TED Case Studies

I. IDENTIFICATION

II. LEGAL CLUSTERS

III. GEOGRAPHIC CLUSTERS

IV. TRADE CLUSTERS

V. ENVIRONMENT CLUSTERS

VI. OTHER FACTORS

I. Identification

1. The Issue

This case study explores the bilateral negotiation between Japan and the United States of America regarding to the deregulation of Japan's telecommunication market, especially interconnection rates that are said to be relatively high compared to that of other countries and work as quasi-trade barriers for foreign telecommunication carriers that intend to enter Japan's market. In this case study, analysis of bilateral negotiation between Japan and the United States are mainly explored. And after that, how the result of the negotiation affect Japanese telecommunication market and development of the internet and information technology is analyzed.

2. Description

• Introduction

The origin of this dispute goes back to the negotiations under the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy started at Denver Summit in 1997 that aims to eliminate the obstacles for reregulation and economic adjustment in Japan. The report issued based on this policy picked up several sectors that were still protective to foreign entrants such as telecommunication, housing, energy, financial service, etc and encouraged to eliminate the regulation that were recognized as quasi-trade barriers. And this report pointed out that Japan's telecommunication market was inefficiently closed to the new entrants with strict regulations that protect the existing market players such as Nippon Telegraph and Telephone (NTT) and Kokusai Denshin Denwa (KDD), and eliminating such regulations should strongly be encouraged to boost up the information technology in Japan toward the 21st century. Along with this initiative, Japan and United States started discussiong to reduce the interconnection rates, which is the issue of this case study.

Additional information is given at the part of 16. Economic Data.

• Japan's telecommunication market after World War II

However, before entering the follow-up of this negotiation process, reviewing the brief history of Japan's telecommunication market would be better to know the points of this dispute. Japan's telecommunication market has long been dominated by the semi-public telecommunication company, NTT. It was established in 1952 to aim the completion of the nation-wide telephone subscription applications and since then it dominated all the telecommunication facilities in Japan under the regulations set by Japanese government. Since then, Japan's telecommunication market has been dominated by only one monopolistic semi-public company, NTT, for over 30 years.

• First liberalization of Japan's telecommunication market

After such goal was accomplished in late 1970s, the demand for more competitive market situation has gradually grown, especially within business community, to introduce more sophisticated telecommunication services and technology development for economic advancement. The government recognized such need and started the implementation of the structural reform of the domestic telecommunication market. The break through of the deregulation appeared in 1984/85 with the enactment of two significant laws about the telecommunication market: the Nippon Telegraph and Telephone Law and the Telecommunication Business Law.(1) These two laws were enacted to aim the structural reform and privatization of NTT and to set the open and competitive market condition for new entrants. In this sense, the first and most significant turning point for Japan's telecommunication market has come in 1985 with the privatization of NTT and liberalization of its market.

Under these deregulations including the telecommunication rate reductions and diversified service offerings, Japan's telecommunication market was liberalized in formal, however, the market was still closed substantially, especially for foreign carriers because of the high tariffs and limited network capacity. These quasi-trade barriers were controlled by Ministry of Post and Telecommunications (MPT), which was changed as Ministry of Public Management, Home Affairs, Post, and Telecommunication (MPHPT) in 2001. On the other hand, MPT gave better treatment for the domestic new entrants (New Common Carriers, or NCCs) aiming to foster them and make the whole domestic market more competitively. At this point, the liberalization of the market made progress, at least for domestic new carriers.

However, such NCCs didn't always take easy path to grow enough to gain competitiveness with the former dominant carrier, NTT. The problem was that they didn't (and still now) have their own telephone circuits so that they had to access to NTT's local circuits to reach the consumers. Therefore, they had to pay charges for each access to the NTT's local circuits in order to offer service. This became the biggest obstacles for the NCCs and thus they didn't have enough shares in Japan's telecommunication market compared with NTT. NCCs asked the negotiation with NTT since then but it never reached agreement until 1995. In addition, NCCs started bring their complains to MPT and urged to improve the situation. On the other hand, NTT strongly opposed to change the rate of access charges, because the charges occupied a significant part of its total earninga and thus reduction of that charges might bring the significant damage to its operations. Under this situation, further liberalization of Japan's telecommunication market didn't go through smoothly.

