Panel suggests break-up of Japan’s NTT

Nippon Telegraph and Telephone, the world’s biggest telecoms group, should be broken up into several independent entities to boost competition in the domestic telecoms industry, according to recommendations from a government panel.

The report from the home affairs ministry’s media panel was due to be submitted to home affairs minister, said Heizo Takenaka, an official at the ministry, on Tuesday.

Advocates of a break-up of NTT say it could stimulate competition particularly in fixed-line services. Analysts regard the Japanese telecoms industry’s biggest weakness as NTT’s almost monopolistic control of phone lines going into homes, known as the “local loop”.

However the report, which recommends NTT be disbanded in about 2010-2011, is likely to face strong opposition from some politicians as well as NTT itself.

The Liberal Democratic Party’s subcommittee on the telecommunications and broadcasting industries recently recommended that the question of NTT’s reorganisation be merely reconsidered in 2010.

NTT currently has five operating subsidiaries: NTT DoCoMo, Japan’s largest mobile carrier; NTT Communications, which provides long-distance fixed-line calls; NTT East and NTT West, which provide local calls in the two halves of Japan; and NTT Data, the computer services company.

The home affairs ministry official said under the panel’s recommendations, NTT DoCoMo, NTT East and NTT West would likely be among the subsidiaries fully hived off as independent entities.

The official said the logic of breaking up NTT was to increase competition. To achieve this, it is understood the report also recommends a relaxation of the regulations governing NTT’s various companies, to give them a freer hand to enter markets and vie with each other.

But the official said that if NTT were broken up, there would still need to be some regulation of NTT East and NTT West, given their huge market power. The two together account for more than 90 per cent of local fixed-line telephone calls, and each dominates its own half of Japan.

An official at a rival company said a break-up of NTT might improve competition in the fibre-to-the-home (FTTH) market – a method of providing broadband internet access to homes that is faster than the conventional digital subscriber line technology. Rivals to NTT argue that when they want to deploy FTTH by using the NTT network, their needs are given lower priority than those of the NTT sister company deploying FTTH.

For some, the recommendations do not go far enough. Sachio Senmoto, chief executive of eMobile, which recently received one of three new mobile phone licences offered by the government, has called for NTT DoCoMo itself to be broken up. NTT DoCoMo has a more than 50 per cent share of the mobile sector.