December 18, 2020 Organizing Study Group on Operation of Price Cap System

The Ministry of Internal Affairs and Communications has decided to organize a study group on the operation of the price cap system in order to examine and organize matters to be kept in mind when calculating the expected rate of productivity improvement (X-factor) required for setting a standard fee index indicating the maximum rate level (price cap) for subscription telephone services.

1. Purpose

The maximum rate level (price cap) has been applied as a rate regulation since October 1, 2000, to charges related to telephone services, including subscriber telephone services, of Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and Telephone West Corporation (hereafter referred to as “NTT East/West”).
For setting the standard rate index that indicates the maximum rate, the expected rate of productivity improvement (X-factor) is to be calculated every three years based on a reasonable forecast of future costs. However, the application deadline of the current X-factor is the end of September 3, 2021, and it is necessary to calculate the new X-factor necessary for setting the standard rate index applied after October 1, 2021.
This study group examines and organizes matters to be kept in mind when calculating the X value.

2. Items to be studied

• 1.
  X-factor calculation method
• 2.

  Forecast of the income and expenses of services subject to the price cap, such as subscriber telephones

• 3.

  Management efficiency analysis of NTT East/West (study on the measurement method and actual measurement)

• 4.

  Concept of X-factor calculation based on 1 to 3.

• 5.

  Others

3. Schedule

The first meeting will be held on December 25, 2020 and will be held until the end of March 3, 2021.

4. Points to be kept in mind

This study group handles non-public information of businesses, and therefore, the meetings will not be disclosed.