Chapter 1. Basic Concept Concerning Desirable Pro-Competitive Policies in the Future
1. Current Market Trends in the Telecommunications Business Field
(1) Taking into account remarkable technological innovations in the info-communications
field in recent years, the stream of broadband has been accelerating as exemplified
by the shift from conventional networks tailored for each service toward high-speed,
large-capacity access networks (always available) commonly based on Internet
Protocols.
(2) In specific terms, a sharp rise in the number of subscribers to DSL services
(34-fold increase over one year); new entries into the fiber-optic access services
by new carriers, including power utility companies (themselves); and many new
entries of IP telephony providers.
(3) In addition, with respect to the mobile communications field, the launch
of the third-generation (3G) mobile telecommunications system; PHS service which
provides flat-rate data communications service, new services through wireless
LANs and so on.
(4) Along with the development of IP and broadband, the vertical-integration
business model, etc. covering multiple business fields has emerged. Moreover,
in business domains on the fringe of the telecommunications services, new business
such as CDN (Content Delivery Network) and iDC (internet Data Center) are already
about to be diffused.
(5) It is necessary to investigate, from the point of view of maximizing user
benefit, the desirable pro-competitive environment, flexibly matching such environmental
changes as the development of IP, broadband and so on.
2. Trends in New Pro-competitive Policies in Major Countries
(1) In the U.S., as to the pro-competitive policies in the broadband age the
Federal Communications Commission (FCC) has been considering whether to maintain
pro-competitive policies through the market mechanism or to switch to a policy
that places priority on encouraging industry. FCC recognizes that the broadband
service market needs to be defined and an assessment made as to whether or not
incumbent local exchange carriers (ILECs) have the significant market power
in that market. Careful monitoring of these deliberations is required.
(2) In April, 2002, the EU adopted the New Directive (2002/21/EC) on a Common
Regulatory Framework for electronic communications networks and services within
the EU territories (by July 24, 2003, all Member States of the EU must adopt
national legislation implementing those new Directives). Under the Directive,
in order to minimize the regulatory levels, definition of markets, including
the broadband market, are given priority, so as to clarify applicable regulatory
frameworks.
3. Basic Concept Concerning Desirable Pro-competitive Policies in the Future
(1) Firstly, it is important to further promote new entries into the market
and to ensure that a fair and competitive environment is in place. Specifically,
it is necessary to open the bottleneck facilities further and to stimulate both
facilities competition and service competition through promotion of aggressive
new entries.
(2) Secondly, it is essential to bolster consumer protection through administration
procedures. In other words, it is vital not only to maximize user benefits by
promoting competition, but also to promptly formulate specific measures to create
an environment wherein users can independently make a reasonable choice from
diversified and complicated services.
(3) Thirdly, it is necessary to examine measures that need to be taken to introduce
new pro-competitive frameworks to suit the IP age. It is essential to conduct
fundamental reviews on the competitive framework itself including the business
categorization, considering the fact that the network and market structures
have been changing along with the development of IP and broadband, and that
the present business categorization does not necessarily mesh with the reality
of competition among carriers.
Chapter 2. Active Implementation of Pro-Competitive Policies
1. Promotion of New Entries
(1) It is vital to stimulate competition in both facilities and services through
further promotion of new entries and emergence of the diversified "competitive
axis."
(2) In order to stimulate the facilities-based competition by promoting new
entries, it is necessary to prepare an environment tailored to further diversification
of local loops and trunk networks regardless of wired/wireless or fixed/mobile
networks. In addition, it is vital to promote service competition by opening
functions of access networks, etc.
2. Promotion of Pro-competitive Policies to Open up Networks
2-1. Resale for PSTN
(1) To identify and organize such items as: subject resale services; matters
pertaining to contracts; necessary activities for a resale carrier; opening
of the operation support system (OSS) enabling necessary activities for the
resale carrier; and major prerequisites for the system development.
(2) Based on the abovementioned organization, the result of NTT East/NTT West's
pro forma calculation of the costs pertaining to the system development is about
84 billion yen. However, the estimates of the development cost in various cases,
e.g., under certain conditions excluding the MYLINE (dialing parity) function,
the NTT East/NTT West's estimates are about 40 billion yen. The time period
necessary to develop the system is 2 to 3 years.
