APT SubRegional Seminar on

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APT Sub-Regional Seminar on Trade and
Telecommunications
Independent Regulator in the Reference Paper
and Japans Experiences
Hideo TOMIOKA Deputy-Director International
Economic Affairs Division Telecommunications
Bureau Ministry of Public Management, Home
Affairs, Posts and Telecommunications (MPHPT),
JAPAN 5 April, 2004
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I. Introduction
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Two Questions
Question 1
Why is an independent regulator necessary?
Question 2
Why has Japan achieved success in development of
broadband and mobile services?
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Japans Success (1) Fast Broadband Speed
Broadband Speed Ranking among OECD Member
Countries
Japan has realized the fastest broadband in the
world.
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Japans Success (2) Rapid Broadband Take-up
(subscribers)
February 2004
10,904,236
1,042,776
Fiber-Optics (FTTH) (for general users)
DSL
Cable Internet
2,546,000
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Japans Success (3) Competitive DSL Market
Japans pro-competitive policies have created the
worlds most competitive DSL market. NTT East
West, incumbent operators in Japan, hold only a
36 market share.
NTT East West
KT
RBOCs
36
81
85
Japan
US
Korea, Rep.
DT
BT

94
99
Germany
UK
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Japans Success (4) Innovative Mobile Services
Japan is the worlds leading nation with respect
to innovative mobile services.
Rate of Internet-Accessible Mobile Handsets
(September 2002)
3G Mobile Users in Japan 15.2million (February
2004)
In 2001, NTT DoCoMo became the first operator
worldwide to provide the 3G mobile service.
Competition is so fierce that NTT DoCoMo only
enjoys a 15 market share.
3G Mobile Market Share (February 2004)
NTT DoCoMo
15
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()
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Answers to the Questions
Question 1
Why is an independent regulator necessary?
Answer
An independent regulator is crucial for the
promotion of competition. It can address the
issue of conflict of interest which arises if the
regulator serves as both a referee and a player
in the market.
Question 2
Why has Japan achieved success in development of
broadband and mobile services?
Answer
The answer can be found at the end of this
presentation.
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II. Independent Regulator in the Reference
Paper
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Section 5 of the Reference Paper
The Reference Paper establishes a common set of
pro-competitive regulatory principles including
independent regulators. (Section 5)

• 5. Independent regulators
• The regulatory body is separate from, and
  not accountable to, any supplier of basic
  telecommunications services. The decisions of and
  the procedures used by regulators shall be
  impartial with respect to all market
  participants.

Supplier
Regulatory Body
Regulatory Body
Supplier
Supplier
Supplier
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Regulators Independence from Ministry Not
Required
The Reference Paper does not require the
separation of regulator from government ministry.
It requires that the regulator be separate from,
and, not accountable to, any operator. It does
not require that the regulator be independent of
any government ministry. In fact, paragraph 5
allows the government telecommunications ministry
to be the regulator. Laura B. Sherman (Former
USTR Associate General Council), Wildly
Enthusiastic about the first multilateral
agreement on trade in telecommunication services,
51 FCLJ 61, 86 (1998)
Not Required
Ministry (Policymaker Regulator)
Ministry (Policymaker)
Regulator
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Various Forms of Regulators
Japan, US and Europe take individual approaches
regarding the form of independent regulator.
EU Countries
Japan
US
Presidential System and Strict Separation of
Powers
Parliamentary Cabinet System
EU Directives
Ministry (Policymaker)
Ministry (Policymaker Regulator)
Commission (Policymaker Regulator)
Commission/Agency (Regulator)
Operators
Operators
Operators
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III. Japans Experiences
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Transition of Telecom Organization in Japan
1885
Ministry of Communications
1949
Operational Function
1952
Ministry of Telecommunications
1952
Regulatory Function
Dendenkosha (NTT-PC)
Ministry of Posts and Telecommunications
2001
1985
In 1952, Japan separated the telecom operational
function from the regulatory function.
NTT
1999
Ministry of Public Management, Home Affairs,
Posts and Telecommunications (MPHPT)
NTT (Holding Company), NTT EW, NTT Com
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Separation of Regulator and Incumbents
Shareholder
Not only is there a separation of the regulator
from operators, but Japan ensures the separation
of the regulatory body and the incumbents
shareholder.
EU Countries Case
Ministry of Public Management, Home Affairs,
Posts and Telecommunications (MPHPT)
Ministry of Finance
National Regulatory Authority
Finance Ministry
Shareholding (46)
Shareholding
Regulation
Regulation
Incumbent
NTT
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Development and Implementation of Competition
Policy
Japan has steadily implemented competition policy
under the purview of MPHPT and its predecessor.
Dispute Settlement Mechanisms
Interconnection Rules
Development of Competition Policy
NTT Reorganization
Asymmetric Regulations
Carrier Pre-selection and Number Portability
Universal Service Fund
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IV. Issues in Implementation and Japans
Solution
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Again, Various Forms of Independent Regulators
The desirable form of an independent regulator
varies from country to country, depending on each
nations circumstances.
EU Countries
EU Directives
Ministry (Policymaker)
Commission/Agency (Regulator)
In Japan, each minister, member of cabinet,
undertakes administrative responsibility under
the parliamentary cabinet system as a basic
principle. A high degree of bureaucratic
neutrality also exists in Japan.
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Regulator Must Be Strong
Regulator must be strong enough to tackle strong
incumbents.
Policy Planning
In the telecommunications market, dominant
incumbents controlling bottleneck facilities
usually exist. To promote competition, effective
asymmetric regulations on dominant incumbents are
essential. In Japan, MPHPT with strong powers
(from policy planning to implementation of
regulations) can effectively regulate dominant
incumbents.
Drafting of Laws
Planning of Regulations
Implementation of Regulations
New Entrant
New Entrant
Dominant Incumbent
New Entrant
New Entrant
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Regulator Must Be Maneuverable
Regulator must take action promptly and actively.
Policy Planning Regulatory Implementation
To regulate the telecommunications sector, where
prompt and active decision-making is necessary,
feedback between policy planning and regulatory
implementation is important. In addition, the
regulator must deal with delaying tactics,
which dominant incumbents tend to use. Japan
avoids inefficiency stemming from the council
system or separation of the organization. To
address convergence issues, it is desirable to
cover other related sectors (including
broadcasting).
Mutual feedback
Incumbent
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(Reference)
Japan once established the Radio Regulatory
Commission as a separate administrative
commission, but abolished shortly.
Drawbacks of Commission-type Organization

• Not suited to the administrative area where
  prompt and active responses are required
• Difficult to reflect public opinion
• Unclear responsibility
• Inefficiency stemming from council system

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Measures for Ensuring Transparency, Impartiality
and Neutrality
Measures to ensure transparency, impartiality and
neutrality may be more important than the
organizational structure of the regulator.
Administrative Procedure Law Consultation with
Telecommunications Council and Radio Regulatory
Council Implementation of public comment
procedure Establishment of the Telecommunications
Business Dispute Settlement Committee for dispute
settlement between carriers Administrative
protests or lawsuits can be filed against
administrative decisions
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V. Conclusion
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Conclusion
Establishment of an independent regulator
separate from any operator is important for
liberalization and promotion of competition in
the telecommunications sector.
There are various forms of independent
regulators, depending on each nations
circumstances.
The system employed by Japan regarding the
independent regulator has led to Japans
success in the telecommunications sector.
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APT Sub-Regional Seminar on Trade and
Telecommunications
Independent Regulator in the Reference Paper
and Japans Experiences
Hideo TOMIOKA h.tomioka_at_soumu.go.jp
Thank you!