Japanese lawmakers mull reform of NTT Law

Japanese lawmakers are looking to scrap laws that require telecom giant NTT to publicly divulge research results of its R&D teams, which the company says undermines its global competitiveness.

The country's ruling Liberal Democratic Party (LDP) last week formed a project team to discuss potential reforms to the so-called "NTT Law," which also stipulates that the government keep more than one-third ownership of the former state monopoly. The LDP will make its recommendations in November at the earliest.

At the same time, the information and communications advisory council of the Ministry of Internal Affairs and Communications is mulling over changes to the NTT Law with a final report due around next summer, according to Nikkei Asia.

At stake is the future of the telco operator's next-generation infrastructure dubbed the Innovative Optical and Wireless Network (IOWN) that is currently in development.

The move comes on the heels of comments made by NTT President Akira Shimada that existing regulations are hampering the carrier's new technology push.

"We've been refused [by potential partners] worried about doing business with us because of the disclosure requirement," said Akira at an earnings conference earlier this month, pointing out "that parts of the law no longer fit the times."

The IOWN, which would slash power consumption in telecommunications to one-hundredth of current levels, is a cornerstone of NTT's 6G ambitions. Reports said more than 100 partners worldwide are involved in its development. With a projected 2030 launch date, NTT has a five-year headway to get it off the ground – more than enough time to build a global ecosystem to buttress its 6G technology.

Outdated law

Major carriers in Japan are governed by the Telecommunications Business Act, but NTT is also bound by another set of regulations that were promulgated in 1985 at the start of its semi-privatization.

Besides public disclosure of research results and the government's mandatory ownership stake, another point of debate around the NTT Law is the universal service provision that required the telco giant to continue providing landline service at a loss.

Landlines were essential 38 years ago and NTT was required to deliver a nationwide service even in unprofitable areas. With the widespread adoption of mobile phones, NTT's landline revenues have long gone south.

Last year, this part of the NTT Law became more superfluous when the Telecommunication Business Act was revised, designating broadband – such as fiber-optic connections – as a universal service.

According to Nikkei Asia, some in the LDP have called for scrapping the law entirely and amending the Telecommunications Business Act into an omnibus law.

Meanwhile, reports said rival carriers KDDI and Softbank are wary about changes in the NTT Law and their adverse impact on domestic telco competition given the dominant player's size and clout.

Full privatization looms on the horizon

But the lawmakers' move to reform the NTT law is motivated by more than just the desire to put Japan ahead of the 6G race.

NTT may be on the path of full privatization, as reports last week revealed the government wants to divest its shares of the company to help fund growing defense costs. The government is doubling Japan's annual defense spending to 2% of its gross domestic product in the fiscal year beginning 2027. It plans to spend 43 trillion yen (US$301 billion) over the next five years.

The government's 34.25% stake in NTT was recently estimated at 4.8 trillion yen ($32.8 billion), based on the stock price. It is the single largest shareholder of the telco carrier. But the NTT law would have to be revised before the shares can be sold.

Akira Amari, a former LDP secretary-general, said share sales would reduce the government's influence on NTT's operations and help increase the company's international competitiveness.

However, there are concerns about Japan's economic security should NTT's ownership rules be changed. Some observers said if foreign companies – which collectively have a one-third stake in NTT – are allowed to buy more shares, their increased influence could affect the telco's policies.

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— Gigi Onag, senior editor, APAC, special to Light Reading