Presentation
Competition Policy in the Age of Broadband
Mr. Yasushi Yoshida
Director, International Economics Affairs Division,
International Affairs Department, Telecommunications Bureau, Ministry
of Public Management, Home Affairs, Posts and Telecommunications, Japan
When we think about competitive policies in the telecommunications market, it must be borne in mind that this sector is experiencing rapid technological innovation and is changing at an unusually fast speed. Although the case may be different in other countries, in Japan, mobile Internet and fiber optic networks have been developed widely. In order to give life to the telecommunications market, it is not enough merely to authorize new entrants: the move from a monopolistic market to a competitive one must be made. During the negotiations on basic telecommunications in the WTO, a reference paper was prepared to establish a framework for promoting competition. There are five main elements in policies to promote competitiveness.
The first of these is competitive safeguards to prevent monopolies from introducing anti-competitive practices. Accounting and structural separation of major carriers is a good method to achieve such an aim. Moreover, telecommunications charges should be cost-based, but there is great difficulty in finding a satisfactory solution to arrive at average and marginal cost, and how to distribute the common cost. In Japan, measures to separate local and long-distance divisions of NTT were adopted in 1999 with a view to preventing anti-competitive practices. As a result, transparency has increased and non-discriminatory policies have been improved. However, further measures are being considered.
The second issue is access and interconnection. NTT still enjoys a monopoly in the regional telecommunications market and this difficult problem must be tackled. It is important to maintain technological neutrality and the market should be the one to decide whether to implement ADSL or fiber optic networks, etc. The government's role is to introduce measures that promote a competitive environment. Elements of such an environment include collocation facilities and the unbundling of local loops. Currently, Japan is making efforts to install unbundled fiber-optic lines and thus achieve ultra-high speed access.
The third issue is universal access, and at the moment NTT is the only carrier obliged to offer universal service. It is important to answer some issues, including that of who should be responsible for universal service and who should pay for the cost of universal service. But the most difficult point is the question of how to calculate the cost of universal service, and eliminate inefficiencies if universal service is only offered by one carrier. In Japan last year, there was a major discussion on whether to implement direct methodology for calculating interconnection charges, although many people were against this idea. The most serious problem in calculating costs is the major difference between the quantity of information held by a carrier and the quantity of information available to a regulator. Although the regulator can state that figures reported by a carrier may be dubious, the regulator cannot prove such claims, unless the carrier provides a model developed by the regulator. Another question that arises is whether universal service should be applied to broadband services, just as it is now applied to telephone services.
The fourth issue in promoting competition is how to allocate access to scarce resources. Currently there are several foreign companies planning to deploy fiber optic networks in Tokyo; however, space is limited and it is important to promote rights of way in the construction of networks. New entrants to the market would have to pay huge costs if they were to install their own conduits in Tokyo. The government is currently studying ways in which new entrants would be able to use existing conduits owned by NTT and electric power companies. Guidelines are currently being compiled for this purpose.
Another issue is the scarcity of radio signals and the importance of ensuring the effective and efficient use of the radio spectrum. It is important to ensure that services can still be provided using regular band services after digitalization of other networks. Another issue on the question of radio frequencies is whether to adopt the auction mechanism. Japan has decided not to adopt this system due to the fact that if auctions were used in areas where there is insufficient bandwidth, such as IMT2000, prices would become exorbitant: a situation that has proved to be the case in some European countries.
Finally, it is important to consider convergence and what kind of regulatory framework should be adopted as telecommunications and broadcasting come together with the Internet. The answer to this matter differs according to which aspect of telecommunications broadcasting is stressed. A focus on either telephone and terrestrial broadcasting or Internet broadcasting may lead to different conclusions, but it is important to adjust all broadcasting media to market conditions, whatever regulatory system is ultimately adopted.
At a time when markets are changing at a rapid pace, it is vital to develop a concrete schedule on what and when to implement and to undertake regular reviews. As the market becomes more global there is a limit to what one country can do by itself. The Japanese experience may not be useful in other locations, but could serve as an interesting case study.
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