Telco opposition grows to NTT Law change in Japan

KDDI, Softbank and Rakuten Mobile have outlined their objections to a proposal by the Japanese government to abolish certain rules governing former incumbent NTT.

The three telcos published a joint statement on Tuesday in which they shared three key areas of concern if the so-called NTT Law is scrapped. The statement comes a fortnight after they announced that a total of 180 entities, including telecoms operators and local governments, jointly formally expressed their opposition to the abolition of the law to the relevant government bodies.

Essentially, the operators are leaning heavily on the potential harm to consumers angle. Their first point is that the law helps to protect fair competition in the market and that losing it could lead to price rises and a stagnation in the development of new services. They also fear that the universal service obligation would not be adequately integrated into the Telecommunications Business Act, something NTT is aiming for, which would negatively impact on services in disadvantaged areas, including rural regions.

Finally, the operators also highlight the removal of foreign investment regulations for NTT. “The NTT Law is the most effective means for regulating foreign ownership to protect NTT and its special assets,” the telcos say, noting that those special assets were inherited by NTT as a result of its time as a public company. The removal of the NTT Law would mean NTT could sell the majority of its shares to non-Japanese individuals or foreign governments, “potentially compromising the security of Japan’s telecommunications infrastructure,” KDDI, Softbank and Rakuten Mobile claim.

Rumour has it that that is exactly what’s in the pipeline. Nikkei Asia reported in July that the Japanese government is keen to sell its stake of around 34% in NTT – it is the telco’s largest single shareholder – with a view to ploughing the cash into defence spending. That’s why Japan’s ruling Liberal Democratic Party is looking into the law change.

NTT seems to be in favour of the move for a variety of reasons. According to the same news outlet in a separate report, NTT is keen to shake off the shackles of the law that bears its name because it feels it is hampering its ability to compete on the global stage.

Specifically, the telco says potential partners have refused to do business with it because it is required under the law to publicise the results of its R&D activities. Given that technological development typically comes through business partnerships, this is proving a problem, the report quotes NTT President Akira Shimada as saying in September.

It goes on to point out that NTT working on the Innovative Optical and Wireless Network (IOWN), with the goal cutting power consumption to one hundredth of current levels, which of course could have a big impact on the standardisation and launch of 6G mobile. More than 100 partners worldwide are involved in the IOWN project, it says.

Focusing on the idea that Japan could fall behind in the 6G race without a law change, which seems to be what NTT is suggesting, is likely a strong argument when it comes to influencing government decision-making.

Similarly, though, regulators in general tend to look very closely at arguments around harm to consumers and to competition, and in Japan’s case competition has been an issue in the recent past, the government having pressured the big three to reduce prices a few years ago, shortly before the launch of fourth MNO Rakuten Mobile, which still does not have a strong market share.

There are solid arguments on both sides of this debate. Change is likely to come, the question is to what extent.

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