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Japan, U.S. fail to narrow gaps over NTT hookup rates.

WASHINGTON, Jan. 19 Kyodo

Japan and the United States failed to iron out differences over ways to reduce interconnection fees charged by Nippon Telegraph and Telephone Corp. (NTT) Wednesday, casting a shadow over the fate of bilateral deregulation talks both parties agreed to conclude by the end of March.

During the two-day negotiations in Washington, Japanese delegates, sensing further deadlock following the talks' rupture in mid-December, presented a revised method for calculating interconnection rates telecom carriers must pay NTT for use of its network.

But the U.S. side rejected the proposal as "insufficient" and "far short" of Tokyo's May 1998 commitment, according to Deputy U.S. Trade Representative Richard Fisher, chief delegate of the U.S. team.

"The proposal would cut a key interconnection rate to a level that would still be far higher four years from now than current rates in the U.S. and Europe," Fisher said at a telephone press conference. "This outcome is highly disappointing."

Both parties, however, agreed to continue talks without setting specific dates for the next meeting.

Japan pledged to introduce a new phone access charge system within 2000 to reflect market-based costs when then Japanese Prime Minister Ryutaro Hashimoto met with U.S. President Bill Clinton in Birmingham in May 1998.

Japan says the new system will be based on the so-called long-run incremental costing method, which reflects theoretical costs necessary to build new local circuits in the most efficient manner.

Before the latest meeting, Tokyo aired to the media a new cost-computing model that would result in a 16.7% reduction in NTT access charges over a period of four years. But the idea drew stiff criticism from Fisher last week, who called for a 50% immediate cut from this year.

The latest proposal, put forward by chief Japanese delegate Sadanori Amano, director general of the Posts and Telecommunications Ministry's Telecommunications Bureau, would cut NTT access charges by 22.5%. "This was the maximum we could swallow," one of the Japanese negotiators told reporters after the meeting.

Washington demanded NTT first introduce a model the telecom ministry's study group once considered as a possible option, which would reduce NTT hookup rates by 41.1%, before achieving the 50% reduction.

The 22.5% reduction translates into 460 billion yen in lost revenues for two regional phone operators of the NTT group while the 41.1% cut called for by the U.S. would cost them 700 billion yen.

"Further reduction would have a major negative impact on NTT's financial standing," the Japanese negotiator said, indicating Tokyo would not budge an inch in talks expected to take place before March.

The cost-setting formula planned by Japan is based on the length of calls by end-users. But the U.S. has proposed a flat-rate formula in which a fixed fee is charged to end-users for a certain duration regardless of their actual length of use.

Washington termed the Japanese method "inconsistent with internationally accepted standards" while Japan said the U.S.-proposed method would push up basic phone charges levied on end-users, making it difficult for NTT to win consumers' understanding.

The U.S. has long maintained that the interconnection fees levied by NTT on other carriers wishing to offer intracity services in Japan are 4.5 times those of U.S. local carriers and four times those of European telecom firms, effectively barring foreign companies from entering the market.

Such high access rates in Japan have also limited the development of the country's telecommunications sector, especially Internet services, Washington says.

"Japan's business community and its citizens will be the major losers if the government of Japan fails to honor its commitments," Fisher said.

He added that Japan's failure to implement further reductions in NTT access rates would render meaningless "hundreds of millions of dollars" U.S. and European carriers have invested in Japan's telecom market, calling into question the Japanese government's commitments to deregulate and open its market.

"The only voice opposed to significant reductions in interconnection rates is the former monopolist, NTT. That the government of Japan wishes to protect NTT in this way, contrary to domestic and international opinion, is astounding," Fisher said.

The Japanese side said even if no major progress is made in future talks, the telecommunications ministry will submit necessary legislation to parliament to go ahead with the revised plan.

The NTT access-charge issue is seen as the biggest stumbling block in ongoing Japan-U.S. enhanced deregulation talks, for which both parties pledged all-out efforts to compile a third joint report on deregulation by the end of March.

A set of deregulation requests made by the U.S. last October included Japan's implementation of a telecom "Big Bang" through drastic decontrol.
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Comment:Japan, U.S. fail to narrow gaps over NTT hookup rates.
Publication:NTT Topics
Article Type:Brief Article
Geographic Code:9JAPA
Date:Jan 24, 2000
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