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Japan's Telecommunications Overview

In summer 1999, the giant Nippon Telegraph and Telephone Corp. (NTT) will be divided into two local telephone companies (NTT East and NTT West) and a long distance telephone company (NTT Long distance). Before that, NTT, the world's biggest telecom company with annual sales of $71 billion (as of 1998, http://www.businessweek.com/1998/14/telecom/tccos.htm), monopolized local service *and* dominated the long distance market.

Three major companies, Daini-Denden, Japan Telecom, Nihon Kosoku Tsushin, and Tokyo Tsushin Network, entered the long distance market after it became competitive in 1985. These "New Communications Companies" (NCCs) had 23% share (based on number of calls) in 1997, while NTT had 77%. International telephone market is dominated by KDD with 60% share.

Pay $700 to Have Telephone

When you arrive in Japan and install a telephone, you will find you have to pay $700. You pay refundable 72,000 yen for the commonly called "telephone subscribing right" (Denwa Kanyu Ken). Monthly basic charge for home telephone is 1,750 yen in big cities (areas with more than 400,000 subscribers).

No flat rate options are provided for local calls. On top of paying 1,750 yen monthly charge, you pay 10 yen per 3 minutes (4 minutes between 11 PM to 8 AM) for each local call. This local toll charge is a major obstacle to the proliferation of the Internet in Japan. It was an obstacle to a wide-spread use of electronic bulletin board systems (BBSs) among citizens. It will be an obstacle to future electronic commerce, network computer, virtual desktop, or any other network based applications. (Who wants to window-shop virtual storefronts if you have to pay for that? Who wants to store your data on the network, instead of your hard disk, if you have to pay each time?)

NTT introduced Limited Flat Rate plans in 1995 to target heavy Internet users. These are only for late night and early morning. With a total monthly fees of 2,550 yen, one of the plans provides flat rate local calls to specific two numbers between 23:00 and 8:00. Though a step to right direction, the service is condemned by the Internet nerds that it further deteriorated their not-so healthy life schedule. The time restriction surely prevents children, housewives, or any ordinary daytime workers from extensively using the Internet. (A good thing, you may say...)

Figure 1  Japan's Telephone Service Rates

(Inside parentheses are Pacific Bell charges.)

72,000 yen installation (refundable) and 800 yen contract fees
(PacBell: $34.75, nonrefundable, $10.00 for lifeline)

Monthly basic charge, business:    2,600 yen
                      residential: 1,750 yen
(PacBell residential: $11.25 flat rate
                      $ 6.00 measured
                      $ 3.00 lifeline )

Local calls (toll call only)
8:00-23:00   10 yen/ 3 minutes
23:00-8:00   10 yen/ 4 minutes
(PacBell residential: none for flat rate.
 For measured, 3 cents for first minute, 1 cent for additional;
 30% off in evening, 60% off in night/weekend.)

Limited Flat Rate plans
Plan 1 (2 local destination numbers):
1,800 yen plus basic charges (total: 2,550 yen)
Plan 2 (2 neighboring area numbers):
3,600 yen plus basic charges (total: 5,350 yen)

Long Distance Telephone

Long distance calls also are expensive in Japan, where "long" is not so long in the small country, one twenty fifths of the United States in size. In the United States, "10 cents per minute anywhere anytime" plans are common, and prepaid phone cards are even cheaper and proliferated. The figures below show the rates for long distance calls from homes and from pay phones in Japan. The official rates, which use a rather complicated per-10-yen calling time measure, are converted to per-minute rates. Pacific Bell's intra-LATA call rates are shown for comparison.

Figure 2  Official NTT Rates (Time allowed for 10 yen):

              8:00-19:00  19:00-23:00  23:00-8:00
Local                3min.           4min.
Neighboring -20km   90sec.           2min.
20-30km             45sec.           1min.
30-60km             36sec.           1min.
60-100km    22.5sec.    30sec.      45sec.
100km-      20sec.      22.5sec.    30sec.

(Weekends and holiday charges correspond to the 19:00-23:00 charges.)

Figure 2  NTT Rates (per 3 minutes, miles), Yen

              8:00-19:00  19:00-23:00  23:00-8:00
Local                   10                 10
Neighboring -13m        20                 20
13-19m                  40                 30
19-38m                  50                 30
38-63m            80           60          40
63m-              90           80          60
(Weekends and holiday charges correspond to the 19:00-23:00 charges.)

