The Kanagawan Wave of Change: Pressures for Fundamental Reform of Japanese Telecommunications

Paul Cowling

ABSTRACT

This article describes the mounting pressures to introduce true competition to the Japanese telecommunications sector in what the author characterizes as the imminent third wave of reform. The author employs caricatured paradigms of 'cultural difference' and 'conspiracy theory' to analyze and interpret both the history and the present circumstances of the regulatory regime and NTT, Japan's dominant carrier. These paradigms exist as alternate explanations of the interaction between external forces that push for reform -- namely, foreign investors and governments -- and internal forces that attempt to preserve the status quo -- namely, the telecommunications regulator and NTT.

The current push for reform is contextualized by the author's discussion of the two previous waves: the government's privatization of NTT and introduction of the current regulatory regime under the Telecommunications Business Law in the early 1980s; and the negotiation of the World Trade Organization's Basic Agreement on Telecommunications in the mid-1990s. The author argues that the second wave fell short of its goal to diminish NTT's overwhelming dominance and to bring true competition to Japanese telecommunications. Further, because the pressures behind this second wave remain unrelieved, the author suggests that a third wave of reform, driven by globalization, is imminent, as evidenced by NTT's acquisitions abroad and by the significant level of foreign direct investment in NTT's domestic competitors. As NTT's aspirations globalize and as foreign investors gain influence as domestic carriers, the pressures for reform will emanate from both external and internal sources. The author suggests that the pressure building in this third wave may provide the necessary momentum, which the second wave lacked, to achieve true competition in Japanese telecommunications. At the same time, the third wave will cause the conspiracy theory and cultural difference paradigms to lose their coherence by dissolving the distinctions between foreign and indigenous influences.

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Citation: (2001) 59(2) U.T. Fac. L. Rev 117.
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