1．Overview of the NTT Act

The NTT Act (formally titled the “Act on Nippon Telegraph and Telephone Corporation, etc.”) is legislation that regulates the NTT holding company (hereinafter “NTT Holding”), which was formerly a state-owned enterprise with assets formed through public investment, as well as NTT East and NTT West (collectively referred to as “NTT Regulated Companies”).

The Act sets forth regulations concerning the scope of business (Article 2) and responsibilities (Article 3) of the NTT Regulated Companies, as well as shareholding obligations for NTT Holding (Article 4) and NTT East and West (Article 5). For NTT Holding, it also stipulates provisions on the appointment and dismissal of directors (Article 10), changes to the articles of incorporation, mergers, and disposition of surplus (Article 11), and the business plan for each fiscal year (Article 12). For NTT East and West, the Act requires approval for changes to the articles of incorporation, mergers, etc. (Article 11), business plans (Article 12), and transfers of key telecommunications facilities (Article 14). It further includes supervisory orders (Article 16) and reporting requirements (Article 17).

２．Ensuring Fair Competition as a Key Focus in the Future of the NTT Act

The need to revise the NTT Act has long been under discussion, and as of today (April 19, 2024), the revised NTT Act has passed the House of Representatives and is under deliberation in the House of Councillors. The amendments aim to abolish the obligation to disclose research results, allow foreign nationals to serve as directors as long as they constitute less than one-third of the board, and relax the requirement for prior approval by the Minister of Internal Affairs and Communications for the appointment and dismissal of directors, replacing it with a post-reporting system.

However, the most significant aspect is the supplementary provision stating that “consideration will be given to the potential abolition of the NTT Act.” In response, it is expected that following the enactment of the revised NTT Act, the Information and Communications Council (Telecommunications Business Policy Subcommittee, Special Committee on Telecommunications Policy), which has been studying this issue, will conduct in-depth discussions including the possibility of abolishing the NTT Act.

While many issues are expected to be raised in that context, this proposal focuses on clarifying the concerns related to fair competition among stakeholders in the telecommunications sector.

3．Issues Concerning Fair Competition

（1）NTT’s Experience with Business Constraints in the Context of Telecommunications Liberalization

In the telecommunications industry, the source of market dominance lies in control over infrastructure. This dominance stems from the bottleneck nature of telecommunications facilities—since such infrastructure is meant to be shared, owning and operating it confers significant competitive advantage. As part of the liberalization of the telecommunications sector, NTT was privatized but inherited an extensive nationwide telecommunications infrastructure developed during the era of Nippon Telegraph and Telephone Public Corporation. As a result, NTT held a dominant position in the market, possessing assets that ordinary companies could not feasibly acquire.

To address this imbalance, the NTT Act was introduced to impose regulations on NTT and ensure fair competition with other telecommunications providers.

NTT has argued that these regulations place it at a disadvantage in global competition and ultimately harm national interests. For instance, under its universal service obligation, NTT East and West were required to install copper lines when a user requested a landline (PSTN) connection—even in rural or mountainous areas—incurring significant economic costs. This burden was partially eased with the 2020 revision of the NTT Act, which allowed mobile networks (e.g., Docomo) to be used as substitutes in such cases. However, the fact that this issue remained unresolved until 2020 illustrates the extent to which the NTT Act has historically imposed disproportionately strict constraints on NTT. Thus, there is some legitimacy to NTT’s call for regulatory relaxation or repeal.

（2）Diverging Opinions Among Stakeholders Regarding the Necessity of Maintaining the NTT Act

If regulations were to be relaxed as NTT suggests, what would be the outcome? Here, opinions are divided between those who believe fair competition can still be maintained and those who believe it cannot.

Proponents of repeal argue that even if the NTT Act is amended or abolished, fair competition can be ensured under the Telecommunications Business Act. While the NTT Act imposes structural regulations such as defining the roles, duties, and scope of operations for NTT Holding and its regional subsidiaries, the Telecommunications Business Act governs actual competition policy.