Figure 3  Pacific Bell's Local Intra-LATA Rates, Cents

           8:00-17:00  17:00-23:00  23:00-8:00
 0-12m(Local)  0           0            0
13-20m        25          20           15
21-40m        36          29           22
41-70m        40          32           24
70m-          42          34           25

(Weekends and holiday charges correspond to the 23:00-8:00 charges.)

Figure 4   Pacific Bell's Pay Phone Rates, Cents

          8:00-17:00  17:00-23:00  23:00-8:00
 0-12m(Local) 35          35           35
13-20m        55          45           40
21-40m        70          60           50
41-70m        75          65           55
70m-          90          70           70

(Weekends and holiday charges correspond to the 23:00-8:00 charges.)


One of the interesting features of the Japanese telephone market is the wide spread use of the Integrated Subscriber Digital Network (ISDN). Unlike the American telephone companies, NTT made a major investment in ISDN since the 1980s. Their ISDN service - INS (Information Network System) - caused an Internet-like hype around 1985. Though the fever having soon receded, the explosion of the Internet in the 90's revitalized the veteran products. There were only 27,000 ISDN lines for 64Kbps speed and 560 ISDN lines for 1.5Mbps in 1990. The numbers increased to 330,000 and 6,000 respectively in 1995. Then the installation doubled every year, reaching 1,701,044 for 64Kbps and 27,997 for 1.5Mbps in September 1998.

The ISDN rates are not cheap. The initial installation is 17,100 yen (the rate you pay when you convert your telephone to 64Kbps ISDN). The monthly ISDN basic fee is 2,890 yen. The 10-yen-per-3-minutes local toll charges still apply.

Yet, fees of your plain, old telephone (POT) being already expensive, you may feel ISDN relatively cheap. One 64Kbps ISDN line accommodates two telephone connections. Two POT lines monthly basic (1,750 x 2 = 3,500 yen) is cheaper than 2,890 ISDN monthly basic. ISDN flat rates were introduced in February 1996, again only between 23:00-8:00.

Figure 5  ISDN Rates (INS Net64, 64Kbps Service), Yen

                Residential    Business
Installation            72,800 (Same as telephone)
Monthly Basic       2,830      3,630
Toll Charge             10 /3m local (Same as telephone)
Flat Rate 1 fees    2,400      4,600  (2 local numbers, 23:00-8:00)
Flat Rate 2 fees    4,800      9,200  (2 neighboring area numbers, 23:00-8:00)


Though appropriate in current technological environment, critics claims, the ISDN proliferation delays deployment of Digital Subscriber Lines (DSL). A widespread deployment of one particular technology (particularly by a monopoly) sometimes hinders adoption of newer technology (possible example: Minitel in France). No DSL services are provided in Japan as of early 1999. NTT announced in December 1998 a plan for experimental service by Fall 1999.

In the United States, telephone companies are rushing to DSLs largely because of competition from the cable modems. DSLs are telephone companies' key products to compete with faster connection of cable medems. In Japan, the penetration of cable TV (Toshi-gata CATV) is about 10 percent, compared with U.S.'s more than 60%. It is debatable if telephone companies in Japan are threatened by the cable TV industry.


NTT's current biggest hype is the Open Computer Network (OCN), an Internet service using NTT's vast infrastructure. The TCP/IP based OCN network provides "best-efforts" connections data communication. Whatever it is, consumers are happy if it provides cheaper Internet access. The cheapest "OCN Dialup" service is 2,300 yen up to 15 hours connection per month (plus traditional 10-yen-per-3-minutes local call charges). Doesn't sound particularly attractive. The 128Kbps "OCN Economy" is a flat 38,000-yen-per-month service for continuos connection. A big improvement from previous dedicated lines. Yet it is still 10 times more expensive than some 1.5Mbps ADSL services provided in the United States. Pacific Bell () introduced in January 1999 a 1.5Mbps downstream (minimum 384Kbps guaranteed) and 128Kbps upstream ADSL service for $39 per month if installed on one year term. The equivalent "OCN Standard," which has a 1.5Mbps speed, costs 350,000 yen.


Ministry of Post and Telecommunications (MPT)
Nippon Telegraph & Telephone (NTT)