Economist says reform plans neglect telecom sector

The government’s deregulation package has gone through its second and final revisions, but little progress has been made in the area of telecommunication services, said Tsuruhiko Nanbu, a professor of economics at Gakushuin University.

“As far as the telecommunications sector is concerned, no drastic changes will take place as I see no notable deregulatory measures in the government’s package,” he said.

As one of the “salient” deregulatory measures in the telecommunications sector, the government has touted the abolition of foreign ownership in Japanese telecommunications companies, except NTT and KDD. The move, which was made in response to a recent telecommunications accord at the World Trade Organization, aims to enhance competition by opening the Japanese market to foreign competitors.

Such a measure alone, however, cannot produce its intended result, according to Nanbu. “U.S. and European carriers are surely interested in the Japanese telecommunications market, which they regard as a potentially lucrative one,” he said. “But they would not come to Japan simply because restrictions over foreign ownership are removed.”

With a number of other regulations intact, they still find it troublesome to operate in Japan, he added. Although the government’s package calls for the removal within six months of restrictions over new entries to telecommunications businesses, Nanbu pointed out that restrictions on withdrawal will stay. “That’s complete nonsense,” he said. “You will naturally hesitate to enter a new business if you are told that you are not free to get out of it.”

Simply put, he said, the range of deregulatory measures proposed for the telecommunications sector lacks the impact necessary to produce change. “A deregulatory measure can be called effective only when its impact is felt by those in the private sector, making them realize a clear shift in the government’s stance and leading them to change their strategy,” he said. “I don’t expect that any Japanese telecommunication companies will change their business strategy because of this government package,” he said.