At this point, the main obstacle of the closed market that led to the bilateral negotiations between Japan and the U.S. was recognized: the charges for the access to NTT's local circuits, that is, interconnection rates.

• Interconnection Rates and its problem

Then, what are "Interconnection Rates" exactly? Interconnection rates are the rates that the telecommunication carriers have to pay to access the local circuits that are owned by the other carriers, mainly the dominant carriers of each country who owns those circuits. In order to offer the telecommunication service, the carriers who don't have their own circuits have to access them to reach the customers. Usually, the processes of telephone calls require two accesses per each call, that is, sending and receiving information, so carriers pay two access charges per a call. In case of Japan, NTT owns almost all the local circuits so other carriers have to pay charges to NTT. The calculation of interconnection rates were based on the Long Run Incremental Costing model (LRIC)(2) regulated under Agreement on Market Access for Basic Telecommunications Services in General Agreement on Trade in Services (GATS).

However, this interconnection rates differ considerably among countries. For example, based on the Trade Summary of Japan issued by the office United States Trade Representative (USTR), the rates in Japan is "over four to ten times as high as similar rates in the United States, quadruple rates in the U.K., and over two-and-a-half times those of Sweden and France."(3) These differences may be based on the differences of internal economic situations among countries, such as income level or consumption propensity, though they are not discussed in this case study. However, such differences become the obstacles for entering the telecommunication markets for foreign new carriers. Especially if the new carriers try to enter the foreign market whose interconnection rates are much higher than that of their native country. It requires extra costs and discourages them to enter. And this would cause the dispute between the United States and Japan that is explored in this case study. As noted above, the interconnection rates in Japan are much higher than that of the United States. And the United States argues that this extremely higher rate doesn't reflect the LRIC model and makes NTT possible to keep its monopolistic position, so it is unfair to preserve such rates for not only domestic carriers but also foreign carriers, especially. Based on this argument, the United States asked for Japan to have bilateral negotiations to eliminate this quasi-trade barrier.

• Enhanced Initiative on Deregulation and Competition Policy

At Denver summit in June 1997, the United States and Japan started negotiations about this issue: Enhanced Initiative on Deregulation and Competition Policy. It included several other sectors, which seemed to preserve unfair protective regulations that discourage foreign companies to enter Japan's markets. About the telecommunication sector, the declaration issued at Denver stated that the United States and Japan set up the specialist meeting about this sector for further deregulation including the implementation of the Agreement on Basic Telecommunication Service under GATS.(4) Substantial goals of this sector were declared on the report published at Birmingham in the United Kingdom in May 1998: Japanese government intended to propose the amendment of Telecommunication Business Law at the parliament in Spring of 2000 so as to introduce LRIC models for the calculation of interconnection rates as soon as possible and implement the introduction of LRIC model by the end of 2000 if all the conditions are permitted. This means that the proposal for reducing the interconnection rates that was the main issue of this case study was announced for the first time in May 1998. After Birmingham, the debate between the United States and Japan continued along with this proposal.

• Substantial debates under the Enhanced Initiative

However, substantial debate did not begin soon after Birmingham. It started in January 2000, about half a year before the deadline: July 2000. Both the United States and Japan agreed that the agreement would be achieved at Okinawa (not the part of summit, though) when the Third Joint Status Report on The U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy is issued. However, the meeting didn't go through well because of their severe differences of the proposals of both countries about the liberalization processes of Japan's telecommunication market. Both countries agreed to reduce the interconnection rates of Japan, but there remained considerable differences about how much it should be reduced. While the United States asked for rapid liberalization by reducing the rates as quickly as possible, Japan didn't want to liberalize the market so quickly as the United States claimed.

One of the reasons that Japan opposed the rapid liberalization was that the dominant carrier, NTT, strongly resisted further liberalization by claiming that it would hurt the stable operations. NTT asked the government of Japan for protecting the telecommunication market from rapid and drastic liberalization. Since the NTT has been semi-pubic owned corporation, there remained very strong connections between NTT and the bureaucrats and politicians. In addition, The Japanese government is still the biggest shareholder of the NTT (owns 59%), so hurting NTT by achieving further liberalization would hurt Japanese government as well. The Japanese government, therefore, had to listen to the claims from NTT, no matter how it was appropriate. As a result, economically as well as politically it is difficult for Japanese government to achieve further liberalization of the telecommunication market. More specifically, the United States initially proposed that the interconnection rates should be reduced about 41% within a year (2000), and Japan Proposed the phase-in reduction of them about 22.5% within four years, both based on the LRIC model. The first meeting about this issue was held in January 18th and 19th, but thus no agreement about the rates of reduction was achieved.

