11/83 ELECTRIC TELECOMMUNICATIONS BUSINESS LAW - VALUE ADDED NETWORK (VAN)

A survey by the Ministry of Posts and Telecommunications in April 1983 revealed that over half of the corporations surveyed wanted the VAN system normalized and were highly interested in the field. In July, 1983 the Ministry held a press conference where it made it clear that it wanted to submit a bill to amend the Electric Telecommunications Business Law, by the next regular session of the Diet, in order to permit the establishment of a proper VAN system. Otherwise, it was likely that the foreigners would walk away with the whole cake, as advances were proceeding rapidly overseas. He noted that there would be big problems if all data processing institutions were foreigners and if all Japanese data were held in foreign databanks. He recommended either an amendment to the law or a completely new law covering only VAN. In this relation Mr. Kobayashi, Chairman of Fujitsu, one of Japan's leading telecommunications equipment makers has strongly urged that the VAN business be totally liberalized as in the US, and that this be done at an early date. Most of the problem in the delay in enacting this kind of law in Japan is the dispute between the Ministry of Posts and Communications and MITI. The former wants to maintain all enveloping controls on the business in order not to lose its lock on the telecommunications system, while claiming that such controls are necessary in order to regulate the system to maintain it effectively, while MITI wants the system totally liberalized as in the US. The VAN business was liberalized to small and medium sized businesses with an amendment to the law in October 1982. Although the growth has been rapid, it has not been as fast as expected and in May 1983, in order to clarify definitions concerning small and medium enterprises, the Ministry of Posts and Communications released guidelines making it clear that the VAN business was permissible so long as over half of the members of the group using a VAN system were small and medium enterprises. One of the problems involved in the VAN business as well is what to do when foreign firms apply for the business as IBM Japan has done. IBM Japan in July 1983 announced its plans to provide VAN services to 30 firms, including supermarkets, wholesalers and manufacturers. The initial reaction of the Ministry of Posts was to accept the application, even though it is rare in most countries to permit foreign firms to engage in such businesses, out of concern over another US-Japan trade problem. However, even under treaties between the US and Japan, the telecommunications business is one concerning which reservations have been made concerning opening the sector to foreign participation. Reservations are also made in OECD treaties on the telecommunications sector. MITI on the other hand wants no restrictions, even on foreigners. Nevertheless, when the amendment was made to the law last year, it permitted the VAN business for all small and medium sized corporations, foreign or Japanese.

In September 1983, however, IBM Japan decided to sit on its application for awhile. The reason for this is that the subject of revising the law is up again for discussion, it feels it wiser to not force itself into the system by enforcing its legal rights, as this may backfire and lead to severe restrictions on foreign activities if a new law is passed. According to reliable Japanese sources, it is expected that the US Department of Commerce will once again call for the business to be opened up for foreigners. They say that the real force behind this is ATT, and that it is really a bluff in an attempt to get Japan's optical fiber technology.

THE JAPAN LAWLETTER, Nov-December, 1983. By Roderick Seeman