Proposals to amend the telecom law being worked out by the government will probably not call for the dismantling of the current holding company structure of Nippon Telegraph and Telephone Corp., according to draft bills obtained Wednesday by Kyodo News.

This represents a major setback for proposals made by a government advisory panel in late December calling for the dissolution of the holding firm structure unless competition is enhanced in the telecommunications market.

In a report submitted to the then posts and telecommunications minister on Dec. 21, the Telecommunications Council encouraged NTT to work out a plan to promote competition among group firms to pass on benefits such as reduced phone charges to users.

If competition is not boosted two years after necessary amendments are made to the law governing the telecom giant, capital tieups among the group firms should be completely dissolved, the panel said.

But the Ministry of Public Management, Home Affairs, Posts and Telecommunications, which is preparing legal amendments based on the panel's report, opted not to include in the bills any specific clause calling for an NTT breakup, ministry sources said.

Instead, the draft bills expect NTT to "voluntarily" promote competition among the group firms.

However, it remains uncertain whether NTT is willing to take effective measures without any legal enforcement, as it fears that doing so could weaken its grip over its group firms and lead finally to the breakup of the holding company structure, industry officials said.

The draft bills also call for establishment of a panel to settle disputes among telecom firms over the use of NTT's facilities and networks.

But the dispute panel will probably not be as independent or have as much enforcement power as the Fair Trade Commission, the industry officials said, adding that the panel's effectiveness in resolving disputes could be questioned.

To help ensure fair competition, the draft bills also call for strengthened regulations over dominant telecom carriers with market shares of over 50 percent, such as regional phone operators NTT East Corp. and NTT West Corp.

Meanwhile, the draft bills would allow NTT East and NTT West to provide Internet access and enter the broadcasting business.

The draft bills also call for raising the limit on foreign ownership in NTT from the current one-fifth of shares to below one-third.

The ministry plans to submit the bills to the ordinary Diet session to be convened in late January after it obtains approval from the Cabinet in early March. It hopes the bills will clear the Diet before the end of the current fiscal year.