At this point, the United States started mentioning the sanctions under Dispute Settlement Understanding (DSU) of World Trade Organization (WTO) or Article 1377 of the Omnibus Trade and Competitiveness Act of 1988 (Telecommunication Trade Act of 1988) which provided the President to initiate bilateral or multilateral negotiations to ensure market opportunities by stating that the calculation of interconnection rates might violate the Agreement on Basic Interconnection Services under GATS, that is, LRIC model. The United States announced that the decision of whether the certain measures for sanction was taken or not would be made by the end of March 2000. However, Japan strongly opposed the argument that the United States provided and claimed that Japan's interconnection rates were exactly based on the LRIC model and unilateral sanction from the United States to Japan would violate the WTO rules.(5)

• Criticisms and progresses of the debate

The Telecommunication Committee of Japan announced on February 9th that the sharp reduction of the rates would be put off, because it would hurt the operations of NTT regional network carriers. If it is implemented, NTT would have to raise the access charges for consumers to compensate the losses. However, there were many criticism appeared from not only the United States but also domestic NCCs, claiming that the calculation of the rates was not transparent to public, the rationalization of NTT operations was not clear, and the information of NTT's operation was not publicized. Though MPT tried to persuade NTT and to make compromises with the United States by implementing the 22.5% reduction within two or three years, NTT strongly opposed it. Therefore, there was no agreement about the rate of reduction in Japan at this point.(6) The next meeting was held on March 21st and 22nd in Tokyo between the vice minister level personnel. In this meeting, the United States compromised by proposing that the rate should be reduced about 22.5% within two years. However, Japan again expressed the sense of difficulties to implement the reduction that the United States suggested, so the meeting was again finished with almost no accomplishment. Therefore, they agreed that this issue would be settled under the minister level meeting right before the summit in July. And since the United States proposed the slower reduction of rates, both countries started seeking the point of compromise under its proposal after this meeting. (7)

While the U.S. and Japanese gvernment expressed their resolutions and discussed the issue to set the appropriate levels of interconnection rates, there were another battlefield about this issue within the domestic telecommunication carriers (NCCs). Basically, all of the NCCs are positive in applying the LRIC model in Japan. Japan telecom argued that the irrationally high interconnection rates was a quasi-barrier for NCCs to enter the market, and thus it allowed the NTT to preserve monopolistic status in the market. In addition, it deprive the NTT of incentive to be effective in business and kept the interconnection rates high substantially as well (8). TT NET argued that the current model of interconnection rates calculation includes several problems., such as the difficulty in ensuring the transparency of costs, excluding the uneconomical costs, and anti-competitive structure that the reduction of demand was bound to the rise of the charges (9). They independently made their own models and calculated the appropriate interconnection rates on their reports. In addition, they also claimed that the reduction of interconnection rates as the Japanese government first proposed was far below the appropriate level of reduction that would ensure the more competitive market, that is, open the door for the NCCs to enter the market. They also claimed that the model that the Japanese government constructed was not appropriate for further reduction of the rates and transparency of the calculations of the rates. NTT also submit its own models, but it was far less innovative than those of NCCs (10). Ministry of post and telecommunications, therefore, invite the private sectors (including individuals) for the alternative LRIC models. Based on the information available on the website of the MPT, such alternative models were introduced in the rules finally set.

To finish the severe debate for the reduction of the interconnection rates in Japan, on June 30th, MPT announced that it would accept the proposal that the United States suggested in March, that is, to achieve the 22.5% reduction of the rates within two years. At this point the proposal that Japan would bring to the meeting with the United States was almost completely formed, though it still might have oppositions from the United States and NTT. For the rate of reduction was the minimum level that the U.S. could accepted, though the agreement was achieved, and it clearly stated that more reduction would be possible. In addition, for the NTT, the result wasn't acceptable because it would further hurt its operation unless it implemented further reconstruction of its management to reduce the cost.

