While it’s time for some restrictions to be lifted, operators warn of the potential impact on consumers and competition of repealing all legislation on NTT
Both chambers of the Parliament have approved the easing of restrictions on former incumbent operator, NTT
On 17 April 2024, Japan’s Parliament enacted a bill to ease restrictions on NTT, almost 40 years after the former incumbent was privatised. In April 1985, the ‘NTT Law’ came into effect, imposing a number of rules and requirements on the operator in order to drive competition in the country’s telecoms market, encourage the entry of new players and protect its assets. The bill to update the NTT Law passed the House of Representatives, the lower chamber of the National Diet, earlier this month. It has now also been approved by a majority vote at a plenary meeting of the House of Councillors, the upper chamber of the legislature. Among other things, the revised law will remove the operator’s obligation to disclose R&D results and the prohibition on appointing non-Japanese directors, allowing it to allocate up to a third of the seats on its board to foreign nationals.
The current Government wants to abolish all legislation on the former incumbent, potentially by next year
The revision includes a supplementary provision requiring the Government to conduct a review of NTT-related regulations, including to study the scope for abolishing the NTT Law, and propose legislative changes as early as at the next regular Diet session, which is expected in January 2025. The ruling Liberal Democratic Party (LDP) wants the law to be scrapped, as does NTT, arguing it is outdated and no longer reflective of the business environment in which NTT faces intense competition in fixed and mobile services. NTT has welcomed the latest revisions, stating that the removal of the R&D disclosure obligation in particular would help strengthen its competitiveness at the global level. However, other stakeholders do not view the updated NTT Law so favourably and have raised concerns about it being repealed altogether. The Japan Cable and Telecommunications Association has stated that its members rely on NTT’s infrastructure to provide TV services, but NTT often refuses their requests for access. In its opinion, abolishing the NTT Law would put NTT’s competitors at a clear disadvantage.
Rivals operators have urged caution about repealing regulation altogether
In November 2023, KDDI, SoftBank and Rakuten Mobile issued a joint statement outlining their objections to the removal of the NTT Law, including concerns for the impact on competition and the knock-on effects of higher prices and reduced choice. Rakuten (owner of the newest and smallest operator in Japan) has even suggested it probably wouldn’t have entered the mobile market had it known the law might be revoked, anticipating doing so would allow NTT to increase prices for sharing parts of its network. While the three operators are comfortable with the LDP acting on R&D disclosure, they have also highlighted the risk that NTT would no longer be subject to a universal service obligation (USO) and could therefore withdraw services freely, affecting rural areas especially. As the operators urge “careful policy discussions” about further revisions of the NTT Law, the Information and Communications Council, which advises the Communications Minister, continues to debate whether to review NTT’s USO for fixed voice services – and is expected to take a position within the coming months.
