Telecommunications Policy in Japan: Lessons for the U.S.

The potential for transfer varies markedly from industry to industry, depending on the degree of similarity in industry organization and economic conditions. The trucking industry is structurally similar in most developed economies, while the railroad industry is not (ranging from national monopoly in Europe, public-private duopoly in Canada, public/private multi-firm in Japan to private multi-firm structure in the U.S.).

For an extended discussion of this issue, see Harris Robert G. , “The Implications of Divestiture and Regulatory Policies for Research, Development and Innovation by the Regional Bell Operating Companies,” Proceedings of the Telecommunications Policy Research Conference, Airlie House, VA, 1987.

Japan uses the term INS (Information Network Services), rather than ISDN. NTT began commercial INS on April 18, 1988.

In my discussions with public servants and enterprise managers on recent fields research trips to Britain, France, and Japan, there were numerous references to the U.S. practice of “preaching” and “talking down,” and the expressed regret that U.S. policymakers seem to believe they have little or nothing to learn from other countries.

As well as other nations, principally Britain and France.

With notable exceptions in the several states where legislatures have passed comprehensive telecommunications policy legislation.

Johnson refers to the jurisdictional dispute between the MITI and MPT as the “Telecom Wars.” Johnson Chalmers , “MITI, MPT, and the Telecom Wars: How Japan Makes Policy for High Technology,” Working Paper, Berkeley Roundtable on the International Economy, Berkeley, CA, 1987.

For extensive histories of Japanese telecommunications in the post-war era, see: Bruce Robert R. Cunard Jeffrey P. Director Mark D. , From Telecommunications to Electronic Services: A Global Spectrum of Definitions, Boundary Lines, and Structures (London: Butterworths, 1986), Chapter 5; Ito Youichi , “Telecommunications and Industrial Policies in Japan: Recent Developments,” in Snow M. , ed., Marketplace for Telecommunications (New York, NY: Longman, 1986); Okimoto Daniel I. , “Regime Characteristics of Japanese Industrial Policy,” in Patrick Hugh , ed., Japan's High Technology Industries (Seattle, WA and London: University of Washington Press and University of Tokyo Press, 1986); Tomita Tetsuro , “Japan's Policy on Monopoly and Competition in Telecommunications,” Telecommunications Policy (March 1984); Vogel Ezra F. , Comeback: Building the Resurgence of American Business (New York, NY: Simon & Schuster, 1985), Chapter 5.

Ministry of Posts and Telecommunications, White Paper: Communications in Japan (Tokyo: MPT, 1987), p. 19.

A very small share of telephone service was provided by rural cooperatives in remote areas, sometimes by radio telephone technology.

Under the Telegraph Law of 1890, until 1953 the legislative basis of Japanese telecommunications policy, all private facilities were prohibited.

Because Japan is so narrow, with such a large share of the population concentrated in the Tokyo-Osaka corridor, “frequency congestion” is a serious potential problem. Private microwave networks were basically limited to Japanese National Railways (for train control), the electric utilities (for load management), the Ministry of Construction (for traffic management on national highways), and the Self-Defense Forces.

Bruce , op. cit., pp.355–56.

A Japanese citizen incurs a very large payment for a first phone, which then entitles him or her to network access for life; NTT effectively has a “three-part” tariff for local phone service; a large payment on receipt of the first phone (by purchase of NTT bonds), a fixed monthly charge and a charge of 10 yen per local call.

MPT issued criteria for shared use; it also authorized shared use on a case by case basis. This was an important policy provision, given the high degree of intercorporate ownership and long-term business arrangements in Japanese industry.

This opening to small business VANs was responsive to MITI's expressed concern that NTT circuit reuse restrictions created a hardship for firms too small to install their own private networks or computers.

The 1956 Consent Decree required Bell Labs to open license all innovations; NTT and NTT family members maintained a close working relationship with Bell Labs, including regular, lengthy visitations by their researchers to the labs, in order to expedite technogy transfer and its application to the Japanese network and equipment.

JTECH Report, 1986, pp.xi–xii.

See Okimoto , op. cit.

MITI was by the 1980's engaged in implementing “structural adjustment” policies for declining industries, but this policy arena had a limited future.

See Vogel , op. cit., Chapter 5.

JTECH Report, 1986, pp.2-10–2-13.

In response to these pressures, NTT lowered its long distance rates four times in the 1981–84 period.

See Johnson , op. cit.

The selection of Dr. Shinto as NTT's President and CEO is itself instructive of Japanese political-economic institutions. A former shipping industry executive with no prior telecommunications experience, Dr. Shinto was recruited by Keidanren as a candidate for the NTT post in order to promote liberalization internally and to manage the process of privatization at NTT. Needless to say, there is no U.S. institution which could so influence the choice of chief executive at a major corporation, even one controlled by the government.

Issued in 1981.

Bruce , op. cit., pp.364–65.

Ibid., p.366.

The First Ad Hoc Commission, in 1961–64, had recommended drastic changes that would have freed NTT from many administrative and legal controls; its recommendations were never enacted. Ibid., p.367.

Because Japan has nine regional electric utilities—regulated by MITI—that was the number of regional telephone companies contemplated.

The ruling Liberal Democratic Party supported the recommendations, the minority Socialist and Communist Parties did not. Bruce , op. cit., p. 368.

Johnson , op. cit.

The revenues flow through the Japan Key Technolgoy Center, which among others, funds ATR (Advanced Telecommunications Research Institute International), whose research will be organized into four major domains: Intellegent communications, telephone (realtime) translation, human auditory and visual mechanisms and light- and radio-wave communications. “ATR: Creating the Communications Future” (promotional brochure): Tokyo, 1986.

Wall Street Journal, November 10, 1987.

New York Times, September 19, 1988, p.44.

Vogel , op. cit., p.166.

MPT, “Open Telecommunications Market of Japan,” revised editions, January 1987 and March 1988.

The three NCCs began providing leased circuits in the fall of 1986, switched services in the fall of 1987. In the first fiscal year ending Machine 31, 1987, they had total estimated revenues of approximately 400 million yen; in their second fiscal year, revenues were estimated at 17–18 billion yen. Observers are forecasting NCC revenues of 70–80 billion yen in the year ending March 31, 1989. Based on personal interviews with company executives, Tokyo, June 1987 and May 1988.

Based upon personal interviews with company executives, Tokyo, May 1988.

The local call applies so long as the NCC has a POI (Point of Interface) in the local calling area; otherwise, the customer would be billed for an NTT short-distance toll call to the NCC's nearest POI. Although Type I carriers are allowed to provide local service, they are using NTT for local access.

Can one even imageine a major joint venture between AT&T and IBM in the U.S. ?

Lannon Larry , “The Quiet Giants: Japan Makes Little Noise but Big Impressions at Telecom,” Telephony, November 23, 1987; Purton Peter , “NTT Makes Big Splash at New Hanover Show,” Telephony, April 28, 1986; Telephony, “NTT Debuts Video Telephone; Enters Optical IC Venture,” July 20, 1987.

Integrated Services Digital Network allows simultaneous use of telephone circuits for voice and data communications, with data transmission at much higher rates than ordinary phone lines.

In the case of airline deregulation, Federal law completely pre-empts state regulation of airline service. In railroad deregulation, state regulation must pass strict national standards to prevent states from imposing burdents on interstate commerce.