by William Auckerman

Over the past decade, Japan's telecommunications services market gradually has been evolving from its former government-controlled monopolistic structure to a competitive environment. With enactment of the Nippon Telegraph and Telephone (NTT) Corporation Law and the Telecommunications Business Law in 1984/85, the semi-governmental NTT Public Corporation was (partially) privatized, and limited competition was introduced into Japan's domestic and international telecommunications market sectors.

The evolution from monopoly to fair and effective market competition has been slow, however, with only a handful of New Common Carriers authorized in 1985 (and none others since).[1] Japan's Ministry of Posts and Telecommunications (MPT) has continued to hold a tight market rein via its regulatory jurisdiction, and the former national and international telecom monopolies (NTT and KDD, respectively), maintain commanding market presences.

In 1990, five years after the initial market reform, the MPT broached the possibility of splitting domestic behemoth NTT into several operating units to stimulate competition, but political pressure forced postponement of a decision for an additional five years. In spite of a similar MPT recommendation on the status of NTT this year, action has been deferred yet again- until 1997 at the earliest, and very likely not then.

The most recent recommendation regarding the future structure of NTT was made in the context of a general government-led economic deregulation fervor, with the MPT proposal quickly becoming the keystone of the telecommunications market deregulation debate. Ensuring fair competition remains the nebulous aim of the telecommunications market deregulation package, but with a decision on NTT postponed indefinitely, "competition" has been reduced to the simplistic battle cry of a charge toward an unknown foe. Little serious consideration has been given to just who will be competitive, or even whether deregulation is the best method to achieve the desired result; the imperative to "deregulate for the sake of deregulation" has too much momentum. At a fundamental level, it can be said that the emphasis of Japan's telecom deregulation effort is on form (the process itself) over substance (the setting of a coherent, defined set of objectives).

The so-called Deregulation Action Program package is, in fact, a jumble of measures that call for deregulation, reregulation, and even several new, stricter regulations. The motivators of the process, meanwhile, are many, and the legacy of ulterior motives and hidden interests is complex. What follows is an eclectic look at Japan's telecom deregulation debate and some of the pertinent underlying issues and motivations.

A Brief Market History

Finally, in 1952, the semi-independent Nippon Telegraph and Telephone Public Corporation was formed, and charged with the task of reconstructing Japan's domestic telecommunications infrastructure. As recovery progressed, the monopolistic NTT Public Corporation set as its two primary goals elimination of the backlog of phone subscription applications (achieved in March 1978) and completion of nationwide direct-dial coverage (reached in April 1979).

With these basic goals accomplished, demand quickly grew within the business community for diversified services and technological development to support Japan's incipient economic advance, and both government and industry soon acknowledged that a significant reform of Japan's telecommunications system was required. This was realized in 1984/85 through enactment of two laws: the Nippon Telegraph and Telephone Corporation Law, which set the objectives, structure, and functions of a privatized NTT, and the Telecommunications Business Law, which opened the market and set conditions for service offerings by competitive telecommunications carriers.

The separate classes of carriers (and specific regulations for each) established by the Telecommunication Business Law remains the basis of Japan's telecommunications services market structure. A Type I carrier may own its circuits and facilities, while a Type II carrier operates via leased circuits. A Special Type II carrier is one that operates an extensive network (or connects with an overseas location), while a General Type II carrier is one not covered by the Special Type II definition.[3] Revision of the Type I/Type II business structure, and other regulated market divisions, is a major focus of the current deregulation measures.

Market "Competition" And "Deregulation"

Nevertheless, Japan's NCCs have traveled a rough road in their attempt to grow sufficiently strong to compete effectively with the former monopolies NTT and KDD.[5] One major obstacle for the domestic long-distance NCCs is that, to complete a call, they must access NTT's local network on each end of the connection. Negotiations between the NCCs and NTT regarding interconnection conditions and rates did not go smoothly in 1995, and the NCCs' complaints to the MPT garnered considerable media attention. In the face of pending MPT review of the company's status, NTT may have shot itself in the foot through its recalcitrance on this issue, since "imposing the obligation to interconnect" and "introducing a rate-schedule and tariff system" for such interconnections (an area over which the MPT now has only limited authority) are prominent items among the proposed telecom deregulation measures.

This scenario highlights a central point regarding the Japanese telecom market deregulation debate. The translated term "deregulation" (kisei kanwa in Japanese) has become a solecism, a word that, like Humpty Dumpty in Lewis Carroll's Through the Looking Glass, participants insist "means what I choose it to mean-neither more nor less." Although most of the proposed "deregulation" measures deal with abolishing or easing current regulations, several measures in the package are better characterized as simply reshaping current regulations, and a few actually call for the formulation and imposition of strict new regulations.[6] Yet, whether the task is abolishing regulations or imposing new ones, it all falls under the rubric of market "deregulation."

