November 16, 2023
The so-called NTT Law has been the subject of some pretty heated debate in Japan in recent months. The law, which stems from NTT’s history as a public company, is now something of an albatross around the necks of both the state and the incumbent telco itself, albeit for slightly different reasons.
NTT’s three main rivals – and a raft of others – oppose the idea of ditching the law. A couple of weeks ago they outlined their specific objections in response to a series of claims from NTT about ways in which existing regulations could be used essentially to protect consumers and competition. They have now tweaked their arguments, albeit on the same theme, again in response to comments published by the incumbent.
But the news here is not so much what the three telcos are saying, but rather the fact that they are still saying it.
The fact that they are banding together to repeatedly bat back NTT’s assertions in such a speedy timeframe shows just how determined they are to make sure the incumbent remains regulated as per its legacy, at least to an extent.
The latest missive from KDDI, Softbank and Rakuten Mobile highlights three key areas of concern: fair competition; universal service obligations; and foreign investment regulations.
NTT apparently – its own publication is only available in Japanese, hence we are relying on its competitors’ summation of its arguments – claimed that the key issue on competition is that the NTT Law prohibits the merger of its fixed and mobile units, but that same prohibition can be applied under the Japan’s Telecommunications Business Act.
However, KDDI, Softbank and Rakuten Mobile claim both that the NTT Law’s business scope regulations are broader than that and could not easily be replicated under the act, and that the act in general may not be effective alone “due to concerns related to regulatory evasion.”
They also countered NTT’s arguments related to preservation of universal service obligations absent the NTT Law, and its claim that the Foreign Exchange Act, as well as other laws and regulations, would cover the foreign ownership rules it accepts are necessary for major telecom operators.
On that last point, the three specify that “NTT’s special assets cannot be treated in the same way as other telecommunications operators’ facilities, and the foreign ownership regulations stipulated under the NTT Law are effective and difficult to replace by strengthening the Foreign Exchange Law.”
The three telcos also believe that NTT erred in making comparisons with other countries where special corporation laws have been abolished, noting that Japan has different characteristics. And the two sides are clearly also quibbling over the technicalities of the ownership of the assets NTT inherited on its transition from a public to private company.
There is likely to be more of this type of thing to come. And quite possibly lots more. The government is looking for change, since the NTT Law serves as a hurdle to any bid to monetise its 34% stake in the telco, while NTT claims the law’s R&D disclosure rules are preventing it from developing research partnerships in the sector; with 6G on the horizon, that’s becoming an issue. Neither party will let this go easily.
For now, KDDI, Softbank and Rakuten Mobile are reiterating their earlier argument – one backed by the 180 entities that signed their names to a formal objection to the abolition of the NTT Law a month ago – that the law could be reworked rather than dumped entirely.
“Rather than abolishing the NTT Law, if revising the law is considered, the signatories believe that the entire industry can hold positive discussions on the future of Japan’s telecommunications industry,” they said. “The signatories hold the view that policy discussions on the NTT Law should proceed in this direction.”
Compromise will be key, but could be tricky to hammer out.
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