In a move characterized by some as bowing to industry pressure and by others as seizing a golden opportunity, the Japanese government approved landmark legislation that paves the way for sweeping deregulation of the country’s telecom industry.

Japan’s Parliament on June 13 passed three key telecom bills, including one that will lead to the eventual break up of Nippon Telegraph and Telephone Corp.-the world’s largest phone company.

The new laws are expected to spur freer, more fierce domestic and international competition as NTT is effectively broken up and reorganized into two local carriers and a long-distance company-all to be supervised by a single holding company.

With NTT’s reorganization, the Japanese telecom giant is expected to become a major impact player in the increasingly deregulated global marketplace.

“The [new] laws will revitalize the information industry [in Japan] and improve our global competitiveness,” said Kan Higashi, chief of the Telecommunications Carriers’ Association and president of Teleway Japan Corp., a long-distance carrier.

Perry LaForge, executive director of the CDMA Development Group, said the Japanese government’s decision to deregulate was “logical and opportunistic. The Japanese are seeing the global deregulation phenomenon and realizing they have a very formidable operator there in NTT. It’s clear that NTT will be able to compete very well globally and the Japanese want to participate.”

Before the legislation passed, NTT had been limited to providing domestic telecommunications services.

The new laws will lead to the eventual creation of two separate major domestic carriers-spun off from NTT-charged with providing service to the eastern and western halves of Japan, respectively.

Another bill, passed during the same session, will allow Japanese international carriers like Teleway and KDD Corp. to begin offering domestic services as well.

“We hope to begin as early as possible low-cost, high-quality services integrating both domestic and international operations to meet our customers’ expectations,” said Tadashi Nishimoto, KDD’s president.

Posts and Telecommunications Minister Hisao Horinouchi said the new laws will enable NTT to meet the challenges of a “great competition era. I strongly hope that the fruits [of the amendments] will be passed on to consumers in the form of a variety of telecom services at lower rates.”

Although the new law is scheduled to take effect in fiscal 1999, NTT is reported to be preparing to offer international service as early as next month.

“The Japanese are going to be a major international player-either through partnerships where they provide funding to a company going after a license or by going after the licenses themselves,” said LaForge, who believes NTT, in its new incarnation, will “be a key source of capital and expertise to a lot of these emerging markets and perhaps also will provide another source of capital for some of the (struggling) C-block players.

“On the domestic side,” LaForge added, “increased competition usually leads to a more rapid advancement of features and services-although it’s still unclear how [these new laws] might impact the wireless front. I think what we’ll see, once the restructuring settles down, is some additional wireless players and competition.”

Clearly, with Japanese telecom deregulation, soon there will be increased opportunities on all fronts.


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