That deregulation will prove to be a horse of a different color in Japan was emphasized in early April when a Japanese government official announced, in effect, that the government "endorses deregulation in principal" but nevertheless "expects to continue to play a major role" in guiding Japan's telecommunications market. Both the MPT and Ministry of International Trade and Industry (MITI), for example, continue to defend their planned (and, in many aspects, overlapping and conflicting) big-budget ministry telecommunications infrastructure projects as "essential."

Why Now?

Japan has traditionally been a follower rather than a leader in policy, and the Japanese attempt is taking place against the backdrop of U.S. and world telecom events. U.S. Vice President Gore's 1993 announcement of American action plans for construction of an "information superhighway" had a tremendous impact on Japan. This, in particular, has been credited with spurring the MPT's 1994 "Basic Data Communications Infrastructure Program" and concomitant telecommunications deregulation review, with recent U.S. telecom reform efforts providing additional impetus. Japanese policymakers continue to intently study U.S. moves, fearful that a failure to follow the U.S. lead could leave Japan out of the competitive and potentially lucrative Internet and international digital telecommunications markets.

Japan's 1995 Deregulation Action Program (initially a five-year plan, now compressed to three years)--of which telecom market deregulation is but one component-sets up a process that is subject to continuous review and annual revisions.[8] So while it is tempting to focus only on the telecom sector--or even a specific aspect of telecom reform, such as the proposed breakup of NTT--it can be misleading to view it in isolation, as something discrete and final. The telecommunications policy making (or unmaking) process encompasses myriad motives and influences, each affecting and potentially altering the others.

Some Underlying Motivators

Playing catch-up. Telecommunications fits the traditional mold of Japanese industrial policy in that deregulation efforts are being driven by a "catch-up mentality." This is not necessarily a negative factor for Japan, since achieving market success by playing catch-up is something the Japanese have long excelled at. Playing catch-up is easier than leading, if only because it eliminates the distraction of choosing a direction.

Player self-interests. Each player in the deregulation drama has its own motivations. Foreign firms want a foothold into the world's second largest telecom market; domestic companies seek a better competitive footing, or the chance to enter new market segments. NTT craves a lifting of restrictions on its activities. And the government hopes that the competition induced by deregulation will increase telecom traffic and penetration rates, create jobs and increase the number of firms, encourage diversification of services and products, and lead to modernization of national infrastructure and services.[9]

Top-down decision making. The traditional and (until recently) seldom-questioned method of national policy making in Japan has been for bureaucrats to decide what the public and industry need (and then, in some cases, spend years convincing them that they really do need it). Both in its handling of the debate over deregulation measures and its recommendation on the status of NTT, there is evidence that the MPT is still acting as an old-style, unaccountable bureaucracy by deliberately ignoring key issues while advancing its own short-term interests.

Bureaucratic rivalry. Among the MPT's interests is augmenting its own resources and influence. The current telecom deregulation and infrastructure development efforts are best viewed in the context of ministerial rivalries-especially the increasingly overlapping interests of the MPT and MITI.[10] This rivalry is seldom publicly confessed, although in a classic understatement, the June 20, 1994, issue of MPT News acknowledged that, "Apparently, there exists competition between MITI and MPT as to which ministry will take leadership" of digital information infrastructure issues.

Foreign pressure (gaiatsu). Telecom services are a growing focus of foreign (primarily U.S. and European) pressure for market opening. There have been numerous bilateral meetings and agreements, and foreign advice to Japan has been abundant. (The U.S. Trade Representative, for example, and the American Chamber of Commerce in Japan and European Union all made several public "suggestions" to the Japanese government in November 1995.) Public gaiatsu often proves a decisive factor for inducing market change, especially when the Japanese government favors an unpopular policy it might otherwise find difficult to implement; foreign pressure offers a convenient scapegoat.

International trade agreements. A little-discussed aspect that is of great potential significance to the future growth and structure of Japan's telecom industry has been the development of multilateral governmental accords. The Marrakesh Agreement of 1994, for example, places national telecommunications services squarely within the existing framework of global trade negotiations-specifically, the General Agreement on Trade in Services (GATS). Despite inherent limitations and ambiguities, GATS and its Telecommunications Annex and related schedules will substantially modify the environment for policy formation-at least insofar as Japan's "specific commitments" open its markets to the oversight of binding multilateral trade rules and impose explicit obligations.[11] Meanwhile, the impact that the emerging free-trade regime of the World Trade Organization (WTO) will have on Japan's telecom market remains unclear.

Advances in technology. Telecommunications technologies, especially wireless communications alternatives, are advancing rapidly. Competition is no longer just between competing companies offering similar services, or different services that can satisfy the same needs, but also among convergent technologies that can fulfill a wide range of needs. Deregulation is both an effect and a cause of these sweeping technological (and the resulting social and market) changes.

The Ghost of Decisions Past

It is increasingly clear that the MPT--or whatever alternative future regulatory entity is devised--must anticipate rather than merely react to telecom market events. Yet absent so far in official pronouncements about regulatory issues is any apparent recognition of the evolutionary and transitory nature of modern telecom technologies that allows market developments to far outstrip the ability of government to define applicable rules.

