Japan revises NTT Law to bolster the telco’s global ambitions

• Japan has revised its NTT Law to boost global competitiveness, scrapping the research disclosure mandate
• The revised law allows foreign directors on NTT’s board, but critics are demanding more discussions
• The government is also now required to review NTT regulations and to consider abolishing the law completely by 2025, despite significant opposition

Japan’s parliament has revised the law governing Nippon Telegraph and Telephone (NTT), the country’s largest telco, in what is being pitched as a bid to enhance its global competitiveness but which is regarded by critics as a threat to domestic telecom service competition. 

The move comes amid rapid advancements in the global telecom landscape and growing concerns over Japan’s ability to keep pace with international rivals: NTT’s argument has long been that the law, which came into effect decades ago, before the development of the internet and digital services market, is holding it back from competing with the global cloud services giants. However, NTT’s domestic rivals are concerned that the national operator, already the market leader in fixed and mobile service provision, will be granted greater freedom in the future and become an even more powerful rival. 

The revised NTT Law (also referred to as the NTT Act), which was approved by the House of Councilors with support from the ruling bloc, introduces several key changes. Notably, NTT will no longer be obligated to disclose its research results, a requirement that was seen as hindering the company’s competitiveness as it made it difficult for NTT to engage in joint research with partners that didn’t want the R&D outcomes to be publicly disclosed. NTT president and CEO Akira Shimada had previously expressed concerns that the existing regulations were impeding the company’s partnerships and technology push.

Additionally, the telco giant will now be permitted to appoint foreign nationals to its board of directors, although they will be limited to occupying less than one-third of the seats.

Proponents of the revision argue that the changes will enable NTT to attract global talent and foster innovation, particularly in the development of next-generation technologies related to 6G, though NTT doesn’t appear to be struggling to team up with telecom partners in this regard — see NTT ramps up 6G efforts with a trio of vendor partners.

However, the move has faced opposition from NTT’s major rivals, including KDDI, Rakuten, and SoftBank. In a joint statement, the companies noted that they intend to “comply” with the new revision but called for more careful policy discussions, expressing concerns over the potential impact on fair competition and the provision of universal services. 

The companies emphasised that a total of 181 parties, including network operators and local governments, had highlighted the importance of fair competition, universal service obligations, and economic security when expressing their opinions on the review of the NTT Act. They strongly urged for these matters to continue to be considered by the Information and Communications Council of the Ministry of Internal Affairs and Communications.

The revised law also includes a supplementary provision that requires the government to review NTT-related regulations and consider the possibility of abolishing the law altogether by 2025:  Critics argue that this timeline may lead to hasty debates and insufficient consideration of the broader implications for Japan’s telecommunications industry. KDDI, Rakuten Mobile and SoftBank noted in their joint statement that they continue to oppose the total abolition of the NTT Law. Such an abolition would allow NTT to merge its fixed line units (NTT East and NTT West) with mobile division NTT Docomo and remove restrictions on the range of business areas in which NTT can operate.   

As discussions continue, the government’s Information and Communications Council is expected to conclude its deliberations on reviewing NTT’s universal service obligation for fixed-line telephone services by this summer. The outcome of these discussions will likely shape the future landscape of Japan’s telecom sector and NTT’s role within it.

- Joana Bagano, Contributing Editor, TelecomTV