Deregulating the telecom industry

An experts’ panel at the Internal Affairs and Communications Ministry has started reviewing the anti-monopoly regulations covering the NTT group and is expected to issue a report by the end of November. Members of the panel should carefully study the merits and demerits of easing regulations on the industry giant.

The bottom line of the review should be how to maximize convenience for users. The panel should find ways to strengthen Japan’s information and communication technology infrastructure so that service providers become more competitive and offer better services at lower cost.

NTT has told a hearing that while current regulations effectively ban companies in the group from forming exclusive business tieups with specific firms, it could enter alliances with companies in various sectors such as automobile, education and medical services if the ban were eased.

But rival telecom groups KDDI and SoftBank have argued that the NTT group’s grip on the market is still so strong that such deregulation would run counter to fair competition.

While the NTT group’s share in the mobile phone market has fallen below 50 percent in recent years, it continues to dominate more than 70 percent of the fixed optional lines market. At the same time, the panel needs to look at not only domestic market conditions but also the rapidly globalizing competition in the telecommunications business.

SoftBank, with its purchase of Sprint Nextel Corp., the third-largest U.S. wireless provider, now has some 100 million customers in Japan and the United States combined.

Behind the start of the review, the first of its kind in three years, is the government’s forecast that the volume of telecommunications traffic in Japan will sharply rise in the years leading up to the 2020 Summer Olympic Games in Tokyo. Even today, radio wave bands for mobile phone services are in short supply because of the rapid spread of smartphones, which handle large volumes of data.

On the other hand, NTT group’s optical lines network are not used to full capacity. So it is logical to seek closer links between mobile phone services and optical lines.

KDDI, operator of the au service, and SoftBank are offering discounts to users who subscribe to packages of their smartphone and fixed-line services. Current regulations prevent the NTT group from offering the same.

If the NTT group were allowed to bundle discounted packages of this kind, use of the optional line networks of NTT East and NTT West by subscribers to NTT Docomo’s smartphone users would likely increase. And if smartphone subscribers could use optical lines or wireless local area networks when calling from inside buildings, wave-band congestion for smartphone services would be alleviated.

The deregulation of NTT’s business is not the only point of discussion by the review panel. Another important issue is how to lower fees for smartphone services, which remain high as the domestic market is dominated by the major carriers. A package discount for customers of NTT Docomo might help lower the overall level of smartphone service fees.

In April, major retailer Aeon Co. started offering discounted smartphone sets and services by renting network infrastructure from a major carrier. By limiting services to minimal functions such as mobile communication and Internet browsing, the retailer is able to offer a monthly fee roughly half that of major mobile providers. The panel should consider how to encourage such mobile virtual network operators.