One persistent criticism of the MPT from all quarters has been its lack of transparency and consistency on key issues: inadequate implementation of policies, inequitable application of rules, and a lack of explicitness about what the rules really are. In particular, it has been charged that the MPT's discretionary application of regulations stifles competition, while its heavy-handed administration of fee-approval authority renders what competition does exist conservative; that applicable standards for market entry approval are neither open nor transparent; that the MPT's regulatory authority holds more force than competitive marketplace pressures; that the ministry uses its jurisdiction to shape industry structure and guide corporate actions as a policy tool rather than serving as neutral referee; and that the ministry's deliberative bodies are closed to public scrutiny.

Nearly all voices in the current deregulation debate have stressed the need for "openness and transparency" and criticized the MPT's discretionary application of its powers. The prevailing situation of the past decade was likened by one critic to a sports contest, with the MPT as referee and telecom firms as the players. Much like players in a game who don't clearly understand all the rules and are at the mercy of inconsistent and biased rulings by the referee, Japanese telecom firms generally have opted to play conservatively out of fear that they may commit some unwritten (or made-up on the spot) infraction of the rules.

The implicit presumption of many seems to be that regulations are inherently bad, yet this is not necessarily the case. While regulations have served in the past to control market access and manage competition, they could instead be used to champion competition. Complete deregulation may be an ideal, but it is not a practical goal; there will always need to be some government regulatory functions--even though they may not be characterized as regulatory or are scattered among ministries--if only to ensure a minimum level of market structure and consumer protection. (Although those who have lived in Japan for any length of time will testify that consumer protection has seldom been a high priority.) And, in the presence of dominating telecom market giants, regulation is essential to ensure fair competition and help the nation and the public to realize the potential benefits of deregulation.

Deregulation and competition are nearly always spoken of in cause-and-effect terms: deregulating the telecommunications market will foster increased competition, which is heralded as the sufficient and necessary impetus for improved and diversified services and lower prices. As evidence that competition brings the latter, the telecom market liberalization of 1985 is generally credited with forcing a drop in the cost of a 3-minute Tokyo-to Osaka NTT call by 55 percent in less than a decade, from ¥400 in 1985 to ¥180 in 1993. But while the positive influence of competition is undeniable, Martin Fransman of the Institute for Japanese-European Technology Studies, rightly points out that the cost of a 3-minute call had previously dropped by 44 percent (from ¥720 in 1980 to ¥400 in 1984) in the "monopoly era" before competition was introduced.[12] Obviously factors other than competition can induce price reductions.

This is not to deny that an increase in competition brought about by deregulation generally leads to a healthier market, but the promotion of competition and the implementation of deregulation are different things. Whether deregulation enhances or even hinders competition is a function of market structure. The key dilemma for the industry is how to ease market regulatory controls while at the same time preventing NTT from using its dominant position and ownership of infrastructure to crush competition.

NTT: The Telecom Center of Gravity

The report of the MPT's Telecommunications Council recommended splitting NTT into one long-distance and two local carriers. As most observers predicted, though, politics intervened, with Japan's ruling coalition on March 21, 1996 urging the implementation of other deregulatory steps but insisting that any decision on the status of NTT be postponed for at least one year.[13] In short, the breakup (or preservation) of NTT has become a partisan political issue rather than remaining an integral part of the overall deregulation process.

The decision was therefore made to classify proposed measures into two types: those considered to be separable from the issue of NTT breakup (for inclusion in the March deregulation package) and those that are inseparable and will be dealt with later. While the division sounds logical, it is a self-serving expediency that will create headaches down the road. The suggestion that deregulation can follow the same path no matter what the future form of NTT will be mindlessly implies it is a medicine that cures all ills, one to be administered in the same dosage no matter what the symptoms.

NTT is, and will remain, a palpable market presence--a fundamental, pervasive force that affects everything else telecom-related. To believe that deregulation can proceed in (more or less) the same direction regardless of the future status of NTT is akin to suggesting that a rocket will fly the same path whether or not there is gravity. NTT's dominant presence in Japan's telecom market, and its future actions and structure, will continue to affect the market in years to come-likely in ways unintended and unwanted if telecom reform charges ahead without considering NTT's looming presence.[14]

For and Against

There are numerous arguments for both sides of the NTT breakup issue. One case made in opposition to the breakup by some (such as the Communications Industry Association of Japan) is that, from a foreign policy perspective, Japan needs a strong "national-flag carrier" to ensure international competitiveness. And NTT, it is maintained, is the only Japanese firm capable of fulfilling that role.[15] A collateral argument holds that NTT is the only Japanese corporation big enough to "stop foreigners from acting as they please" in Japan's domestic telecommunications market.

Other arguments warn that without a nationwide NTT presence, it might prove difficult to maintain Japan's current high level of services, and that the proposed regional/long-distance division might introduce regional disparities and even jeopardize the provision of "universal service." Or that Japan will not be able to implement the much-publicized government program to install fiber-optic cable nationwide by 2010 without assistance from a monolithic NTT.