(3) The discount rate ranges from 17.6% to 27.0% according to the estimate wherein
the sales cost that is not included in the resale cost is excluded from the
total cost. In practice, however, the costs pertaining to the system development/operation
are to be added the estimate.
(4) Thus, carriers who wish to start the resale business shall request NTT East
and NTT West for the resale based on their own business judgment by taking into
account the abovementioned factors, and shall negotiate with the parties concerned.
When NTT East or NTT West declines to participate in the negotiation, the carriers
may request the administration to issue an order to start such negotiations.
In this case, the administration shall make a decision by taking into account
the merits of the resale for PSTN and the rapid changes in the environment surrounding
telephone services.
2-2. Relationship between Interconnection Charges and User Charges
(1) In order to make the interconnection charges more reasonable, it is appropriate
to examine the relationship between the interconnection charges and user charges
upon authorization for the interconnection charges. The same examination shall
be conducted in cases where a competitor, etc. submits complaints or opinions
or where the relationship between interconnection charges and user charges is
deemed to be unreasonable after notification of user charges is received.
(2) Internet-related services, in particular, DSL services, etc. shall be appropriate
as a subject for the examination.
(3) When the relationship between the interconnection charges and the user charges
is inappropriate, it shall be deemed adequate to reduce the interconnection
charges in principle. In addition, upon examination, the current status of the
price competition in the market and trends in the market shares of NTT East
and NTT West shall be taken into account.
2-3. Access to OSS
(1) With respect to access to the OSS (Operation Support System), the issues
to be discussed in depth are i) an automatic notification system of the conformity
confirmation result, ii) automatic notification of names of services not to
be shared with DSL services, iii) automatic notification of telephone subscribers'
information [i), ii) and iii) above are for DSL services], iv) disclosure of
detailed information on the schedule of interoffice transmission optical line
facilities construction, v) disclosure of information on the number of interoffice
transmission optical line facilities unable to be interconnected, vi) disclosure
of information on a specific plan such as floor expansion of buildings [iv),
v) and vi) above are for interoffice transmission optical line facilities],
vii) disclosure of information on the approximate period required for interconnection,
viii) disclosure of information on the different route, and ix) disclosure of
information on the arrangements and progress of the construction work of local
optical line facilities [vii), viii) and ix) above are for the local optical
line facilities].
(2) The methods of cost sharing among carriers including NTT East and NTT West
shall be in accordance with the benefit principle as a general rule.
(3) With respect to the disclosure of telephone subscribers' information and
personal information protection, NTT East and NTT West shall stipulate in the
tariffs that they may disclose telephone subscribers' information to carriers
interconnected, and make said tariffs public. However, in cases where a telephone
subscriber clearly stipulates that he or she does not want proprietary information
to be disclosed NTT East and NTT West shall ensure that measures are taken to
prevent the disclosure of such information.
3. Measures to Deal with Structural Issues
(1) It is important to flexibly deal with changes in the market, monitoring
i) the implementation situations of fair competition promotion measures including
the preparation of the asymmetrical regulation, etc., ii) the implementation
situation and the results of the coming competition rules, iii) whether firewall
measures are observed by NTT East and NTT West since reorganization; at the
same time, watching the progress in competition in the local telecommunications
markets from various aspects.
(2) In addition, with regard to structural-separation pro-competitive policies
(structural separation of wholesale/retail units held by NTT East and NTT West),
careful deliberations thereon shall be continued, taking into account of the
merits/demerits and trends in foreign countries.
Chapter 3. Improvement of Consumer Protection Administration
1. Significance of Consumer Support Measures and Current Status Thereof
(1) In order to maximize consumer benefits through the very significant expansion
of service availability for users derived from development of competition in
the telecommunications market, consumers are encouraged to make a rational choice
by eliminating information asymmetry against telecommunications carriers, at
the same time, an appropriate safety net should be prepared that immediately
remedies troubles involving consumers.
(2) At present, along with the widespread deployment of advanced and diversified
telecommunications services among Japanese people, troubles involving consumers
concerning Internet-related services, etc. are increasing. The number of consultations
and complaints filed with MPHPT, the National Consumers Affairs Center of Japan
and other related organizations is also increasing.
(3) To this end, comprehensive consumer support measures in the telecommunications
field shall be strengthened. MPHPT shall i) formulate comprehensive policies
for consumer support, ii) introduce and apply necessary institutional frameworks,
and iii) make collaborative efforts with the relevant ministries and organizations.