The third and final meeting was held right before the summit, from July 10 to 18 in Tokyo with the minister level personnel. And at this meeting, the agreement was finally accomplished between the United States and Japan. After the formel meetings between President Clinton and Prime Minister Mori at Okinawa, the accomplishment of the agreement was announced on July 22nd. Based on this agreement, the United States and Japan completed to make the Third Joint Status Report on the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy that stated the accomplishments and future proposals. All the agreement that the United and Japan intended to make was included in this report.

• Agreement on interconnection rates

The main points of the reduction of the interconnection rates agreed were that it would be reduced approximately 20% by the end of the fiscal year 2001 from April 2000, and the reduction of the rates would be continued in fiscal year 2002 as well under the revised model of the calculation of the interconnection rates. Though Japanese government (especially MPT) resisted the proposal that the United States brought, the results of this agreement were relatively closer to the idea of the United States rather than that of Japan. Owing to this agreement, further liberalization of Japanese telecommunication market was promised.

• Benefits of this agreement

U.S. officials evaluated this agreement from not only an international aspect but also a domestic aspect. This liberalization would promote the foreign carriers to enter Japan's $130 billion telecommunication market, the second largest in the world, and at the same time, Japanese domestic carriers, both that already entered the market and that would enter the market in the near future, could have more competitiveness to gain more shares in the market that has been dominated almost monopolistically by NTT regional carriers. Because these interconnection rates affects all the carriers entering the market except NTT, who own almost all the circuits, as officials said.(11) Therefore, this agreement can basically benefit all the telecommunication carriers in Japan.

In addition, this result also benefits the consumers by lowering the access charges that they pay when using the telephones. For example, Japan Telecom, KDDI (merged company of KDD, DDI and Nihon Ido Tsushin (IDO), and TT Net (Tokyo Tsushin Network) intend to lower the rates of local access that the consumers pay, along with the reduction of the interconnection rates. They can pay less to NTT and obtain more users. And consumers can use the telephone with lower charges. It clearly does well for both these carriers and consumers. Obviously, this also applies to the carriers that provide long-distance calls and cellular phones, because they also pay interconnection charges to NTT. They would lower the charges that they impose to the consumers as well. Since more and more people are now using cellular phone in Japan, the effect of this agreement would be so huge.

To compete with other carriers, NTT regional carriers would be urged to lower the dominant rates of access charges for consumers that have been unchanged over a quarter of a century. Though NTT claims that it would hurt the financial conditions, however, NTT also benefits from this result because this gives incentives to improve its operations and thus bring further efficiency. In addition, this reduction would expand the market, so NTT could earn more not only from increasing number of other carriers but also from the consumers both who newly start using the telecommunication related services and who increase their use of it.

Finally, as the United States believed at the beginning of this dispute, this agreement would clearly help newly entering Japan's telecommunication market for foreign carriers, because this reduction of rates would take away the quasi-trade barrier, that is, the relatively high interconnection rates, and bring less difficulty in entering Japan's market for them. Therefore, it is clearly true that this agreement benefits both existing and new players of all in whole Japan's telecommunication market.

• Substantial effect of the agreement

Currently the interconnection charge of one use of the line is 5.57 yen (approximately 5 cents) per three minutes. And since one call requires sending and receiving the data, NCCs have to pay 11.14 yen per a call to NTT. However, the basic fee of the local call that NTT provides to the consumers is 10 yen per 3 minutes per a call. In this situation, it is impossible for NCCs to provide the services to consumers with less than 10 yen per a call and thus hinder their entrance to the local call market. NCCs cannot keep enough competitiveness under this situation, because if they try to compete with NTT, they have to provide services at least 10 yen per a call, but it makes the service unprofitable for NCCs and thus oppress their financial condition.

However, based on the result of this agreement, the charge lowers to less than 4.5 yen per one use. Therefore, it makes NCCs possible to provide the services less than 9 yen per a call and thus NCCS can obtain enough competitiveness with NTT. This opens the door for them to enter the monopolistic telecommunication market, say, further liberalization of the market.

• Impact on the information ages

Since this dispute is quite new, just accomplished on July 2000, there are few research and economic estimation brought from this agreement. However, almost no one who engages in this dispute doubt that this result is sure to promote further progress of communication and information technology. Both Japanese and domestic NCCs (except NTT) welcomed this agreement. Telephone is still a most important and widest-used tool of distance communication. Internet communication is widely accepted to the people all around the world but in most part it also requires the use of the telephone circuits. This means that reducing the cost of telephone charges also affect the number of internet connections. The access charges that the internet service provider (ISP) imposes reduced gradually in the late 1990s and along with this reduction, the number of internet access increase drastically (see 16. Economic Data). In addition, the discout rates of the telephone charges that NTT introduced to the private use (ex. Tele Hodai, or Tele Choice ) contributed to the increase of the time and number of internet connection. Therefore, further liberalization of the telecommunication market, that is, reducing the irrational costs and improving the efficiency, has critical effect to the future expansion of internet connections.