This Act includes ex-ante regulations to prevent dominant carriers—such as NTT East, NTT West, and NTT Docomo—from abusing their market power. For example, it prohibits the misuse of information obtained through interconnection services, preferential or discriminatory treatment toward specific businesses, and unnecessary interference with equipment manufacturers. Based on this, proponents argue that the Telecommunications Business Act alone can ensure fair competition, rendering the NTT Act unnecessary.

In contrast, opponents argue that the current Telecommunications Business Act is insufficient for maintaining fair competition. They assert that NTT’s dominance—stemming from its unique inheritance of nationwide infrastructure from its public predecessor—must be explicitly addressed through law. Thus, the structural regulations imposed by the NTT Act are deemed essential for effective competition policy. These critics contend that if the NTT Act is to be relaxed or abolished, equivalent regulatory objectives must be incorporated into the Telecommunications Business Act or codified in new legislation mirroring the external constraints of the current NTT Act.

（3）Facilities-Based Competition vs. Service-Based Competition

As examined thus far, a central issue in the debate surrounding the NTT Act is whether competition in the telecommunications sector can be maintained if the Act is relaxed or repealed—and, in that case, whether the Telecommunications Business Act alone can sustain effective competition policy.

The connection rules that allow other telecommunications carriers (commonly referred to as NCCs) to use NTT’s telecommunications infrastructure are in place for both fixed-line networks (e.g., telephone lines and fiber optics) and mobile networks (e.g., MNOs). The fixed-line infrastructure is owned by NTT East and West, and relevant regulations require them to submit (guaranteed) service agreements to the Minister for Internal Affairs and Communications. Moreover, NTT East and West must obtain ministerial approval for interconnection agreements, maintain separate interconnection accounting, and submit and publish network function provision plans. These strict requirements represent heavy regulation of connection conditions.

In the mobile sector, there are also price cap regulations on user charges and obligations regarding the submission of interconnection agreements and accounting. These regulatory schemes under the Telecommunications Business Act effectively impose limitations on carriers with substantial infrastructure like NTT, thereby promoting “facilities-based competition.”

Such facilities-based regulation is more stringent for the fixed-line sector than for the mobile sector. This is largely due to historical reasons—the legacy infrastructure, including switching facilities and central offices, inherited from the Nippon Telegraph and Telephone Public Corporation. Conversely, the mobile sector is regulated across all carriers, including NTT Docomo, because (i) wireless networks rely less on physical infrastructure than fixed-line networks, (ii) demand for mobile services surged only after NTT’s privatization, and (iii) NTT does not have a significant competitive edge in the mobile sector compared to the fixed sector. As a result, regulatory obligations are lighter for mobile networks, and a certain degree of facilities-based competition has been achieved in this domain.

At the same time, strict investment and usage regulations imposed on NTT East and West have facilitated fair access to infrastructure and encouraged competition in the upper service layers—this is referred to as “service-based competition.” Policies related to facilities-based competition are, in effect, aimed at stimulating service-based competition. Under this model, when NCCs request interconnection with NTT East and West’s networks, NTT is obliged to respond under fair terms. As service-based competition intensifies, NTT’s fiber-optic network increasingly assumes the character of a public utility. From NTT’s perspective, these dual burdens—regulatory obligations and investment constraints—should be removed to allow greater freedom in infrastructure investment and fairer participation in service-based competition.

On the other hand, NCCs who rely on interconnection with NTT’s infrastructure argue that both the NTT Act and the Telecommunications Business Act have together supported a competitive environment. They oppose the repeal of the NTT Act, especially for fixed-line networks, fearing that it would make negotiations with the infrastructure-monopolizing NTT East and West more difficult.

