US firms hope to ring up new sales as Japan ends monopoly on telephones
As American and Japanese trade officials meet this week, Japan's telecommunications industry will be staring them in the face. The United States hopes to reduce its $35 billion trade deficit with Japan in part by selling telecommunications products and services to Japan. That was made possible in December, when the Japanese government passed legislation ending the telecommunications monopoly long held by Nippon Telegraph & Telephone Public Corporation (NTT).
While some details still need to be smoothed out, the bill, which takes effect April 1, will allow other enterprises to enter the field. For American companies such as IBM, American Telephone & Telegraph, and RCA, that presents a catch-22: They want a chunk of the $5 billion market but are hesitant to have their products scrutinized by Japanese officials.
The feeling among foreign businessmen here is that the market is not going to open up quickly. The new law requires that any equipment hooked into Japanese telephone lines be tested and approved by inspectors from Japan's Ministry of Posts and Telecommunications. The inspections will not include foreign officials, as the US has requested, and US companies think their products may be discriminated against. US companies are also concerned that examination of their equipment might cause design secrets to make their way to Japanese companies.
Restructuring of NTT is not expected to cause an actual breakup of the public corporation, as happened with AT&T in the US. Rather, it is part of the administrative reform plan supported by Japanese Prime Minister Yasuhiro Nakasone to trim inefficiencies in the public sector. NTT is expected to continue to dominate telecommunications even after private companies start competing in the market.
Under the plan, the telecommunications business will be divided into two main categories. The first is the actual telephone service, including installation of optical-fiber lines and satellite links. The second involves renting circuits from the first category for computer data communications service. Foreign companies will be allowed to participate in the latter, but not the former.
Already several Japanese companies have expressed interest in the lucrative communications business. Kyocera, a Kyoto-based company known for its ceramic engines, has announced plans to join a consortium to provide communications service using microwaves. The Japanese Federation of Economic Organizations plans to buy a US communications satellite to offer services in the domestic market.
Even the deficit-ridden Japan National Railway is jumping on the bandwagon. It wants to rent space along its tracks to Kyocera and other private companies for laying optical-fiber cables.
Other companies have hurriedly signed joint-venture agreements with foreign companies to get into the satellite business: Mitsubishi Corporation and Mitsubishi Electric, with Ford Aerospace; Sony, with RCA Astro Electronics.
One of the most sensitive issues to be resolved is the sale of NTT stock and what to do about the revenue from the sale. The bill proposes that NTT sell as much as half its shares in the next five years, ultimately leaving the government with only one-third ownership.
The big question is who should get the revenue from the stock sales. A lot of the argument appears to be caused by rivalries among the government ministries. The Posts and Telecommunications Ministry, eager to keep control of the telecommunications field, wants to feed back the money into research and development. The Ministry of International Trade and Industry, which considers computer technology part of its sphere of influence, is jealous of having the Post and Telecommunications Ministry get into an area that could possibly overlap with its own. And the powerful Finance Ministry wants to use the new revenues to reduce at least part of the longstanding government deficit.