Foreign Pressure and Domestic Politics of Adjustment in Japan's Telecommunications Services

Abstract

The 1985 reform brought about a historical change in Japan's telecommunications business by liberalizing common carrier services. Many of the New Common Carriers (NCCs) since then have entered the various segments of the telecommunications service market in Japan, which had been monopolized by NTT or KDD. At the same time, the newly established Telecommunications Business Law empowered the Ministry of Posts and Telecommunications (MPT) to regulate the entry of NCCs for the purpose of demand-and-supply adjustment. With this regulatory authority, MPT was capable of restricting the number of new entrants and, by so doing, influencing the structure of Japan's telecommunications service market. MPT's adjustment policy, nonetheless, was not always effective in the presence of foreign pressure. The U. S. government, in particular, pressured its Japanese counterpart to allow more NCCs to enter the market, hoping that freer entry would provide U. S. carriers and telecommunications equipment manufacturers with greater business opportunities in Japan.
This study examines how foreign pressure may be related to domestic politics by analyzing three cases of demand-and-supply adjustment in Japan's telecommunications services: (1) satellite service, (2) cellular service, and (3) international service. In each case, foreign pressure was applied to change the adjustment policy in favor of foreign carriers and manufacturers. However, the cases differed from one another in the extent to which foreign pressure was effective in promoting a policy change; foreign pressure brought about a drastic change in international service (abandonment of the adjustment), a moderate change in cellular service (revision of the adjustment), and no significant change in satellite service (continuation of the adjustment).
I argue that the variance in outcome is explained by the domestic politics in Japan rather than foreign pressure per se. Domestic politics here refers to the coalition politics among the domestic actors that had interests in the regulation of telecommunications services. The analysis in this study suggests that foreign pressure was most effective in changing the demand-and-supply adjustment policy when such change was supported by major domestic actors, especially large users of telecommunications services. Although users in general are assumed to be silent in the politics of regulation, large business users had a way to represent their interests through Keidanren. In short, the effectiveness of foreign pressure depended on the domestic political environment of the target country-most important of all, the preferences of the major actors involved.