
                Dial-Up Always-Connected 
Always-Connected
3. Service
                  Voice, Fax (Individual services)
Integration of Voice, Data, Image and Video
4. Speed, Volume
    Narrowband 　　　 　 Broadband 　　　 　　 Ultra
Broadband
(54K or 64K) 　　　 (8M,12M, 20M ～ ) 　 (100M ～ )
5. Diversity of Connection Combination
                Wire or Wireless 　　　 Wire and Wireless
(terrestrial and satellite)
All copyrights reserved (MPHPT)
24
 Outline of Revision of the Telecommunications
Business Law
(plan in 2003)
New regime corresponding
To transition from “telephone-age”to”IP-age”

current business categories new regime

Type-1 business Type-2 business telecom business

Provision Provision of Provision of

Provision Provision
ofofservice services services Provisionofof
service service
service

network possible either to install own

infrastructure infrastructure and/or to utilize
taking advantage of infrastructure owned by others
network
network networks owned
infrastructure
infrastructure by Type-1 businesses

25
 The revision of Telecommunications
Business Law (Summary)

1. Abolition of permission system for market entry and

discontinuance of services by Type 1 Telecom.
Business
2. Abolition of tariff regulations for non-dominant
carriers
3. Abolition of ex-ante regulations for non-dominant
carriers with regard to interconnections, such as
prior notification of interconnection agreements
4. Maintenance of asymmetrical regulations for
dominant carriers
5. Abolition of distinction between Type 1 and Type 2
Telecommunications business
26
 The Concept of Type 1 and Type2
carriers
and the change of Market situation
Type 1 Telecommunications Carriers

Carriers establishing circuit facilities by themselves

As of “Large Telephone Company”
1985  Examples (as of March 1986)
NTT, KDD, Japan-Telecom and others (7 companies)
 Mainly providing PSTN (Telephone) service

Emergence of type 1 carriers

providing services
Recent
with very limited scale
trends  CATV operators (290 companies)
 Wireless LAN operators
 Otemachi access operators
27
 Type 2 Telecommunications Carriers

Carriers borrowing circuit facilities from other carries

As of “Value-added Service Provider”
1985
Mainly providing value-added services such as
data services to meet individual corporate needs

Emergence of type 2 carriers

providing services
Recent To large number of public users
trends ISP services
IP-Telephone Services
ADSL Services

Competition in the same service market has significantly progressed

28
 Rules for Services 1. “Market Entry”
Type 1 Carriers Special Type 2 General Type 2
(installing circuit facilities) carriers carriers
Current
Scheme Notification
Permission Registration to the Minister

Carriers installing
large-scale circuit facilities Other carriers
Revised
Scheme
Registration Notification to the Minister

Resul 　　　　 Enabling all carriers to develop business swiftly,

t catching emerging business chance and meeting users’ needs.
29
 Rules for Services 2.
“Suspension and discontinuation of
business” Type 1 Carriers Type 2 Carriers
Current
Scheme
Permission Ex post Notification
Ensure users to be notified and to enable to 
switch to other operators smoothly
No rules for user protection
Protection of user interests

ALL Carriers

Revised
Scheme Notification to Users
+ Ex post Notification to the Minister

Result
     Establish rules for user protection at suspension and discontinuation
of business for all carriers
30
 Rules for Services 3.
“Charges and other terms and
conditions” Type 1 Special Type 2 General Type 2
Contract tariff Contract tariff －
Current
Uniform Charge Uniform Charge Relative contract possible
Scheme
It sets scheme for appeal from users and business improvement order and so on.

Services provided by dominant carries

installing so-called “bottle-necked” equipment Others

Securing Contract tariff －

Relative contract possible

Revised Accountability of important matters to users

Scheme Obligation to process complaints swiftly and properly
 Notification of the tariff for universal services is required; basic charge, local call,
emergency call etc.
 Current regulatory scheme on dominant carriers is maintained.
 Scheme for appeal from users and business improvement order are maintained to
Resul
protect users.
t
Promote variable services to meet user needs, and enhance user protection
31
 Rules for Infrastructure 1. “ Rights – of –
Way ”
All Type 1 Carriers (installing circuit facilities)
Rights-of-Way
Current
Scheme
Permission 　 to market entry Usage of public utility tunnels
Usage of public water when
installing undersea cables
Setting rights of use on
property of others
Speedy permission to
occupy road
Carriers installing circuit facilities
Entry through Registration or Notification

Which do not require Which requires Rights-of-Way

Revised Perquisite Rights-of-Way
Scheme Certification
Examples
CATV operators of business
Satellite operators etc.

Resul Enabling smooth deployment of infrastructure

t by giving rights-of-way to carriers at their requests 
32
 Rules for Infrastructure 2.
“Technical Standards, Interconnection”

Rules for security and confidence of network

Technical standards to assure security and confidence are required continuously.

Rules for interconnection

Ex-ante regulation for transaction among carriers are abandoned, except for
interconnection to bottle-necked facilities.
For disputes among carriers, Dispute Settlement Scheme and order for business
improvement are available

Rules for essential communications

Assure end-to-end essential communications, by establishing rules for essential

communications between carriers.