Splitting NTT into smaller units would diminish its technology R&D capability (and thus threaten Japan's technology leadership), goes yet another lament. The most persuasive argument, though, is that an NTT breakup is form instead of substance; that the action would not accomplish the stated objectives because the resulting regional companies would still have an anti-competitive monopoly that might, in fact, cause the cost of interconnections to rise and lead to higher tariffs.

The government's ruling coalition, meanwhile is reluctant to render a final verdict one way or the other for fear of angering a potential body of voters: either those favoring the breakup, or the NTT worker's union, which is an organized and vocal force. And then there is the issue of NTT stock. Although NTT was "privatized" in 1985, 20 years later the Ministry of Finance remains the company's majority stockholder, holding some 65 percent. It is commonly accepted that the decision in 1990 to postpone action was made in part out of fear that a breakup of NTT would adversely affect its stock prices-and, perhaps, the overall market. And since the Japanese economy remains sluggish, with stock prices well below their dizzying heights of last decade, now is not perceived as a good time for divestiture (even though many financial analysts support a breakup, predicting that it would raise NTT's market value by at least 35 percent).

In the face of such opposition, why does the MPT steadfastly support splitting NTT into smaller firms and increasing market competition? As already mentioned, several factors (besides the perceived market benefits) come into play. If there are more, smaller firms to regulate, the ministry's power will increase. The more firms there are, in turn, the less influence that any one giant, like NTT, will be able to exert in contravention to the MPT's will--or, on the ministry itself. But there may be an additional, compelling personal interest that is not obvious at first glance.

Amakudari (literally, "descending from heaven") has long been an accepted practice in Japan. High-level bureaucrats retire from government service and, after the minimal waiting-period prescribed by law, take executive positions in private firms that their former ministry oversees. While amakudari is cited by some as a bar to reform and deregulation, one writer suggests that it might actually be a motivation behind MPT support of deregulation.

Joshua Ogawa, a journalist with the English-language paper The Nikkei Weekly, cynically views MPT as favoring telecom deregulation in part because it will create more firms where retired MPT officials can land a job.[16] Lending credence to this charge is the reality that all three Tokyo PHS firms as well as all the NCCs have at least one former MPT official in an executive role. NTT has four ex-MPT officials on its board, and nine NTT affiliates have an average of two each. According to Ogawa, as of March 1996, at least 52 former MPT senior officials held top-level executive positions at 33 leading telecommunications firms.

A Map is Not a Journey

One question not adequately answered (and, for the most part, not even asked) is: What is the mandate of the entity that oversees the deregulation process? Is it to increase competition, or to safeguard new market entrants? To protect end-user interests, or to promote national policy? Or something else entirely? Likewise, little thought has been given to the future organizational structure for telecom market oversight. Will it be a regulatory agency within the MPT; a separate, independent body whose decisions are sometimes subject to ministry review; an autonomous regulatory body not subject to ministry review; a "self-regulation" body set up by the industry; or...?

In short, the telecommunications deregulation effort emphasizes form over substance, process over end product. In this, as in many matters Japanese, so long as the proper form is observed, the substance (or lack thereof) is secondary. A quintessential example is the (apocryphal, but oft-told) tale of the hapless foreigner (gaijin) who gets stopped by police on a day he has forgotten to carry his alien registration card. To make amends for not having it in his possession, a proper apology letter is called for; but since our gaijin doesn't know the approved form, the official tells him what and how to write. Then, when the task is done, the same official who dictated the letter takes it, carefully reads it through as though seeing it for the first time, nods and says "yes, this appears to be in order," and then lets the miscreant go on his way. Though the incident might seem ludicrous, proper form has been observed.

An instructive "real-life" case is the recent decision by Kawasaki City to allow non-Japanese to apply for municipal jobs--this in spite of objections from the Ministry of Home Affairs, which contends that public servants having administrative authority must be Japanese nationals. Kawasaki City replied that it would not promote foreigners to the position of section chief or higher, to prevent them from having "administrative authority," but the ministry objected that this bar on the promotion of non-Japanese would constitute discrimination in the workplace. Don't hire non-Japanese-period-is the ministry's form-over-substance solution to avoid on-the-job discrimination.

A similar myopic vision is apparent in government efforts to reform the telecom services market. It is commonly acknowledged that the complex framework of regulations which shielded the Japanese telecommunications industry in the 1970s and 1980s has been become a shackle that is hobbling the nation as it tries to march into the new age of international and liberalized markets. But the single-minded focus of deregulation has been on policy "making" with little regard for matters of policy "implementation" or policy "evaluation and revision." And heedless of the maxim that "you can't do just one thing," the government shows an almost callous disregard for potential side-effects of its championed policy measures.