At the same time, increasing competition under more liberalized market has strong effect to the development of more sophisticated information technology. Telecommunication carriers and companies related to its market compete with each other to gain more shares in the market by developing better technologies. Obviously such technologies would give consumers better environment for smoothier communications. And continuing circulations of consumers' demand for more efficient communication and companies' intense effort to develop more sophisticated technologies would promote further progress of the information technology. And the reduction of the interconnection rates would be the motivation to start moving such circulations. Thus, the reduction of interconnection rates are essential to further liberalization.

Notes:

1. The Law Concerning Nippon Telegraph and Telephone Corporation, Telecommunication Business Law
2. About the details of LRIC, see 8. Legal Standing below.
3. United States Trade Representative, 2000 National Trade Estimate on Foreign Trade Barriers
4. Enhanced Initiantive on Deregulation and Competition Policy
5. Nikkei January 21, 2000
6. See this sites (Japanese only): http://www.mpt.go.jp/policyreports/japanese/group/denki/PDF/001018d56105.pdf
7. Nikkei March 24, 2000
8. http://www.mpt.go.jp/policyreports/japanese/group/sonota/model-iken_4.html
9. http://www.mpt.go.jp/policyreports/japanese/group/sonota/model-iken_3.html
10. http://www.mpt.go.jp/policyreports/japanese/group/sonota/model-iken_5.html
11. Nikkei July20, 2000

3. Related Cases

You can search the related cases listed below by using Sort Cases

• The best category for this case study is "Information" category in "Industry" variables. However, there are no other case study in its category. Therefore, other variables and categories are introduced to find the related cases as listed below.
• There are several cases related to Japan. Sort cases by putting "Japan" in "Country Name" variables.

  • Apple
  • Blowfish
  • Bluefin
  • Cherryjp
  • Chopstik
  • Driftjap
  • Gillnet
  • Hawksbil
  • Ivory2
  • Japanair
  • Japanoil
  • Japanpl
  • Japansea
  • Japcedar
  • Japgolf
  • Japrice
  • Jpgolf
  • Jpshrimp
  • Jwhale
  • Lucky
  • Minamata
  • Pactuna
  • Pearl
  • Pokemon
  • Thaiwoman

• Some of the disputes listed above are between Japan and the United States, same as this case.

  • Apple
  • Cherryjp

• There are several cases related to liberalization. Sort cases by choosing "Liberalization" in "Measure" variables.

  • Co2trade
  • Ivory2
  • Nafta
  • Silkroad
  • Iranpipeline
  • Ukraine-IT

4. Draft Author: Daisuke Okuyama

II. Legal Clusters

5. Discourse and Status: Agreement amd complete

• Agreement was achieved and liberalization process is now in progress, as explained above.

Under the agreement accomplished in July 2000, the interconnection rate would be lowered approximately 20% from the rate in April 2000 by the end of fiscal year 2001. And it is expected to decline further within the fiscal year 2002.

6. Forum and Scope: Japan and Bilateral

• Japan and the United States of America, bilateral.

Based on the agreement that pursues further liberalizations of the certain sectore both in Japan and the United States, Enhanced Initiative on Deregulation and Competition Policy issued in June 1997 at Denver summit, the United State and Japan started discussing several issues including telecommunication market. Every year at the summit, they published the report (Joint Status Report) that announced the result of further liberalizations.

To achieve the proposal that was states in the Enhanced Initiative on Deregulation and Competition Policy, the United States and Japan held the bilateral meetings several times in the first half of 2000. And finally, in July 2000. The result of the meetings was announced in the Third Joint Status Report issued in July 2000 at Okinawa summit. And the reduction of the interconnection rates was also included in the report.

7. Decision Breadth: 2

• Japan, the United States of America, and mainly other industrial countries who has telecommunication companies that have the potential to enter Japanese market.

