The 81st Interconnection Committee Meeting Summary of Minutes

           Date and time: Friday, March 24, 2006, 15:00 - 15:50
Location: Conference Room 902, MIC
Attendees:
Interconnection Committee -  Mr. Toukai, Committee Chair; Mr. Sakai, Deputy Chair; Mr. Aida, committee member; Mr. Sato, committee member; Mr. Fujiwara, committee member
MIC -  Mr. Taniwaki, Director; Mr. Izumi, Senior Planning Officer; Mr. Katagiri, Deputy Director; Mr. Shirai, Deputy Director; Mr. Yokote, Deputy Director; Secretary

[Summary of Agenda Items]
  1. Approval of the amendment to the Articles of Agreement Concerning Interconnection for type 1 designated telecommunications facilities of NTT East (the provision of functions for reception systems for number portability applications)
  •  MIC explained the outline of the proposed amendment to the ministerial ordinance as well as the draft report to the Telecommunications Business Division of the Telecommunications Council. Deliberations followed.
  •  As a result, the draft report was approved for submission to the Telecommunications business division without change.
  1. Approval of the amendment to the Articles of Agreement Concerning Interconnection for type 1 designated telecommunications facilities of NTT East and NTT West (FY 2006 interconnection charge calculation based on LRIC method)

  •  MIC explained the outline of the proposed amendment to the ministerial ordinance as well as the draft report to the Telecommunications Business Division of the Telecommunications Council. Deliberations followed.
  •  As a result, the draft report was approved for submission to the Telecommunications business division without change.


[Discussion Details]



  1. Approval of the amendment to the Articles of Agreement Concerning Interconnection for type 1 designated telecommunications facilities of NTT East (the provision of functions for reception systems for number portability applications)

    Mr. Sakai, Deputy Chair: Have the vendors been awarded the contract and the contract prices disclosed to the public?
    MIC: No, because that would be inside information.
    Mr. Sato, committee member: Is the cost of development by the vendors broken down into, for example, cost of equipment and cost of maintenance?
    MIC: In this case, the Application Outline did not make it a point to provide details of the cost.
    Mr. Sato, committee member: Is the cost of equipment divided into depreciation expenses and running costs?
    MIC: That is correct.
    Mr. Sato, committee member: For example, if the depreciation period of 5 years for software passes, there would be no more depreciation expenses necessary for this part?
    MIC: That is correct.
    Mr. Sato, committee member: The Application Outline does not list individual software development costs, equipment costs, and running costs. Is there any particular reason for this?
    MIC: When we accept an application from NTT East, we do check the points that you have just pointed out. However, we judged that it was not necessary to list those points in detail in the Application Outline and have omitted them.
    Mr. Sato, committee member: The Application Outline gives the public the opportunity to make a judgment on the contents, so whenever the MIC feels the necessity for information disclosure, it would be desirable to list the details of the equipment costs and management costs in the Application Outline.
    MIC: We will take note of this point.
    Mr. Sato, committee member: If the Application Outline lists the details of the costs, would it be possible, for example, to more or less see the reduction in cost on reaching the end of the depreciation period for software?
    MIC: Yes, it would be possible.
    Mr. Sakai, Deputy Chair: After the cost becomes fixed, will it be simply distributed by the number of uses? Would there be no unit cost, but instead the payment is determined according to the frequency of use?
    MIC: That is correct. The agreement will state the total amount per month. The concept is to distribute the cost among the carriers actually using the system.
    Mr. Sato, committee member: Does that mean NTT East will be able to recover actual costs without being affected by the number of uses? The month with high usage volume and the month with low usage volume will have different usage amounts?
    MIC: That is correct.
    Mr. Toukai, Committee Chair: What if there was no use for a month?
    MIC: We do not expect that to happen, but according to the Articles of Agreement Concerning Interconnection, NTT East would not be able to recover costs for that month.
    Mr. Toukai, Committee Chair: When the application items are the same, we should employ a method where the interconnection charges for those items that are not specific to the applicant are leveled out as much as possible.
    Mr. Sato, committee member: What is the computational period for the expenses for procedures?
    MIC: One year. Basically the depreciation cost does not change, so it would only have minor changes according to the changes in cost of equity.
    Mr. Sato, committee member: I am worried about what problems may arise in actual implementation, because it differs from the pricing in the past.
    Mr. Fujiwara, committee member: No one pointed out these issues when public comments were invited?
    MIC: No.
    Mr. Sakai, Deputy Chair: There would be no problem if there were no big changes in the usage, but if there are, losses may be incurred on the months with high usage rates.
    MIC: We do not think there would be significant changes in carrier shares per month.
    Mr. Sato, committee member: There may be, for such reasons as relocation.
    Mr. Toukai, Committee Chair: It may be easier to level out by calculating per year instead of per month.
    Mr. Sato, committee member: How is the monthly charge decided? Will the charge be collected after the applicable month?
    MIC: That is correct.
    Mr. Toukai, Committee Chair: The opinions of the committee members have raised the point that there may be a more appropriate interconnection charge calculation method. I would like to ask the MIC to review this issue.
    MIC: Consented.
    Mr. Toukai, Committee Chair: In terms of the relationship with the vendors, NTT East is a private enterprise, so some view it necessary for them to have freedom in choosing vendors, but when they are required to decide on the total amount under regulations, choosing vendors should be handled as a somewhat public matter, and we should keep a close watch so that efficient procurement is ensured.
    Mr. Sato, committee member: Is the MIC notified of bidding information concerning the vendors by NTT East?
    MIC: This time we are not notified to that extent.
    Mr. Sato, committee member: Is it possible to obtain the information if necessary?
    MIC: It is possible as long as it is based on the Telecommunications Business Law.
    Mr. Sato, committee member: If the information is available, that could be used when comparing with others.
    Mr. Toukai, Committee Chair: Opinion No.3 mentions the application of retroactive settlement. What are the specific methods used?
    MIC: Retroactive settlement basically goes back to the beginning of the fiscal year to settle accounts, but for this case, the plan is to go back to the date of approval.
    Mr. Toukai, Committee Chair: I will report to the Telecommunications Business Division that this matter should be approved as stated in the draft report.

