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Japan Telecom Co. is considering entering the local telephone business as early as next year in major cities such as Tokyo, Nagoya and Osaka, with rates lower than those offered by its rivals, it was learned Tuesday.

According to sources close to the carrier, the firm, which is closely tied to the Japan Railway group, hopes to set its rates lower than the 10 yen per three minutes charged by Nippon Telegraph and Telephone Corp. and the 9 yen per three minutes set by Tokyo Telecommunication Network Co. (TTNet).

Japan Telecom will aim to expand the service after establishing it in the larger cities, the sources said.

At Tuesday’s regular press conference, Japan Telecom President Haruo Murakami said the firm has not reached a final decision on entering the local call market.

“We want to offer one-stop, global and seamless services from end to end,” Murakami said.

Even if the local access business generates some losses, Japan Telecom wants to enter the market to make itself a “total communication company,” he said.

He also indicated that local charges for end-users would probably be less than NTT’s rate of 10 yen per three minutes, noting that anything higher would “‘not be very attractive” to consumers.

Observers said that if Japan Telecom widens its local call service nationwide, it could crack the effective monopoly enjoyed by NTT in domestic telecommunications.

This in turn could lead to greater competition that would further reduce call rates and increase the level of services offered, they added.

According to Japan Telecom sources, the company plans to pay connection fees to NTT and use NTT’s local networks to link customers to Japan Telecom converters. Once the call reaches the converter, Japan Telecom will use its own communication lines.

The sources added that Japan Telecom believes it highly likely that cuts in NTT’s connection fees would be accelerated by bilateral negotiations between Japan and the United States on the issue, therefore making its plan feasible.

The U.S. is demanding NTT reduce its connection fees, which it maintains are too high, by 22.5 percent in two years and 40 percent soon after. The two nations hope to strike a deal when Prime Minister Yoshiro Mori meets President Bill Clinton on the sidelines of the July 21-23 Group of Eight summit in Okinawa.

The move comes before the introduction in May of the so-called presubscription system, under which users will be able to select the telephone firms they want to use for their local, long-distance and international telephone services.

By entering the local call market with lower rates, Japan Telecom hopes to expand its customer base. The firm currently offers long-distance calls under the 0088 prefix and international calls under the 0041 prefix.

As for NTT, the entry of Japan Telecom into the local call business would likely subject it to heated competition and increase calls for revision of the NTT Law, which the nominally privatized behemoth says is too rigid to let it compete, observers say.

Another potential competitor, KDDI, a firm to be created through the merger of DDI Corp., KDD Corp. and IDO Corp. in October, also plans to enter the local call business.

TTNet, which began offering local calls at rates of 9 yen for three minutes in January 1998, has done fairly well in the Kanto region, winning slightly more than 10 percent of the market.

Kyushu Telecommunication Network Co., or QTNet, began offering the same rates in Kyushu in April 1999, however, because the services of these two firms were limited to specific regions.