Telecommunications carriers shall promote appropriate approaches in establishing
a consumer support system and adopt strengthened measures.
2. Specific Measures to Strengthen Consumer Support
(1) One priority that needs to be addressed is the development of capable persons
able to help consumers make a rational choice concerning a variety of rapidly
changing telecommunications services, and give consumers advice that contributes
to solving troubles concerning telecommunications. To this end, MPHPT, telecommunications
carriers, etc. shall cooperate with the National Consumers Affairs Center of
Japan or local governments to foster expertise for them on telecommunications
consultants, etc. who provide counselling for consumers. In addition, in order
to promote widespread use of IT by Japanese people, introduction of a system
to certify "communications service planners" by the private sector
will be useful; thus, a conference consisting of interested parties to deliberate
upon the practical system shall be established.
(2) In order to promote the diffusion of information that helps consumers in
choosing telecom activities, telecommunications carriers and telecommunications
carriers associations shall develop industrial self-regulation guidelines containing
items to be informed to consumers of new services that are deemed to have a
social impact, in particular best-effort type services. As for MPHPT, there
is a need to improve the provision of information to consumers via its website,
etc., such as a portal site function to provide a variety of IT information.
Furthermore, upon conclusion of a contract pertaining to telecommunications
services, appropriate frameworks that ensure explanation of important items,
etc. to consumers shall be studied further.
(3) In order to activate consumer counselling procedures, with regard to the
submission system of complaints/opinions and dispute-settlement systems as provided
for under the Telecommunications Business Law, there is a need to promote effective
use of those systems and ensure transparency thereof, such as publication of
dispute resolution manuals by MPHPT. It is essential to strengthen collaboration
among relevant organizations through establishment of a liaison committee on
a regular and on-going basis consisting of MPHPT, the National Consumers Affairs
Center of Japan, telecommunications carriers, consumer groups, etc. In addition,
there is a need to conduct a study by the government and telecommunications
carrier associations on the establishment of a counselling unit to accept complaints
and consultations on telecommunications; in this case, step ahead measures such
as ADR (alternative dispute resolution: i.e., mediation, arbitration, etc.)
functions shall be put in perspective.
(4) Where flexible regulatory frameworks are introduced, with respect to consumer
support measures in the telecommunications field, industrial voluntary efforts
to support consumers shall be strengthened based on the concept of compliance
practice. To this end, industrial self-regulation guidelines shall be developed
by telecommunications carriers, in collaboration with telecommunications carriers
associations and the administration.
Chapter 4. Direction of New Competition Frameworks
1. Changes in Market Environment and Necessity of Reviewing Competition Frameworks
(1) The present categorization of Type I and Type II telecommunications businesses
has been a basic structure of competition frameworks in the telecommunications
business field. This categorization based on a clear standard has effectively
promoted competition to date.
(2) However, corresponding to the recent changes in market structures and network
structures brought about by the development of IP and broadband and the emergence
of new business models, the time is ripe to comprehensively review the present
competition frameworks.
2. Basic Viewpoints Related to Review of Competition Frameworks
Upon examination of new competition frameworks in the telecommunications business
field, the following three points shall be recognized as basic viewpoints:
(1) Lowering the overall level of regulation in order to encourage competition
through the emergence of diversified business models, freely combining a variety
of networks and services;
(2) Creating systems for supplementing market mechanisms from the viewpoint
of ensuring fair competition and protecting consumers (business model neutrality
and technological neutrality are necessary); and
(3) Ensuring due process and transparency.
3. Desirable New Competition Frameworks
(1) With regard to desirable new competition frameworks, it is necessary to
examine the fundamental regulatory frameworks, such as entry/exit regulations
and public utility privilege (namely, rights-of-way; "ROW" hereinafter)
directly linked with the entry regulations; at the same time, other existing
systems (regulations on services for end users, interconnection rules, ensuring
universal service, telecommunications number, technical standards, essential
communications, etc.) shall be comprehensively and systematically examined.
(2) Regarding the entry regulations, the present Type I and Type II business
categories shall be abolished, and the entry regulations shall be drastically
relaxed (abolition of permission system pertaining to Type I business). Further
studies including legislation are necessary to fix the entry regulation systems
(enabling business entry by registration or notification), considering that
measures to ensure fair competition and protection of consumers shall be taken
prior to the new entry when necessary.
