The government and the ruling coalition are considering urging the two regional arms of telecom giant Nippon Telegraph and Telephone Corp. to merge in spring 2002 -- less than three years after they were split -- according to coalition sources.

The sources said the government may present to the ordinary session of the Diet early next year a bill to revise the NTT law that would allow NTT East Corp. and NTT West Corp. to merge.

If the bill clears the Diet, the two NTT regional arms, created in July 1999 under the reorganization of the Japanese phone giant, would be reunited by spring 2002.

Work on drafting the bill will start next Tuesday, when the Telecommunications Council, a ministerial advisory panel, starts debate on competition policy in the telecom industry by its special subpanel, they said.

Behind the move were growing perceptions among top policymakers that there is an urgent need to reduce telecom costs to promote an information-technology strategy advocated by Prime Minister Yoshiro Mori's Cabinet.

"It is essential to cut telecom costs via the reunification (of NTT East and NTT West)" so that dramatic cost-cutting and streamlining will be made possible for NTT, a senior ruling party official said.

But it is likely to trigger opposition from NTT's rivals, who worry that the dominant position of NTT may be strengthened if its regional arms merge again after only one year as separate entities, industry sources said.

The merger would also run counter to a proposal by a trade ministry advisory panel that NTT's monopoly of the local telephone network be terminated in order to promote competition and bring down telecommunications costs.

In a report earlier this month, the Industrial Structure Council's subpanel on information and economy said dismantling NTT's monopoly will increase competition in Japan's telecommunications market.

The government would also want the reunification because it must live up to the agreement it made last month with the United States that it will cut NTT's interconnection rates substantially.

Tokyo promised Washington that the fees NTT charges its rivals for access to its local networks will be cut by 20 percent within two years and that the formula to calculate the rates will be reviewed in the third year.