In order to make information technology (IT) a locomotive for Japan's economic revitalization, the Government should implement the following regulatory reforms as soon as possible:

1. In terms of the telecommunications and broadcasting regulatory framework, we should move to a world-leading, fundamental transformation from a project-oriented vertical regulatory structure (i.e. telecommunications, broadcasting) to a function-oriented, horizontal, competitive structure (i.e. content, IT infrastructure, etc.) to promote competition and the convergence of telecommunications and broadcasting.

2. In regard to the infrastructure of information and telecommunications, broadband Internet networks should be built, through measures such as (a) further promotion of fair competition through structural separation in the subscriber networks (separation of wholesale and retail), (b) building of optical fiber networks connecting every household, and (c) making efficient use of radio waves.

3. We should strive to diversify the services provided via the Internet and improve content.

Issues

- The current analog technology-based regulatory framework for telecommunications and broadcasting does not fit with the reality of the continuing rise of digital technology and the IP (Internet Protocol) network.

- Under current circumstances, is it possible to achieve the goals laid out in the e-Japan basic strategy?

Is an environment being created whereby private sector businesses that are at the center of the IT field can freely build broadband IP networks and provide diverse, low-cost services under fair competition?

The Regulatory Framework and the Current Situation

1. Under the vertical regulatory structures, the information and telecommunications networks exist alongside several vertical sectors, but with digitization and the development of IP, there are moves toward integrating all networks into the IP network.

2. Telecommunications and broadcasting are regulated by separate laws, but with the advancement of digitization and development of IP, the inevitable trend is toward the convergence of telecommunications and broadcasting.

3. Telecommunications and broadcasting will be shifted from a vertical business-oriented integrated structure to one allowing the horizontal separation (unbundling) of each layer such as content, platform and network infrastructure.

Direction for Regulatory Reform

There is the concern that analog technology-based vertical regulatory structure for telecommunications and broadcasting will inhibit the various changes brought about by digital technology and IP development.

The Government should immediately

(1) examine and implement fundamental reform of the current regulatory structure toward a horizontal, competitive structure on the basis of digital technology and IP development and, at the same time,
(2) achieve the further promotion of fair competition through structural separation in the subscriber network in the network layer, the building of optical fiber networks and the efficient use of radio waves, and
(3) achieve the promotion of fair competition and the strengthening of the protection of rights in the content/platform layers.

[1] Fundamental Transformation of the Legal Structure for Telecommunications and Broadcasting

Through reform of the analog technology-based vertical regulatory structure for telecommunications and broadcasting to a horizontal, competitive structure in line with digital technology and IP development,
- the horizontal separation (unbundling) of businesses and interlayer competition and
- the convergence of communications and broadcasting
should be promoted.

[2] The Network Layer

In the network layer, for the further promotion of
1. fair competition,
2. the building of optical fiber networks, and
3. the efficient use of radio waves,
the necessary regulatory reforms should be implemented immediately and the development of a broadband IP networks should be promoted.

1. Further promotion of fair competition
- In the subscriber networks which have a high degree of monopolization, competition in the service base should be promoted through measures such as the creation of a system of public network resale and structural separation (separation of wholesale and retail).

- We should deepen the discussion immediately on the most desirable modality for NTT from the perspective of the further promotion of fair competition and the promotion of the development of a broadband IP networks, while giving due consideration to the NTT employment issue.

(Reference) e-Japan Priority Policy Program (March 29, 2001)
"In addition, if there is no sign, in spite of the measures promoting fair competition, that there is sufficient advancement of competition, we should promptly undertake a fundamental review of the system related to telecommunications, the modality of NTT and so on, taking into account securing communication sovereignty and trends in international competition."

2. The building of optical fiber networks
In the aim of promoting the liberalization of and use of dark fiber, the following should be undertaken:
- further liberalization of the dark fiber held by electrical power companies, railways and road administrators;
- liberalization of the dark fiber held by local public bodies and unification of methods of dark fiber vacancy information disclosure and lending procedures;
- enhancement of the flexibility of a provision system through indefeasible right of use (IRU) (realizing provision by band and wavelength as well as core wire); and
- refinement of an environment for the laying of lines.

3. Efficient use of radio waves
a) Reform the radio wave allocation system in the following ways, in order to make it possible an internationally strategic reallocation of radio wave resources:
- Thorough disclosure of information and introduction of reallocation mechanisms for radio wave resources
- Setting of wave use rates at levels corresponding to actual value
- Other appropriate measures to introduce competition

b) In other areas, the following reforms of the radio wave-related system should be undertaken.
- Expansion of license-free band for wireless LAN
- Introduction of band licenses (multiple-purpose uses on the same band)
- Simplification of radio station licensing procedure, screening criteria, etc.
- Self-authentication of the certification of terminal equipment conformity to technical conditions

The following approaches should be undertaken by the Government in addition to regulatory reform in relation to the network layer.

1. Promotion of the dissemination of IPv6
In the aim of realizing of a ubiquitous network, the dissemination of the IPv6 should be undertaken as soon as possible through the following measures:
- Policy measures aimed at shifting from IPv4 to IPv6
- Strategic cooperation with other countries, in particular Asian countries, and other measures

2. The strengthening of security
The Government should take fundamental action to strengthen security immediately.

[3] Platform/Content Layers
The following approaches should be undertaken for these layers, while abolishing regulations from the economic viewpoint as much as possible so that the services provided via the Internet be diversified and its content improved.

1. Fair competition should be promoted through the prevention of businesses utilizing market domination of the network to expand to upper layers.

2. In the aim of improving the content provided via the Internet, the following should be promoted:
- Information provision of rights such as copyright and the establishment of a simple licensing system;
- establishment of technological protection methods including surveillance and tracking,
- digitization of broadcast programs;
- developing the conditions toward enabling delivery of NHK programs via the Internet; and
- cooperation with Asian countries on protections of rights such as copyrights.

The Modality of Regulatory Organizations

1. The Japan Fair Trade Commission
In the aim of the promoting fair competition in each layer, the functions of the Japan Fair Trade Commission should be strengthened immediately, while there should also be consideration for transferring it out of the Ministry of Public Management, Home Affairs, Posts and Telecommunications.

2. Establishment of an independent competition-monitoring organization for information and telecommunications
Given the technical nature of the information and telecommunications field, there should be consideration for an independent competition-monitoring organization.