A Permanent Organization Needed for Handling Telecommunications Disputes: Part 3

Hajime YAMADA (Professor of Economics, Toyo University)

Time to Conclude Discussions on Access Charges

The Information and Communications Deliberative Council recently created a draft report stating that the Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHMT) should promote reduction of telephone services access charges. It was released on August 1st to solicit public comments. The proposal for reduction was examined at the Council as a part of the prescribed procedure prior to approval, because the access provisions for both Nippon Telegraph and Telephone (NTT) East Corporation (NTT East) and NTT West Corporation (NTT West) are subject to approval by the Minister of Public Management, Home Affairs, Posts and Telecommunications.

Access charge problems arise when a call involves two or more business entities, such as new entrants, NTT East and NTT West, regarding how fees from users should be divided. Therefore, these issues should be discussed among the enterprises concerned, and the Dispute Settlement Commission should only be consulted if any discord arises. Article 88 of the Telecommunication Business Law clearly states as follows: The Dispute Settlement Commission shall mediate between the businesses concerned when they cannot agree on issues of cost-sharing, access conditions, or other details upon reaching an agreement on connections of telecommunications facilities.

However, these issues actually are discussed by the Information and Communications Deliberative Council, an advisory body to the Minister. In spite of the prescription in the Telecommunications Business Law, the Dispute Settlement Commission is left totally in the dark about access charge issues under the present circumstances.

Meanwhile, the access charge issues have been on the agenda for Japan-U.S. Telecommunications Negotiations since the mid-1990s. The Negotiations are planned to resume this fall. Invitation of public comments prior to the Negotiations was intended to sound out the United States beforehand, and as was expected the U.S. government commented that the access charge in Japan is too high compared with other countries.

Issues of access charge were submitted to the Council for the first time on March 27th. After four months a draft report was released. A time line now has been arranged for the issues to be negotiated between Japan and the United States in the fall, and at last the access charge will be settled in the winter.

Access charges affect the basis of management of the telecommunications business. The access charge that a new entrant pays NTT East and NTT West account for the largest cost item for the company when the company provides telecommunications services. The final profit and loss accounts of NTT East and NTT West could possibly change from the red to the black, depending on the incoming access charge. Eight months is too long a time for modern corporations to take to determine such an important matter. It is irresponsible, because no management forecast can be established in this way. In the "dog years" of the high technology industry, technology innovation progresses several times faster than other industries. But management also must catch up to speed. As it is, decisions are being made at a snail's pace.

In the first place, it sounds unnatural and peculiar that an access charge issue among Japanese private sectors would become a subject of diplomatic negotiation between the governments of Japan and the United States. Having long been wondering about this, I recently had a chance to get in touch with competent sources of the United States Trade Representative (USTR) and the Federal Communications Commission (FCC), including others, in the United States to collect primary source information from an academic point of view. As I expected, their responses amounted to a demand for establishment of an independent regulatory organization.

With regulation and promotion of industry coexisting in the MPHPT, national benefits cannot be realized because of the conflict of interests, similar to an individual serving as an umpire and a manager at the same time. In the United States, a definite division of roles has been established so that the FCC functions as a regulator, while the Department of Commerce and other offices take charge of promotion of industry. The persons I met with in the US are asking that Japan establish such an independent organization for regulation.

Toward Establishment of an Independent Regulatory Organization

Establishing an independent regulatory organization seems to be the ultimate solution for a series of telecommunications issues.

The Dispute Settlement Commission should be drastically fortified to become an independent regulatory organization. In particular, careful selection must be made in order to appoint full-time (not part-time) Commissioners who thoroughly know telecommunications. A wide range of specialists, including technology experts, should support them.

The mission of this organization is to draw up and implement a minimum of necessary regulations to promote competition in the market. It should become an organization that makes a routine study of where competition exists in the market, and take prompt actions against any events that would impede competition. In this way, discretionary administrative factors can be reduced. Also, by appointing both jurists and technologists, the organization will have the right insights into the essentials to resolve even the latest technological issues such as wireless Internet access.

Regarding the access charge, the basic provisions should be specified by the law, while leaving the rest to the initiatives and negotiations of the business corporations. If any disputes arise, this new regulatory organization can promptly handle them. In this way, normalization can be materialized without political issues such as the Japan-U.S. negotiation.

It was only two years ago when the international procurement problem of NTT was brought to an end. The problem had been on the agenda of the Japan-U.S. negotiations in the early 1980s, which dates back to the era of the former Nippon Telegraph and Telephone Public Corporation. Since then not only paradigms of the industry, but also other situations have drastically changed, including privatization of NTT. Once an economic issue is taken into the political world, the industry loses healthy axis for development, because the politics require a long time to deal with the changing environment. In Japan-U.S. negotiations, a disgraceful circumstance occurred when some politicians tried to adjust a matter just before the Okinawa Summit, resulting in a noisy farce. Fortunately, now that procurement problems were solved, the pending questions between Japan and the U.S. are only those concerning access charges and establishment of an independent regulatory organization.

If we can reinforce functions of the Dispute Settlement Commission and acquire its independence, not because of foreign pressure but because of our own decision, Japan will make a further stride toward the information society. As a result, we can bring this overly long negotiation to an end at last. If we consider an appropriate organization by ourselves, the U.S. will not force an FCC-style regulatory organization upon Japan. Moreover, administrative transparency will increase by publicized discussions.

Both the business and technology of telecommunications have become much more complicated because of the shift from the era of telephone to the Internet. It is the very reason that the government needs to establish a firm organization with a certain scale in order to make good decisions.

(Part 3 of an English version of the author's Japanese article that appeared in the October 1, 2002 issue of "Economist," published by Mainichi Newspaper Co.)