Telecommunications has long been a contentious issue between the United States and Japan. This is because although Americans believe that the U.S. has the most advanced and most competitive telecommunications system in the world, market penetration in Japan for U.S. equipment suppliers and service providers has been extraordinarily low. This has been attributed to market barriers in Japan.
Telecommunications first emerged as a major bilateral trade issue in the late 1970s, when the U.S. -- as part of the GATT Tokyo Round government procurement negotiations -- pressed Japan to remove barriers to selling equipment to NTT. This was followed by negotiations in 1983 and 1984 on drafts of the Telecommunications Business Law, enacted in 1985. During my time at the Office of the U.S. Trade Representative in the late 1980s, the Japanese telecommunications market remained a high priority for the U.S., as reflected by negotiations in the MOSS (Market-Oriented, Sector-Selective) talks, IVANS (International Value-Added Network Services), cellular telephones, and third-party radios. Even after the World Trade Organization basic telecommunications services agreement was concluded in Geneva in February 1997, the U.S. and Japan negotiated a further opening of the international simple resale market.
Currently at issue are NTT's interconnection rates, which carriers pay NTT to pass traffic through NTT's network. Since NTT currently controls about 98 percent of local wireline subscribers in Japan, all new telecommunications carriers are forced to pass significant amounts of traffic through NTT's network.