In today's fast-evolving telecommunications environment, the nature of the issues at which a policy decision is directed are likely to change, perhaps fundamentally, even while a policy is being formulated and before it is implemented. While the policies "made" in the March 1996 Revision of the Deregulation Program are the frame for ministerial action, it is day-to-day policy implementation and individual decisions that will sketch in the picture and determine the success or failure of the Japanese telecom market liberalization effort. These routine activities, however, do not garner the media attention of the more conspicuous or sensational aspects of policy "making," nor have they received much notice in the telecom deregulation debate. Yet, with government bureaucrats known for discretionary case-by-case interpretation of regulations, it is how policy is implemented that will determine Japan's route to the telecommunications future.

The Patchwork Future

The proposals of Japan's telecommunications market deregulation package so far take the form of vague concept rather than coherent course. And the bottom line--which so far has been largely ignored--eventually must be: How does the nation measure whether the deregulation process is proving successful?

When the current deregulation fervor has run its course, and the near-term future of NTT has been decided (if only by perpetuation of the current structures through deliberate non-decision), I fear that what remains for Japan will be a patchwork of remedies that cures some of the nation's current telecom ills but does little to lay the groundwork for dealing with future maladies.

In early 1996, like cyberspace itself, the matrix of issues and events encompassing Japan's telecommunications deregulation process was evolving and changing so rapidly that traditional publication and distribution methods could not adequately keep pace. For this reason and because the theme of this symposium is "CyberJapan" I decided at the outset of my research to focus on "cybersources" rather than conventional paper documents.

There is no dearth of data relating to Japanese telecommunications deregulation (and other Japan telecom-related topics) on the World Wide Web. A mid-April search for keywords "Japan AND telecommunications policy AND deregulation" (using the Alta Vista search engine), for example, brought more than 800 "hits." Even adding the constraint "documents posted since January 1, 1996, on Japanese (.jp) servers" turned up nearly 90 hits. After accessing and printing out those documents that appeared to be most relevant, I ended up with a stack of paper over four-inches high.

This listing of approximately three dozen cybersources represents merely the tip of the iceberg of useful online documents, and it is limited to English-language documents. (Although I consulted several online Japanese-language sources, I found little information or analysis not replicated in English-language materials.)

1. Web-Based Resources

As an aid to those who wish to consult the listed sources, the Computing Japan magazine Web site will, for several months following the symposium, provide an online version of this bibliography with links to these URLs (and new ones that may be created). Rather than type in each address individually, I invite you to visit and click on the document you wish to access.

The cybersources hereunder are presented in the following format: Author's name. "Title of Document." Title of Complete Work (if applicable). Date of original document posting (or most recent modification); Date of my latest access. Full http address.

A. Japan telecom policy-focused documents

Anderson, Stephen. "From Crisis to Information Society in Japan: NTT Reform." ND; 3/28/96. <http://ifrm.glocom.ac.jp/doc/a01.002.txt.html>

In this February 14, 1996, speech to the American Chamber of Commerce in Japan, Anderson argues that Japan's "crisis" is a myth of perception. He concludes that the sought-after "information society" will follow from the telecom deregulation/NTT status debate, hastened by a sense that Japan is falling behind.

Despite the similar title, while this much longer paper (delivered at the Japan Studies Association of Canada on September 30, 1995) addresses many of the same infrastructure topics as the above document, it is overall less focused and less relevant to the issue of deregulation. In this earlier version, Anderson omits discussion of the NTT issue.

In addition to providing a good overview of general telecom issues, this document contains a short section entitled "The Case of Japan: an Unfinished Process."

In this paper presented at the (September 28, 1995) Financial Times Symposium in Tokyo, U.S. FCC Commissioner Chong focuses on what Japanese policymakers can learn from the U.S. experience.

This November 1, 1995, press release summarizes the CIAJ's position on the NTT and telecom deregulation issues. CIAJ opposes the breakup of NTT because "national flag carriers are essential from the point of view of national interest." Other CIAJ recommendation summaries are accessible at http://www.ciaj.or.jp/ciaj/welcome.html.

This chapter provides an informative overview of a peripheral, but intriguing, aspect of the Japanese telecommunications market.

In this prelude to a more detailed (not yet published) study, Fransman addresses three basic questions: What is the debate all about? What major arguments have been put forward? What are the perceived strengths and weaknesses of those arguments?

These three sets of policy proposals by the ITCPFJ (a private academic/business-oriented forum whose goal is to open the telecom policy debate to the general public) and the accompanying discussions address the telecom deregulation and information infrastructure development issues from a goal- rather than a process-oriented perspective. Though occasionally turgid and dissonant (representing, as they do, a wide range of views synthesized and prepared by different individuals), these proposals illuminate a plethora of vital interests and issues that many other analyses do not address.

This article offers a concise, concrete overview of the Japanese telecom market and specific deregulation concerns as of late 1994.

Johnstone looks at the bureaucratic infighting underlying what he criticizes as Japan's failure to create a coherent information infrastructure strategy.

This provocative Japan Times article argues that the breakup of NTT is a minor issue which has pushed aside the proper focus of policy debate.