Since Japan's telecommunication market is so huge, worth of approximately $130 billion, there are so many telecommunication carriers both in Japan and the foreign countries that are interested in this market. Therefore, the liberalization of Japan's telecommunication market can affect many carriers' decision-making, that is, whether to enter the market or not.

For example, after the agreement, there are several carriers in Japan (NCCs)that announced that they intended to newly enter the local call market, that was long dominated by NTT. In addition, there are several foreign carriers that hold the share of Japanese carriers, for example, British Telecom and AT&T have the share of Japan Telecom, and there are also some foreign carriers that have already start providing services in Japan such as MCI World Com. They seems to start playing actively in Japan along with the result of liberalization achieved this time.

8. Legal Standing: Agreement

• Agreement on Market Access for Basic Telecommunication Service in General Agreement on Trade in Services (GATS) as multilateral framework, especially the Long-run Incremental Cost Model as internationally accepted model to set the interconnection rates.
• Interconnection Cost Calculation Rules in Japan
  The way to set the rates are regulated under "The rules on connection rates"(translated by author) that was enforced on November 18, 2000, which was the part of "The telecommunication business law (of 2000). Interconnection rates regulated on this rules were applied retroactive to April 1, 2000.
  The study group of the LRIC model defines the LRIC as follows. That is, it is calculated based on the cost of the network newly built with the cheapest and most effective facilities and technologies available at the moment with the same ability to cope with the same size of the present subscribers and traffics.
  Under these rules, interconnection rates must follow these criteria below:
  
  
  • The interconnection rates should be based on the property and costs of the network newly built with the cheapest and most effective facilities and technologies available at the moment.
    
  • The cost of the interconnection rates are the sum of the management and operation cost of the designated facilities, the cost of the rented capital, the cost of owned capital, and the tax of the corresponded profit. The calculation of each cost and the system of the interconnection rates are regulated on these rules as well.
  
  In detail, see the following sites (Japanese only):

  
  

  Report of the study group of the LRIC model
  

  The draft of the rules on connection rates (Aug. 2000)
  

  A ministerial ordinance of the rules on connection rates (Oct. 2000)

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: Asia

b. Geographic Site: East Asia

c. Geographic Impact: Japan

10. Sub-National Factors: No

11. Type of Habitat: Temperate

IV. Trade Clusters

12. Type of Measure: Liberalization

• Agreement on Market Access for Basic Telecommunication Service in General Agreement on Trade in Services (GATS)
• Section 1377 of the Omnibus Trade and Competition Act of 1988

13. Direct v. Indirect Impacts: Direct

• Direct: impact to telecommunication companies
  
• (Indirect: impact to consumers)

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: Yes; Interconnection rates

b. Indirectly Related to Product: Yes; Telephone Circuits

c. Not Related to Product: No

d. Related to Process: Yes; Culture

15. Trade Product Identification: Information service (telephone circuits)

16. Economic Data

As noted above, this issue is quite new and enough research has not been taken to anticipate the possible effect of the result of the agreement. However, there are several indicators that can be useful to know the background of this issue. Therefore, in this section, the economic data about Japanese telecommunication market is mainly introduced.

What can be found in the first data is that both telephone and internet access charges are not always higher than that of other cities. Many criticize that the information related charges in Tokyo is expensive, but it is not always true. Therefore, in case of internet use, the charges in Tokyo is not always expensive. However, it is obvious that this statistics doesn't mean that the liberalization is not needed.
On the other hand, compared the charges of local call to other cities (set the rate in Tokyo as 100), the one in Tokyo is most expensive. It is not clear whether this is because of the high interconnection rates, but this clearly gives the other countries the reason to attack Japan about the high telecommunication charges. Therefore, in this point, further liberalization seems to be needed.

As this data shows, the effect of the liberalization proposed in the Third Joint States would be so huge, especially for NTT West. For NTT, the way to avoid the worst scenario, it seemed two choices remained, one was to resist further liberalization, and the other was to reconstruct their operations to improve their financial conditions. NTT took these two options at the same time to preserve enough competitiveness in the market, though some criticized that their plan for reconstruction was so incomplete. However, as a result of the agreement, NTT would be required to implement further reconstruction of their operation. Because the result would require NTT from implementing the reconstruction along with the worst scenario. Therefore, based on this data, apart from the problem of the reliability, it can be said that further liberalization is not always good for NTT.