The Japanese and U.S. governments are at odds over access charges for NTT networks. The Japanese side is balking at a U.S. demand for a deep and prompt price cut, on the grounds that it will have a crippling effect on NTT operations. As things stand, it is unclear whether an agreement can be reached by the end of March, the mutually set deadline.
Lower access charges will, of course, spur competition in the communications market and ease the financial burden on users. Japan’s communications market is said to be several years behind that of the United States and Europe in terms of liberalization. To regain competitiveness, an early cut in interconnection fees is inevitable, although this is not to say that Japan should accept the U.S. demand in its entirety.
Much criticism has been leveled here and abroad against NTT’s high hookup charges, which communications firms such as long-distance and international carriers and cell-phone companies pay to NTT East Japan and NTT West Japan for access to their local networks. The price for three minutes of service in Japan is 5.81 yen, compared with 4.44 yen in the U.S., 2.27 yen in Britain, 3.26 yen in France and 3.39 yen in Germany.
These payments add up to enormous sums, accounting for roughly 40 percent of the total revenues of long-distance carriers such as DDI and Japan Telecom. In the case of some local communications firms, such as cable-television systems, the figure is reportedly as high as 70 percent.
In theory, the access problem can be resolved if independent local lines are set up. In practice, however, this makes little business sense because it requires huge investments. The only practical way for companies and households to get access is via the lines of the two regional NTT companies. The high access fees also create problems for foreign companies seeking to expand into Japan’s communications market. That is why the U.S. government is pressing for a rate cut. The Japanese government, which earlier promised to cut fees beginning in 2000, must deal positively with the U.S. request.
During the negotiations that started last autumn, Japan offered a 22.5 percent reduction, spread over a period of four years. The plan would cut the three-minute charge to 4.5 yen in the final year, almost equal to the current U.S. rate. But the U.S. side rejected the proposal and demanded that the price be reduced by 41.1 percent by the end of the year. Japanese negotiators say that if the U.S. demand is accepted entirely, the basic telephone charge will have to be raised by about 300 yen.
The two NTT regional units are now pushing three-year restructuring programs featuring layoffs of 21,000 workers and a 1 trillion yen cut in capital spending. They say that a quick, sharp cut in access fees will force further restructuring on NTT, with negative effects on employment and the economy in general. They are reportedly reconsidering the price cut for long-distance phone calls that they announced last July when they reorganized.
However, they have given no convincing reasons why the basic charge must be increased and why further job cuts are needed. The fact is that the two regional companies continue with their de facto monopoly of local phone lines. No doubt this is largely responsible for the high interconnection fees. For a start, NTT should disclose more information on its financial condition.
It seems that it is mere expediency that justifies a raise in calling rates to make up for a cut in access charges. Indeed, reversing the announced decision to reduce long-distance rates amounts to a breach of public promise. The first order of business for NTT is to make further efforts to boost its competitiveness, and not to increase the burden on users.
On Tuesday, an advisory group to the minister of posts and telecommunications officially recommended that the NTT access charges be cut — gradually over a certain period — by 16.7 percent. Moreover, it failed to specify the deadline for the rate reduction. On Wednesday, NTT followed up with the announcement that by the end of May, it will slash by half the fixed charge imposed on Internet users that has been, in effect, on an experimental basis and in a limited number of areas. However, both moves obviously fall short of helping to expedite the stalled bilateral talks.
Catching up with fast-paced competitors in the U.S. and Europe requires forward-looking steps: cutting the cost of communications, creating a competitive climate and reducing the burden on users. These steps will also go a long way toward invigorating the Japanese economy. NTT has a vital mission: to set the pace for liberalization and open new vistas in Japan’s communications market.
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