This October 1995 ITU report is an excellent overview of various national information infrastructures and the outlook for the future. While the latter sections (including section 7, "Regulation in a Multimedia World") were not yet online as of May 1, a summary of the full report is posted at http://www.itu.ch/WTDR95/ov.html.

In this February 1996 document, NTT summarizes its corporate goals and management policies to achieve those goals, and states the company's "requests" (e.g., "it is essential that NTT firmly remain one company serving the entire nation") to help it achieve those goals.

How are others attempting to do it? Titch and Williamson provide a comparative global market perspective with concentration on European telecom developments.

The initial portion of Wakabayashi's analysis offers an excellent introduction to the development and deregulation of Japan's mobile phone market.

In this Japan Policy Research Institute working paper (no. 7; 2/95), West summarizes the basic policymaking processes behind Japan's National Information Infrastructure debate.

This in-depth paper covers some of the policy-making processes at work in the NII debate and highlights the similarities of, and differences between, the Japanese and US plans.

While these documents are not telecom-specific, they provide a basic background for considering Japanese policymaking and deregulation issues.

Miyoshi, Masaya. "Deregulation in Japan: the Road Ahead." 7/25/95; 3/28/96. http://www.keidanren.or.jp/english/journal/review/rev001.html

This excerpt from a May 18, 1995, speech by the author offers an intriguing if somewhat cynical overview of what deregulation can accomplish, and why it is difficult to implement.

This document includes sections on Japan's telecommunications equipment procurement procedures and telecom services market.

This February 26, 1996, Nikkei Weekly article quotes an unnamed PHS-company official to back up its claim that the MPT pressures telecom firms to give jobs to ex-bureaucrats (amakudari) and seeks deregulation primarily as a way of creating more firms, and thus more potential posts for retiring MPT officials.

This paper, presented at the 1995 Japan Documentation Center, Library of Congress symposium, analyzes the changing effectiveness of foreign pressure and contributing domestic political factors.

Tilton, in another paper presented at the 1995 Japan Documentation Center, Library of Congress symposium, offers an interesting introduction to the important, but often under-appreciated, role of trade associations in consensus-formation and the policymaking arena.

The Japanese government, and especially the MPT, has been proactive about using the Internet as a PR tool and supplying online English-language information. Some documents, in fact, are translated and posted in English days or weeks before they go online in Japanese.

Ministry of International Trade and Industry. "Program for Advanced Information Infrastructure." 4/8/95; 4/1/96. http://www.glocom.ac.jp/NEWS/MITI-doc.html

After summarizing the June 1993 report of the Industrial Structure Council's Information Industry Committee and subsequent developments, this May 1994 report focuses on the emerging image of Japan's "Advanced Information Society," basic concepts regarding the government's perceived role, and assumptions about policymaking direction and specific policies for realizing such a society.

This is an outline of recommendations for "revitalizing the nation's economy and enhancing advantages for the consumers" made by the named committee in its October 3, 1995, report.

The MPT's annual White Papers offer a broad overview of trends in telecom services and financing, measures related to key ministry policies, and recent advances in digital and other multimedia technologies.

Though labeled as a "summary," this online version of the 1995 communications White Paper contains all text and charts of the paper version; only the color photos and appendix are omitted.

This is a provisional translation of the January 23, 1996, report that outlines the background and basic concepts for MPT's recommendations and summarizes the concrete measures planned for carrying out deregulation.

This document summarizes the procedures, processes, and related laws of Type I telecommunications businesses. It offers excerpts from the Telecommunications Business Law, with supplementary explanations, diagrams, and tables, as well as excerpts from Regulations for Enforcement of the Telecommunications Business Law and Examination Standards Regarding the Telecommunications Business Law.

This summary of the May 31, 1994, report issued by the Telecommunications Council in response to the minister's inquiry no. 5 (1993) emphasizes the importance of the info-communications infrastructure and proposes several concrete measures that should be taken.

This is the much-talked about report of the Telecommunications Council's Special Subcommittee on the Status of NTT, which recommends the breakup of NTT.

A brief comparison of the original and revised programs, with an outline of the principal points of the revised measures and examples of some deregulation measures and their expected results. This brief document links to a longer summary of "Matters Related to the Information and Telecommunications Business" in table format at http://www.mpt.go.jp/telecom/Deregulation/Telecommunication.html.

An unofficial translation of the minister's inquiry asking the Telecommunications Council to provide suggestions re the title topic.

This is an industry-overview paper presented at the April 1995 KISDI-OECD Joint Conference on Information Infrastructure in Seoul, Korea, by the director of MPT's International Affairs Division.

Communications Industry Association of Japan (CIAJ):
Recent issues of the CIAJ Quarterly, each containing a variety of informative articles about Japanese telecom topics, can be found at http://inetsrv.ciaj.or.jp/ciaj/ciaj-e/ci000191.html.

