A fierce battle is raging within the telecom sector over whether the access fees charged by NTT firms for use of their telephone infrastructure should be raised.

Last month, the Public Management, Home Affairs, Posts and Telecommunications Ministry proposed that the charges paid by foreign and domestic carriers to NTT East Corp. and NTT West Corp. be increased, beginning in April.

A ministry advisory panel is expected to discuss the issue Friday.

Rival carriers, consumer groups, scholars and overseas governments claim the ministry's proposal would only benefit the two NTT firms. They say the hike would traduce the government's efforts to promote competition within the telecom sector, which has long been dominated by Nippon Telegraph and Telephone Corp.

But Satoshi Daigo, a University of Tokyo professor who served as a member of the advisory panel between 1996 and last January, believes the interconnection fee hike would hurt the two NTT firms as well as rival carriers such as KDDI Corp. and Japan Telecom Co.

"It would eventually push more people toward low-rate Internet Protocol telephone services and further decrease the traffic volume of fixed telephone lines," he said. "I think the ministry should freeze its plan for a year to thoroughly discuss problems concerning the current access charge setting system."

Under the telecom ministry's plan, the interconnection fee for a three-minute local call will fall about 3 percent from the current cost, to 4.37 yen. Meanwhile, the access charge for a three-minute long distance call will rise about 12 percent to 5.36 yen.

Consequently, the weighted average of the interconnection fees will increase about 5 percent.

In addition, the ministry's plan will impose an additional financial burden on carriers that use NTT fixed phone lines.

According to the proposal, should the traffic volume of fixed lines fall more than 15 percent from the previous year, carriers would be required to pay adjustment fees to the two NTT firms to cover the costs of managing the fixed lines.

The telecom ministry claims that a sharp decline in fixed-line phone calls in recent years is a major factor behind its proposal.

In fact, this traffic volume stood at 8.84 billion hours in 2001, a decline of 9.1 percent from the peak year of 2000. The change occurred as more people resorted to using mobile phone and IP telephony services, according to the ministry.

KDDI President Tadashi Onodera voiced concern over imposing additional burdens on telecom carriers.

According to Onodera, the new system will have a major impact on management, as it is impossible to predict traffic volume changes and calculate additional costs.

The proposed measures will also hit industry newcomers hard.

For example, Fusion Communications Corp., which launched long-distance call services in 2001, currently pays NTT 9.5 yen for every 20 yen three-minute call, while keeping the remainder as revenue.

An increase in access charges would narrow the firm's profit margin and could force it to increase its overall call rate, Fusion Communications President Tadahisa Sumida told a recent public hearing on the issue.

"The hike is disappointing. No new companies will opt to enter the telecom sector," Sumida said.

But NTT East and NTT West argue that they have faced hardship in recent years and claim that certain measures to reduce their burdens are essential.

Amid pressure from the United States, which viewed high access charges as an obstacle preventing foreign firms from entering Japan's lucrative telecom market, the government introduced a new method of lowering access fees and intensifying price competition among carriers in fiscal 2000.

The new method, known as the long-run incremental cost model, calculates access charges using a model cost, which is the cost when the most efficient equipment is used, instead of the actual cost that the NTT firms had incurred.

As a result, in the three years through fiscal 2002, interconnection fees for local telephone calls fell 9.1 percent and charges for regional calls dropped 37.5 percent.

NTT East and NTT West have complained that there is a huge gap between the actual costs they incur in managing fixed lines and the amount they receive as access charges from other carriers under the LRIC model.

The two firms had to shoulder a combined 100 billion yen to cover the shortfall last year, according to NTT East President Satoshi Miura.

"It's not fair that only NTT East and NTT West should shoulder the shortfalls," Miura said, claiming that a system to compensate the gap should be introduced.

Kiyoshi Fujita, president of InfoCom Research Inc., an NTT group company, thus stated that the nation's telecom carriers should emphasize other businesses, including IP technology-related services, in order to absorb the impact of the access-charge hike.

"Those carriers should have thought about the possibility of the hike as a business risk," Fujita said.

Meanwhile, the discord between NTT group firms and other carriers over the fee hike is not the only controversy that has been sparked by the ministry's proposal.

Also at issue is a plan to set the same access charges for NTT East and NTT West -- even though their fixed-line business costs are different.

In September, the ministry's advisory panel stated that these charges should be different.

The panel advocated lowering the charges for NTT East, whose business has been profitable, and raising those for unprofitable NTT West, whose service area covers many remote islands and less-populated regions.

In November, however, the public management, home affairs, posts and telecommunications committees of both the Upper House and the Lower House unanimously adopted a resolution calling for uniform interconnection fees nationwide.

Local residents and governments in western Japan also backed this position, fearing that different access rates could result in higher telephone charges.

Naoki Nishikado, a researcher at Mitsubishi Research Institute, said Japan should hammer out a system to maintain the nation's telephone network without hindering competition among carriers.

"Adjusting their interests over access charges is a policy judgment," he said.

Meanwhile, some consumers are urging the government to make the conventional communication system fair and stable for any user.

If the prospective access charge hike leads to an increase in call rates, some consumers would opt for IP telephone services. But others, especially the elderly, would stick with fixed phones, according to Masayo Kato, a councilor at the Housewives' Association (Shufuren).

"The government should think of ways to manage the fixed phone system without causing inconvenience to those people," Kato said.