YOU ARE AT:Archived ArticlesU.S., JAPAN REMAIN AT IMPASSE OVER PHS EQUIPMENT CONTRACTS

U.S., JAPAN REMAIN AT IMPASSE OVER PHS EQUIPMENT CONTRACTS

WASHINGTON-The Clinton administration is expected to press Japan on the Personal Handyphone System issue before returning home this week from Tokyo, where the United States participated in the Asia-Pacific Economic Cooperation meeting in Osaka.

The United States and Japanese trade negotiators are at an impasse over whether a PHS licensed in Japan to a consortium led by Nippon Telegraph and Telephone Corp. should be subject to a 1994 bilateral pact calling for NTT to liberalize telecommunications equipment procurement practices.

The United States believes NTT Personal Communications Network Inc., one of three PHS partnerships authorized by the Japanese Ministry of Posts and Telecommunications, is bound by last October’s accord.

The other two PHS networks are licensed to DDI Pocket Phone, a unit of long-distance carrier DDI Corp., and the Astel Group in Japan.

“We’ve already raised it (the PHS issue),” said U.S. Trade Representative Mickey Kantor several days prior to the trip. “Ambassador (Ira) Shapiro was in Japan three weeks ago and raised it directly. I’m sure I’ll raise it again with our friend Mr. Hashimoto.” Ryutaro Hashimoto heads Japan’s Ministry of International Trade and Industry. Shapiro is a senior council and negotiator at USTR.

Japan’s position is that because NTT Personal Communications is a new company with private investors, as opposed to being a spinoff of NTT like NTT Mobile Communications Inc. (a cellular carrier), it is not bound by the 1994 telecommunications procurement agreement.

But U.S. officials reply that NTT Personal Communications is a vestige of NTT, which became a private company in 1985 yet remains two-thirds owned by the Japanese government. They also assert that NTT holds 76 percent interest in NTT Personal Communications, exercises some control over the affiliate and maintains business ties with it.

Cable & Wireless plc, Marubeni Corp. and Itochu Corp. each own a 5 percent share of NTT Personal Communications, while Japanese banks hold the remaining 9 percent.

Personal handyphones, a less expensive and technically inferior alternative to cellular phones that cannot operate in vehicles, have become a huge success in Tokyo and Sapparo since arriving on the scene last summer. PHS service is supposed to be available in Osaka this fall. Very small, low-powered base stations, or microcells, that are located every couple blocks enable pedestrians in densely populated areas, like Tokyo, to make calls at low cost.

But, unlike cellular and personal communications services, telephone conversations cannot switch from one cell to another if users are moving fast. PHS sales nonetheless have been strong, and the Japanese government projects there will be 38 million users by 2010. The United States wants a crack at that market.

The failure of the two sides to make progress on the trade dispute in working-level talks late last month upset and disappointed the White House, according to an administration aide, because U.S. officials were led to believe Japan would be offering new ideas following a July 21 meeting between U.S. and Japanese negotiators in San Francisco.

USTR said it offered to talk again with Japanese trade officials in December. Japan said it could not accommodate that schedule but would try to find an alternate date.

In spite of the spat over PHS, Kantor said telecommunications trade with Japan is improving. He noted that from March 1994, when Japan agreed to open and deregulate its cellular telephone market, subscribers on the North American-designed analog cellular phone system jumped from 22,000 to 500,000 by September this year. Yet, the United States insists Japan’s markets are still largely closed and that pressure will continue to be applied to gain greater access to that country.

“The U.S.-Japan relationship is deep, strong and multidimensional,” said Kantor. “It is a testament to the strength of the relationship that we can solve problems in trade, without threatening the overall ties.”

The Asia-Pacific region, according to Kantor, could become the largest export market for the United States by 2010.

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