With the trade dispute between the United States and Japan over connection fees charged by NTT Corp. resolved, focus has now shifted to how the nation's telecom giant should be structured in the long term.

Although negotiations lasted until just days before this weekend's Group of Eight summit in Okinawa, a compromise on Japan's part was clearly made easier by the NTT group's announcement in May of its better-than-forecast earnings for fiscal 1999.

NTT had initially insisted that the group could not cut connection fees by 22.5 percent in two years, as the U.S. government was demanding, saying it would force NTT West, which services more rural areas than NTT East, deep into the red.

But May's financial results for fiscal 1999 showed that NTT West posted pretax losses of 43 billion yen against earlier projected losses of 70 billion yen, which led NTT West to also revise upward financial projections for fiscal 2000, 2001 and 2002.

The better-than-expected earnings made it possible for the Japanese government to offer a greater cut without losing face. The focus of the negotiations has become how much and how fast -- not if -- the charges should be reduced, observers said.

Another issue that had been spotlighted during public debates over the connection fee issue was how the NTT group should be structured.

Some ruling lawmakers and NTT executives have recently stepped up their campaigns calling for a revision of the NTT group in order to grant more freedom to NTT's two local-calling firms, if the connection charges are to be cut as deeply as the U.S. is demanding.

Japanese government officials have staunchly argued that the two are separate issues and that the possible reorganization of the NTT group should be debated in the future.

But a senior Posts and Telecommunications Ministry official admitted that the connection fee issue has given the ministry an opportunity to launch a thorough review of the telecom giant, with an eye toward reforming NTT's and the nation's telecommunications infrastructure.

"It's true that (the connection fee issue) created an opportunity to review (the NTT group)," he said.

The ministry plans to convene a meeting of its Telecommunications Council on July 26 to commission the advisory panel to start discussions on how domestic telecom firms should be structured in the long term.

The panel's discussions are expected to cover such issues as whether and in what way the NTT group should offer universal services in both urban and rural areas, and the reorganization of its group firms NTT East, NTT West and NTT DoCoMo Inc.

The senior official said the future shape of the NTT group itself was not a major issue during the bilateral negotiations over connection fees, despite an NTT executives' call for the two issues to be linked.

"I don't think the U.S. government hopes for a revision of the NTT law," he said, adding that Washington probably doesn't want to give more freedom to the NTT group because it could make it more competitive.

Many parties, however, are calling for revisions of the law for various reasons, with some calling for regulations to weaken the NTT group and others calling for deregulation to strengthen it.

For example, NTT's opponents, most notably DDI Corp. President Yusai Okuyama, are strongly calling for a complete split of the NTT group firms, including the division of NTT DoCoMo into several regional companies.

Many scholars also agree that the rules which allow competitors to use NTT's infrastructures should be made clear to promote domestic competition, and oppose giving a free hand to the telecom giant via NTT law revisions.

The Clinton-Mori summit was scheduled to close with the formal confirmation of the agreement on the connection fee reduction.

But the process of reforming the nation's telecom industry and the NTT group has just begun, with a bumpy road lying ahead of the many parties involved.