International Telecommunications Union (ITU):
Documents of the ITU are available online at . Of special interest re policymaking and deregulation are reports of the ITU regulatory colloquia on "The Changing Role of Government in an Era of Telecom Deregulation" (available for downloading as Word for Windows 6.0 documents), including:

Leive, David M. (colloquium chairman). "Options for Regulatory Processes and Procedures in Telecommunications" (report of the 1st colloquium, 2/93). 1/24/96; 5/4/96. http://www.itu.ch/itudoc/osg/colloq/firstrep/coloq1e_25779.html

_____. "Interconnection: Regulatory Issues" (report of the 4th colloquium, 4/95). 2/6/96; 4/6/96. http://www.itu.ch/itudoc/osg/colloq/fourrep/col4_27270.html

_____. "Trade Agreements on Telecommunications: Regulatory Implications" (report of the 5th colloquium, 12/1995). 2/6/96; 4/6/96. http://www.itu.ch/itudoc/osg/colloq/fifthrep/fifthe_30244.html

KDD Research Institute:
Recent back issues of Japan's Telecom Headlines 24, a monthly report focusing on policy and regulation, international and domestic carriers and services, and technology and products, are online at http://www.plaza.co.jp/kri/head/headline.html.

Ministry of Posts and Telecommunications:
The URL of the MPT home page is http://www.mpt.go.jp/. All of the MPT documents cited above can be accessed from the menu on this page.

Copies of the biweekly MPT News (since April 1994) can be found at http://www.mpt.go.jp/MPT-News/News-home.html. The MPT News, however, focuses on bland PR-type topics and steers clear of controversy (including any mention of NTT breakup and telecom deregulation issues).

Translations of important MPT reports and speeches (including several cited individually above) can be accessed from http://www.mpt.go.jp/Report/Report-home.html.

Translations of the "summary of the minutes" for some of the meetings of the MPT Telecommunications Council, Special Subcommittee on the Status of NTT, are posted at http://www.mpt.go.jp/Council/Council-home.html.

Other relevant MPT documents are grouped at http://www.mpt.go.jp/telecom/telecom-home.html and http://www.mpt.go.jp/Broadcasting/broadcasting-home.html.

2. Supplemental Paper-Based Resources

The first three books listed here offer insights into some of the basic issues involved, while the fourth supplies a concise compilation of recent and historical telecom market data.

Communications Study Group. Telecommunications Business Law. Tokyo, MPT, Jan. 1995. A translation of the Telecommunications Business Law (Law No. 86 of Dec. 25, 1984), as amended last by Law No. 73 of June 29, 1994; the law has 114 articles focusing primarily on telecommunications business practices, use of land, and penal provisions, plus 20 supplementary articles.

Fransman, Martin. Japan's Computer and Communications Industry. London, Oxford University Press, 1995.

Fransman offers perhaps the only comprehensive coverage of the evolution of the technologies, firms, industries, institutions, and policies that have shaped Japan's converging IT and communications sectors. Chapters 7 ("The Future of NTT") and 8 ("DDI: NTT's Major Competitor") are particularly relevant to the issues at hand.

Though dated, this collection of essays comprises an excellent comparative study of the key themes underlying traditional Japanese policymaking processes. Of particular relevance are Haruhiro Fukui's "Studies in Policymaking: A Review of the Literature" (pp. 22-59) and Bradley Richardson's "Policymaking in Japan: An Organizing Perspective" (pp. 239-268).

This informative 48-page booklet, prepared by the International Affairs Department, is one of the few major MPT publications not yet available via the Web. It covers the reforms of 1985 and subsequent legislation, and the status of Japan's telecom service system and markets. Chapter IV provides contact information for Japanese telecom-related organizations.

2. In 1949, the Ministry of Communications was divided by function into the Ministry of Postal Affairs and Ministry of Telecommunications. When NTT Public Corporation subsequently took over much of the latter's role in 1952, the remaining telecom responsibilities were transferred to the Ministry of Postal Affairs, which was renamed Ministry of Posts and Telecommunications.

3. MPT approval is required for a Type I carrier to enter the market; a Special Type II carrier must register with the MPT, while a new General Type II carrier need only notify the MPT. As of the start of FY1995, there were 111 Type I, 44 Special Type II, and 2,063 General Type II carriers. This compares with 62, 28, and 813, respectively, at the start of FY1990, and just 7, 9, and 200, respectively, at the start of FY1986. Besides NTT, KDD, and the 3 long-distance and 2 international New Common Carriers, the other authorized Type I carriers are 11 regional, 2 satellite, and 91 mobile communications providers.

4. By 1994, following a series of MPT-approved reductions, the difference was about 6 percent (¥180 vs. ¥170).

5. In FY1993, NTT held a 90 percent share of Japan's domestic telecom market, while KDD handled over 70 percent of the nation's outgoing international calls. NTT's three domestic long-distance competitors are Daini Denden Inc. (DDI), which counts Kyocera and Sony as leading shareholders and traditionally has had close ties with the MPT; Japan Telecom Co. (JT), which is closely aligned with the JR (Japan Railways) group and enjoys favor in the Ministry of Transportation; and Teleway Japan Corp., with Toyota as a leading shareholder, which has lines buried beside highways and finds support in the Ministry of Construction. KDD's competitors are International Digital Communications (IDC), which has Itochu, Toyota, and Cable & Wireless as its most prominent shareholders, and International Telecom Japan (ITJ), a consortium led by Mitsubishi, Mitsui, Sumitomo, and Matsushita.

