December 24, 2019 Results of Appeal for Opinions on Draft Ministerial Ordinance, etc. for Partial Revisions of Regulations for Enforcement of the Telecommunications Business Act and Interconnection Tariff Relating to Category II Designated Telecommunications Facilities, along with Report from the Information and Communications and Posts Administrative Council

The Ministry of Internal Affairs and Communications (MIC) made an appeal and a re-appeal for opinions on a ministerial ordinance and pertinent conditions to make partial revisions to the Regulations for Enforcement of the Telecommunications Business Act, to introduce the future cost accounting method to category II designated telecommunications facilities. As a result, MIC received eleven opinions and five opinions in response to the appeal and re-appeal for opinions, respectively. Accordingly, MIC has decided to open the submitted opinions to the public, along with MIC’s views on the opinions.
Furthermore, MIC has received a report today from the Information and Communications and Posts Administrative Council stating its approval as inquired to a ministerial ordinance and pertinent conditions to the partial revision of the Interconnection Tariff Relating to Category II Designated Telecommunications Facilities. With consideration of the report, MIC will promptly revise the ministerial ordinance and related conditions.

1. Outline of draft Ministerial Ordinance

The institution for category II designated telecommunications facilities adopts historical cost accounting to calculate interconnection charges based on actual costs, profits, and actual demand values. However, despite interconnection charges being the primary cost of providing mobile virtual network operator (MVNO) services, final payments are not finalized until the end of the current or next year. It has been pointed out that MVNOs have not been able to ensure predictability, which has hindered appropriate cost management. Besides, when the connection fee is declining, provisional payments will be made at a relatively high interconnection rate based on the actual values, such as the cost of the previous two years. Therefore, it has been pointed out that MVNOs have an excessive cash flow burden.
Otherwise, the future cost accounting method, which is adopted for category I designated telecommunications facilities, calculates interconnection charges based on projected costs, profits, and demand values. Accordingly, interconnection charges are calculated on the basis of reasonable forecasts. Therefore, MVNOs will have the advantage of improving the predictability of interconnection charges for the present fiscal year, eliminating the need for payment based on the actual value of the previous two years and reducing the cash flow burden. If interconnection charges for multiple years in the future are calculated, further improvements in predictability are expected.
The revisions will make significant institutional development to apply interconnection charges for data transmission exchange in the future cost accounting method to category II designated telecommunications facilities in and after fiscal 2020 for ensuring fair competition between category II designated business operators and MVNOs.

2. Results of appeals for opinions and report

MIC made an inquiry to the Information and Communications and Posts Administrative Council about the partial revision of the Interconnection Tariff Relating to Category II Designated Telecommunications Facilities (Inquiry No. 3123 of September 27, 2019)
In this connection, MIC made an appeal for opinions from Saturday, September 28 through Monday, October 28, 2019, on a draft ministerial ordinance concerning the said partial revision, along with pertinent draft ministerial ordinance, conditions, etc. and received eleven opinions. Furthermore, MIC made a re-appeal for opinions from Thursday, October 31 through Wednesday, November 13, 2019, regarding the submitted opinions, and received five opinions.
MIC has today received a report from the Information and Communications and Posts Administrative Council stating its approval as inquired with consideration of the results of the appeals of opinions.

3. Future plan

MIC will promptly revise the Interconnection Tariff Relating to Category II Designated Telecommunications Facilities on the basis of the report.