33
 Strengthening Consumer Protection

　 Prior publication on market exit (legal requirement)

Provision of sufficient information on service content
when making a contract (legal requirement)

Provision of information on service Terms and conditions of

content to users upon conclusion of a communications service
contract contract

1. Charge: xxx yen

2. Terms and
conditions: •••••••
3. Responsibilities of
the provider and
user : •••••••
4. Treatment upon
suspension of
service: •••••••

34
Reference
.1 ： Expanding the number of telecommunications carr

( 社） 12,000 Type-I telecommunications carrier :413

（ *of these, CATV business operators:303)
Special Type=II carriers :115
10,000
General Type-II carriers :10,789
　　 Total :11,317
（ As of April 1, 2003 ）
8,000

Type-I telecommunication carriers:7

6,000 Special Type-II carriers :9
General Type-II carriers :200
　　 total :216
4,000 （ As of April 1, 1986 ）

2,000

0
1985 … 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

General Type- II carriers Special Type- II carriers Type- I carriers

(as of the end of the year ）

36
 Ref.2 ： Structure of the Telecommunications Market

NTT
NTTGroup
Group NCC
NCC
KDDI, Japan
Telecom, JSAT
KDDI(au)
(satellite-based ） Electric power related, Nifty,
J-PHONE
CATV-based ADSL-based

NTT DoCoMo NCC NCC regional Type

Type 22
NTT Communications Long-distance
NCC mobile
communications Telecommunications
Telecommunications
mobile
mobile communications
communications NTT Data
long-distance network communications networks
networks
network
network networks network

connection connection connection connection

negotiation negotiation negotiation negotiation

2002
0402 NTT
NTT East
East and
andWest
West Regional
Regional Networks
Networks
Number
NumberofofNTT
NTTEast
Eastand
andWest
Westregional
regionalnetwork
networksubscriber
subscriberlines
lines=74,887,000*
=74,887,000*
（ 99% of total number of subscriber lines
（ 99% of total number of subscriber lines ） ）

（ New Common Carrier ）

breviation for the type 1 telecommunication carriers that have entered the market since the telecommunications system regulation of April
As of April 1st 2003, there are 413 such companies, providing a variety of services such as telephone, leased line and mobile telephone
ces. *For all of the services(telephone, ISDN, leased line etc.) provided by NTT East and West, 64kbps is counted as one line.
37
 Ref.4 ： Reduction of telecommunications service
charges
①Long-distance call (Tokyo-Osaka) ②Local call
(3 minutes, daytime,
(3 minutes, daytime,
500 weekdays)
weekdays) NTT East and
\400 West
400 TTNet,
Fusion, NTT East \9 KDDI,JT,NTT-C MEDIA \8.2
HEISEI DEN DEN QTNet \9 \8.5
TTNet \8.7 HEISEI DEN DEN
300 MEDIA 10 TTNet,QTNet \7.5
NTT-C,JT \20 \8.4
TTNet
200 ▲ 95 ％ KDDI \80
\54
\10
C&WIDC \9 \9
100 \18 5 ▲25% \8.5 \8.2
～ ～

～
\8.7 ～
0 ▲15% \8.4 \7.5

0
TTNet March 1, 2001 ～ , NTT-C ､ KDDI ､ JT 　 March 1, NTT Nov., 17, 1976 ～ Jan., 10, May 1, 2001 ～
NTT July 21, 1983 ～ 98.1.7 か
2001 ～ TTNet 　 Jan., 7, 1998 2001 ～ MEDIA Jan., 30, 2002 ～
Fusion April 1, 2001 ～ , HEISEI DEN DEN Dec., 2001 ～ ～ ら HEISEI DEN DEN Feb., 1,
MEDIA Jan., 2002 ～ , C&WIDC April 21, 2002 ～ QTNet April 1, 1999 ～ 2002 ～

（ 3 minutes, daytime, ④Cellular phone （

（ 800Mhz digital
③ International call (Japan-U.S.A.) weekdays)
800Mhz digital
system
system ）
）
MCIWCJ \150(Dec.,1,1998) Call rate(Cellular phone→fixed phone,
2000 JT \180(Oct.,1,1999) 400 Basic fee Intra-prefectural)
20,000 400
C&W IDC \180(Oct.,5,1999) \17,000
KDD \450(Nov.,23, 1996)
1500 \1,530 KDDI 　 \180(Nov.,1,1999) 300
15,000 260円
JT \440(Dec.,20, 1996) TTNet \132(Nov.,1,1999) \260 300
C&W IDC \440(Dec.,20, 1996)
1000
DTJ \75(Dec.,10,2000)
NTT-COM \160(April 3,2000)
200
10,000 ▲ 75% 200
Fusion 　 \45(Sep.,1,2001)
100
5,000 70円
▲ 73%
100
500 ▲ 90 ～ MEDIA 　 \45(Jan.,30,2002) \4,300 \70
HEISEI DEN DEN \
96% 45(Feb.,1,2002) 00
0 NTTﾄﾞｺﾓ J - PHONE
東日本 NTTﾄﾞｺﾓ NTTﾄﾞｺﾓ中 央 ほ か 9社
96.11～
93.3.25
93.3.25 ほ か1 社 99.6.1 ～ 93.3.25
現 在 00.12.1～
KDDI 85.4.1 KDDI 96.11.23 98.12～ NTT DoCoMoNTT DoCoMo and nine
NTT DoCoMo J-Phone
KDD April 1, Nov.,1996 ～ Dec.,2000 ～ Mar.,25,1993 ～ Jun.,1,1999 ～ Mar.,25,1993 other companies
1985 ～ ～ Dec.,1,2000 ～

　 Note: On March 25,1993, the “800MHz digital cellular phone service” started.
NTT DoCoMo reduced the basic change to 4,500 yen (including a fee call allowance
worth 200)in June 2000.