6. As one example of the prevalent ambiguity and contradiction, the Communications Industry Association of Japan-in its endorsement of telecom deregulation-called on the government to "reduce/eliminate regulations governing telecommunications service providers," while at the same time insisting it must "increase the enactment of regulatory measures ... stricter than regulations applied to other telecommunications providers" to deal with an undivested NTT. CIAJ, "Summary of Urgent Proposal."

7. I use the term "debate" loosely, since there has been only limited provision for public input or disclosure. The Special Subcommittee on the status of NTT, for example, declared that, "If complete details [of proceedings] ... were to be made public, it would be difficult to hold discussions that were completely forthwright [sic].... It was therefore decided neither access to the meetings nor copies of their complete and detailed minutes will be made available to the public." (See "Outline of Discussion" at http://www.mpt.go.jp/Council/NTT-Oct24.html.)

The most obvious forum for "debate" has been the popular press, with attention centered on the issue of whether or not to break up NTT rather than on specific market options and alternatives. Some observers suggest that the MPT has deliberately encouraged the focus on the status of NTT as a smoke screen to deflect attention from more basic market and technology issues that it is not prepared to address.

8. In March 1995, the Japanese Cabinet approved the Deregulation Action Program, and in March 1996, it approved the Revision of the Deregulation Action Program. The revised program covers 1,797 items, in such fields as construction, transportation, financial and legal services, and imports. Of the 94 measures that fall within the purview of the MPT, 55 have been at least partially implemented; action on the remaining 39 measures (including most of the major ones) is pending.

Some of the measures have been characterized as trivial or vacuous, (one measure relating to foreign ownership of Type I carriers, for example, begins, "the possibility will be considered...."), implementation schedules remain vague, and few concrete procedures have been specified. For the unofficial translation of all proposed measures, see http://www.mpt.go.jp/telecom/Deregulation/Telecommunication.html on the MPT Web site.

9. Even a cursory review of the ongoing debate shows it to be centered on the potential revenues and jobs that deregulation is expected to create, not concern for the consumer. The rationale for seeking lower-cost telecom services is not to benefit the average consumer, but to boost overall Japanese industrial competitiveness (and prevent corporations from relocating to other, cheaper Asian locations).

10. The regulation of industries in digital technology (computers) is under MITI authority, while the communications sector falls under MPT jurisdiction. As digital technologies and communications infrastructures converge, these two ministries have been vying for leadership. They have long championed parallel (but separate) multimedia infrastructure efforts, such as MITI's "new media communities" vs. MPT "teletopias."

11. These obligations include "transparency" (through publication of regulatory rules), reasonable and non-discriminatory access by service suppliers, and licensing issues-all of which have been key topics in the telecom deregulation debate.

12. Fransman, Japan's Computer and Communications Industry, pp. 356-8. While the "non-competitive market" reduction is only two-thirds in terms of percentage, it was a larger "real value" decrease in a significantly shorter period of time (a drop of ¥320 between 1980 and 1983 vs. a drop of ¥220 between 1985 and 1993).

13. This is not the first such postponement of a decision. In 1982, before privatization of NTT Public Corp., the Provisional Commission on Administrative Reform recommended the breakup of NTT, and MPT's Telecommunications Council proposed similar action in 1990 as a means of introducing increased competition. So far, only a very limited degree of divestiture has been achieved. In compliance with the March 1990 "Measures to be taken in accordance with Article 2 of the Supplementary Provisions of the Nippon Telegraph and Telephone Competition Law," NTT established independent long-distance and regional divisions in April 1992, and in July 1992 spun off its mobile communications (cellular & radio paging) business.

14. International Telecommunications Union's 1994 statistics showed NTT to be the world's top "info-communications" company, with sales of $79 billion. (AT&T and IBM were nos. 2 and 3, with sales of $72 billion and $64 billion, respectively.)

15. Many of these same people then go on to proclaim their enthusiastic support for deregulation of the telecom market, without bothering to make explicit how small domestic firms will acquire the competitive strength to go head-to-head with this brawny national carrier.

16. Ogawa, "Posts Ministry's NTT-Breakup Called Selfish." This Nikkei Weekly article quotes an unnamed PHS-company executive as charging that the MPT "demanded almost everything from us: a good salary for the former ministry official [as company executive VP, and] ... above all, the right to speak on behalf of the company."

17. For an online summary of all proposed measures, see MPT, "Revision of the Deregulation Action Program" and the embedded link. For an excellent analysis of the basic issues, see the discussions at Information Technology and Communications Policy Forum of Japan, "Information Technology & Communications Policy."

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