(3) However, the General Type II business may be started only by notification
under the present system. Even under new regulatory frameworks, special treatment
shall be given to carriers with a negligible social impact, for example, enabling
such carriers to enter only by notification.
(4) As for ROW, in order to facilitate smooth deployment of network infrastructure
by telecommunications carriers, it is necessary to remain the system of granting
the right. In specific, further studies shall be made on the introduction of
a new scheme to grant ROW based on application from carriers after examination
of business plans by amending the present systems where ROW is directly linked
with the entry regulations, taking into consideration consistency with other
laws and regulations.
(5) With respect to market exit regulations, permission for changes of business,
and transfer/takeover, merger/break-up, inheritance of business operations,
it is appropriate to shift from the present permission/authorization systems
to notification systems. However, along with the shift of the market exit regulations
to prior notification systems, obligation of prior announcement to users on
market exit shall be studied.
(6) With regard to not-for-profit telecommunications business (e.g., run by
local public entities, etc.), there is a need to study on imposing minimal regulations
such as ensuring of secrecy of communications and conformity with technical
standards.
4. Matters to Be Studied in Line with Shift to New Frameworks
(1) In line with abolition of Type I and Type II businesses categories, the
entire structure of the Telecommunications Business Law shall be reviewed. In
particular, as for services for end users, regulatory frameworks shall in principle
be considered separately from networks, so that each carrier can flexibly offer
services.
(2) Specifically, it is appropriate that in principle obligation to establish
charges/tariffs for providing services shall be lifted and contracts are to
be concluded through negotiations between parties concerned. However, from the
viewpoint of consumer protection, mechanisms for ensuring sufficient provision
of information to users on contract, and issuing orders to improve business
activities or to change charges shall be required.
(3) In addition, with regard to dominant carriers with market power, obligations
shall be imposed, to establish charges/tariffs of the services where said carriers
are assumed to have market power, and to provide said services based on said
charges/tariffs. However, contracts pertaining to said services based on negotiations
are also to be allowed. Furthermore, in order to open up platform functions
such as authentication and charging inseparable from said services, necessary
measures shall be studied.
(4) It is necessary to define each appropriate sub-market, taking into consideration
features and substitutability of each service in end user service markets, and
to evaluate market powers in said sub-market. As for desirable scheme of regular
effective competition review (market analysis), a specialist panel shall be
established for detailed study. In addition, the regulatory authority shall
be empowered with strengthened and improved market monitoring functions.
(5) With respect to interconnection rules, rules focusing on bottleneck facilities
indispensable for other carriers to interconnect are still essential. However,
the coverage and regulatory measures on designated facilities shall, if necessary,
be reviewed based on the progress of competition in the market.
(6) With regard to ensuring of the universal service, assignment of telecommunications
numbers, conformity with technical standards, ensuring of essential communications,
etc., desirable regulatory frameworks for maintaining and ensuring those schemes
shall be studied further. The technical standards shall be reviewed comprehensively,
fully taking into account the diffusion of best-effort type services.
Chapter 5. Toward Development of New Pro-Competitive Policies
(1) It is desirable to construct new regulatory frameworks where the present
Type I and Type II businesses categories are abolished so that carriers can
freely deploy their business and problems in light of fair competition and consumer
protection can be immediately eliminated.
(2) To this end, the government shall start i) drafting a necessary bill to
amend relevant laws concerning new competition frameworks right away, and ii)
studying more concrete measures of effective competition review, new methods
for assigning telecommunications numbers, comprehensive review of the technical
standards, etc.
(3) It is necessary to improve consumer protection administration as combined
policies with pro-competitive policies. Thus, the establishment of a conference
concerning a qualification system for supporting consumers, the development
of industrial self-regulation guidelines by telecommunications carriers associations,
etc. shall be studied without delay.
(4) The highest strategic priority shall be given to the development of the
telecommunications market in order to promote Japan's structural reform and
improve its international competitiveness. In addition to the radical transformation
of the abovementioned pro-competitive policies, there is a need to develop new
comprehensive IP policies from multifaceted perspectives including i) promotion
of R&D including realization of a ubiquitous environment, ii) promotion
of widespread deployment of broadband platforms without uneven distribution,
and iii) tie-up and collaboration for enhancing international competitiveness
among the government, academia and industry, etc.