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Posts minister now suggests that 22.5% cut in less than three years possible Japan on Friday offered a compromise in the long-standing dispute with the United States over telephone connection rates, bringing the two nations closer to resolving the bilateral trade row before the upcoming Group of Eight summit in Okinawa Prefecture.

Posts and Telecommunications Minister Eita Yashiro told a news conference that Tokyo is ready to accept a reduction of 22.5 percent over a period of one to three years in interconnection fees charged by NTT Corp. instead of an identical cut over four years.

The concession effectively meets Washington’s demand that the rates be cut by 22.5 percent in the first two years and the reduction be raised to 41.1 percent in the following two years.

Japan should cut the rates earlier than originally planned in light of NTT’s better-than-anticipated earnings results for fiscal 1999, Yashiro said.

The minister effectively acknowledged that Tokyo’s reasoning until now for rejecting the U.S. demand — that the financially squeezed NTT would be further hurt by a drastic cut in the hookup rates — does not hold water.

In a recent interview, Deputy U.S. Trade Representative Richard Fisher said the U.S. would be flexible in upcoming talks in Tokyo next month if Japan softens its stance first.

The latest concession is expected to provide impetus for an early resolution of the dispute at expert-level talks set for July 10 and a sub-Cabinet-level meeting scheduled for July 15.

In Washington, U.S. Trade Representative Charlene Barshefsky told reporters the previous day that she wants to visit Tokyo in July to resolve the issue.

Japan had previously refused to budge from its originally proposed 22.5 percent cut in fees levied by NTT on other carriers for use of its local networks.

The U.S., demanding a deeper 41 percent cut over a shorter period, has threatened to file a complaint over the issue with the World Trade Organization unless Tokyo compromises by July 28.

Washington recently offered to break the deadlock, proposing a 41.1 percent cut over four years, including a 22.5 percent reduction in the first two years.

Tokyo apparently yielded to Washington’s demand, as it does not want the NTT issue to overshadow the Okinawa G8 summit, which has the promotion of information technology as the top item on its agenda.

Fisher said Japan, as chair of the July 21-23 G8 summit, would be in an “awkward” position in Okinawa if the issue is not settled in time for the event.

A reduction in NTT’s hookup rates is part of comprehensive deregulatory talks between Japan and the U.S. The dispute over the issue has prevented the two countries from compiling a second joint report on a comprehensive deregulation package by the end of March this year.

NTT brightens outlook

Two local call companies of NTT Corp. on Friday revised upward their midterm financial predictions for fiscal 2000-2002, attributing the revision to recent unexpected surges in customers accessing the Internet.

The sharp increase in the predicted profits are expected to affect coming negotiations between Washington and Tokyo over NTT’s connection charges because the NTT group had cited poor financial earnings in an earlier prediction as a reason to refuse a U.S. proposal for deeper cuts.

NTT East revised its pretax profit predictions from 18 billion yen to 44 billion yen for fiscal 2000, from 61 billion yen to 82 billion yen for fiscal 2001, and from 90 billion yen to 109 billion yen for fiscal 2002.

NTT West likewise revised predicted pretax losses from 99 billion yen to losses of 67 billion yen for fiscal 2000, from losses of 33 billion yen to 18 billion yen for fiscal 2001, and predicted profits of 22 billion yen for fiscal 2002 against profits of 10 billion yen in the earlier prediction.

The revisions are based on better-than-predicted reports for fiscal 1999 as NTT East posted a 27.7 billion yen improvement in pretax income and NTT West a 26.9 billion yen increase from the earlier prediction.

NTT East said local call profits increased by 14.9 billion yen thanks to increases in dial-up calls to Internet service providers and other reasons.

Basic monthly fee income also increased by 3.1 billion yen due to a surge in sales of integrated services digital network (ISDN) lines, which are mainly used for Internet connections, NTT East said.

At a press conference Thursday, NTT officials said a U.S. proposal to cut connection charges by 22.5 percent in two years is still unacceptable because it will push NTT West deep into the red.

Eita Yashiro, posts and telecommunications minister, suggested earlier in the day that the government may strike a compromise for a 22.5 percent cut over between one and three years.

But NTT officials said a cut over three years would still be unacceptable, claiming that NTT West will suffer pretax losses in 30 billion yen even in 2002, NTT’s target year to get NTT West back in the black.

New generation mobiles

The Posts and Telecommunications Ministry on Friday authorized three mobile phone operators to offer the next-generation IMT-2000 format service, which features high-speed image and video transmission.

Mobile phones using the IMT-2000 format have the sound quality of conventional land-based phone lines.

The three operators are NTT DoCoMo Inc., the nine-company J-Phone group and an alliance between DDI Corp. and IDO Corp.

NTT DoCoMo and the J-Phone group will adopt the W-CDMA technology platform widely used in Europe. The two plan to offer the new service initially in Tokyo, Osaka and some other areas in 2001.

The DDI-IDO group will start the new service in Tokyo, Nagoya and Osaka in fall 2002, using cdma2000 technology developed by Qualcomm Inc. of the United States.