  2. Approval of the amendment to the Articles of Agreement Concerning Interconnection for type 1 designated telecommunications facilities of NTT East and NTT West (FY 2006 interconnection charge calculation based on LRIC method)
    Mr. Sato, committee member: On the movement of traffic, I would like to know the difference between "within MA" traffic and "GC interconnection" traffic.
    MIC: Four types of traffic are used in the modeling; "within MA," "between MA and within ZA," "GC interconnection," and "IC interconnection." "GC interconnection" and "IC interconnection" refer to the traffic connected from external POI to the GC switch and IC switch, as their name indicates. "Within MA" and "between MA and within ZA" generates return traffic, so that must be counted.
    Mr. Sato, committee member: GC interconnection traffic is increasing in the number of times and decreasing in the length of time. Why is it different from the other types of traffic?
    MIC: The number of times for GC interconnection traffic is increasing because there are more carriers that handle GC interconnection.
    Mr. Sato, committee member: Does that mean that the carriers who have been using IC interconnection are shifting to GC interconnection?
    MIC: That is correct.
    Mr. Sato, committee member: Are there influences of dry copper phones?
    MIC: Dry copper phones do not go through switches, so that contributes to the overall decrease in traffic.
    Mr. Sato, committee member: Is it possible that the progress in the move to IP is having any influence?
    MIC: Because the amount of decrease is about the same compared to last year, we do not believe that the move to IP is necessarily contributing to the decrease in traffic.
    Mr. Sato, committee member: I believe the switch equipment cost is calculated, and the unit cost is determined by dividing that by the amount of traffic. Is the basic cost increasing or decreasing?
    MIC: Total cost is decreasing by about 40 billion yen, a decrease of 5 to 6 percent.
    Mr. Sato, committee member: Are the basis of these calculations clear?
    MIC: For this fiscal year, the basis is clear. If we are to compare the data with the previous fiscal year, we would need to clarify the basis of calculations for the previous year.
    Mr. Toukai, Committee Chair: As for the measure to mitigate drastic changes in trunk ports, am I right in considering this a measure to make mitigation effective?
    MIC: In the Articles of Agreement Concerning Interconnection that was approved last year, it was stipulated that the adjustment ratio will be halved, but this time, the proposal is to halve the reduction in interconnection charges. As for this point, page 7 of the revision table submitted by NTT East and NTT West states that "For fiscal 2006, the charge based on the number of lines connected to the local switch will be reduced by the amount resulting from subtracting an amount based on the number of applicable lines (calculated by the following calculation) from the charge and multiplying the remainder by 0.5."
    Mr. Toukai, Committee Chair: This is the calculation for fiscal 2006 by the LRIC method, whose basic methods have already been discussed, so the basic methods are not included in the scope of today's discussion. As mentioned in the opinion submitted as a public comment, the basic approach is to be determined as soon as possible, so I would like to ask the MIC to present the future direction concerning this matter.
    MIC: As mentioned in the public comment, while traffic is significantly decreasing, the move to IP is progressing, and is bringing about huge structural changes. The discussions on the current interconnection charges calculation must therefore take into consideration the structural changes in advance. We believe that we are at such a stage today. This matter is also being discussed in the “Study Group on a Framework for Competition Rules to Address Progress in the Move to IP,” but we would like to also discuss this matter as the Interconnection Committee making inquiries to the Council.
    Mr. Toukai, Committee Chair: Would it be sufficient to do this within this year?
    MIC: We would like to do so.
    Mr. Toukai, Committee Chair: I will report to the Telecommunications Business Division that this matter should be approved as stated in the draft report.