Japan Phone Market Deregulation Too Late For Some

Fierce rivalry between existing phone operators and the high cost of launching the new business has discouraged potential competitors despite the long-awaited liberalisation, and the industry's reaction so far has been cool.

For example Recruit Co, which rents lines at low wholesale prices and re-leases them, said it sees few new opportunities in domestic long-distance calls following liberalisation.

Deregulation is coming too slowly and too late, a Recruit spokesman told Reuters in an interview.

We have no plans to enter the long-distance call market as rates are already low (due to price competition), the spokesman added.

With deregulation, the holder of a leased line will be able to connect each end of it to the public phone network.

 

This means companies which do not own phone networks will be able to lease lines and use them to provide telecommunications services to the general public.

The measure is expected do promote competition, especially in the long-distance call market.

But cut-throat price competition between the nation's three existing domestic carriers has already brought phone rates down so low that newcomers would be hard pressed to keep up, industry officials said.

It will be difficult for them to provide the service to the public at very low rates, when costs of launching new business are considered, Kazuo Inamori, chairman of long-distance phone service firm DDI Corp, told a recent news conference.

Launching a new business is costly partly due to the dominance of Nippon Telegraph and Telephone Corp (NTT) in Japan's phone market.

It owns the public network, is Japan's biggest telecoms carrier and is partially state-owned.

Rivals have had a hard time competing with the giant carrier due to lack of easy access to its local call networks.

Industry officials say newcomers will be no match for NTT and the two other domestic long-distance operators unless they offer rates well below 100 yen (90 cents) per three minutes.

In the latest round of the price war, NTT has pledged to cut its domestic long-distance rates to 100 yen (90 cents) per three minutes from the current 140 yen ($1.30) by 2000.

Data-processing service firm Intec Inc said deregulation would have a slow but steady impact on the industry by generating new telecoms services, if NTT provides open access to the local call networks that it monopolises.

Deregulation is good. But the costs of launching new business will be high and business prospects will stay unclear unless the access issue is resolved, an Intec spokesman said.

The government will draw up rules for access to local call networks by next spring.

But liberalising leased lines will at least cut in-house communications costs for big firms with extensive leased-line networks. Among such firms, only Matsushita Electric Industrial Co has shown any interest in selling leased lines to third parties to start new businesses.

The United States deregulated its leased line market in 1984. Japan has delayed liberalisation due to the large impact on NTT's business.