（4）Key Considerations for Ensuring Fair Competition in Light of Changes in Infrastructure Requirements

However, the fundamental premises of this competition framework are gradually evolving—an observation that holds relevance for both proponents and opponents of the NTT Act’s repeal. Proponents argue that the mobile communications market is becoming saturated and that competition among MNOs is shifting toward non-network services such as apps and payments, which fall outside the traditional scope of facilities-based or service-based competition. Therefore, they claim, the NTT Act has minimal influence on today’s market competition.

Indeed, non-network services like apps and digital payments have become indispensable to consumers. Furthermore, platform providers—many of whom are not traditional telecom operators—hold significant market share in these domains. These services are increasingly governed by financial and IT regulations, suggesting that competition should no longer be evaluated solely through the lens of the telecommunications sector.

That said, telecommunications revenue still exceeds that of non-telecom services (e.g., apps, payments), and because telecom services lack viable substitutes—unlike non-telecom services—network outages due to large-scale failures or natural disasters can have severe societal consequences. Given this, telecom infrastructure must be robust, and such concerns arguably outweigh even those of fair competition.

Additionally, while both fixed and mobile networks are subject to service and price regulation, legacy constraints have led to particularly strict regulation in the fixed-line sector. As a result, companies investing in fixed-line infrastructure may face competitive disadvantages compared to mobile carriers. In extreme terms, the continued existence of the NTT Act may be hindering NTT from making large-scale, nationwide infrastructure investments that would also benefit mobile networks. If NTT’s investment in fixed-line infrastructure stagnates or declines, this could negatively impact mobile service provision across all carriers relying on NTT interconnection.

Meanwhile, opponents of the Act’s repeal argue that fixed-line infrastructure will become increasingly important in the post-5G era. They contend that this enhances the relevance of the NTT Act from a facilities-based competition standpoint. For instance, post-5G wireless communications will use higher frequency bands, which have weaker propagation characteristics than lower bands. This shortens the range over which signals can be transmitted and received. Thus, even though users A and B are communicating via wireless devices like smartphones, most of the actual transmission will rely on wired connections such as fiber-optic cables. Consequently, NTT’s role as the bottleneck infrastructure provider becomes even more critical in shaping market competition.

However, investments in these higher frequency bands—such as millimeter-wave (mmWave)—remain limited, and from a business standpoint, lower bands like sub-6GHz (especially “platinum bands”) currently offer better value. At present, fixed-line and mobile networks are managed and invested in as separate systems. For infrastructure development in higher frequency bands to progress, a government-led strategy is needed that promotes the integration of fixed and mobile infrastructure, supported by clear telecommunications and spectrum policy.

4．Key Issues

Based on the foregoing observations, the Policy Research Institute identifies the following as key issues for further consideration:

・Regulatory Framework: How should the dual ex-ante regulatory framework under the NTT Act and the Telecommunications Business Act, as well as the ex-post regulation under the latter, be structured moving forward? In this regard, it is necessary to examine whether to maintain the ex-ante corporate governance regulations under the NTT Act, whether to rationalize fixed-line regulations under the Telecommunications Business Act, and whether to strengthen its ex-post regulatory mechanisms.

・NTT’s Role and Public Utility Nature of Infrastructure: NTT’s fixed-line infrastructure, as previously discussed, has bottleneck characteristics and has functioned to some extent as a public utility, such as through its mandated interconnection obligations with NCCs under past telecommunications policy. If the repeal of the NTT Act grants NTT greater management freedom and enhances its status as a purely private company, should NTT still be expected—or required—to maintain and expand such public utility infrastructure?

・Infrastructure and Competition in the Post-5G Era: How should the competitive environment be designed to ensure appropriate use of communication infrastructure, particularly when integrating fixed-line and mobile networks in the post-5G era? Considering the physical characteristics of radio wave propagation and other technical factors, how should future infrastructure development be rationally implemented? Moreover, how should the balance between facilities-based and service-based competition be structured?

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