KDD to Comment on Ministry of Posts and Telecommunications' "International Simple Resale (ISR) Deregulation Policy"

International Simple Resale (ISR) refers interconnection of leased lines with public switched network for basic voice services in international VAN services.

After ISR is deregulated, a large number of international telephone service providers, other than the existing type 1 international telecommunications carriers, are expected to spring up to provide international telephone services which are deeply embedded in people's life and economy.

With this in mind, in order to have the basis for fair and effective competition secured for a sound development of the international telephone service market, KDD desires the Ministry to set the framework for deregulation as follows:

(1) Abolish the present discriminatory regulatory process for new or revised tariff between type 1 carriers and type 2 carriers to uniformly apply the tariff notification system.
(2) Demand type 2 carriers to submit to the Ministry the same reports on revenues and telecommunication traffic that type 1 carriers are required to submit; keep track of the entire international telephone market to ensure fair and effective competition.
(3) In cases where a foreign business establishes a subsidiary or affiliate that acts as type 2 carrier to provide international telephone services, take such measures as to prevent the foreign company from bypassing the accounting rates or giving preferential treatment to the subsidiary or affiliate.

As for international Internet telephone service, KDD sees no problem in its deregulation in advance of ISR. As is with the same vein for ISR, KDD requests the Ministry to demand type 2 carriers that provide the international Internet telephone service to file reports on revenues and traffic.

A gist of the comment letter is as follows:

1. Basic voice service by ISR (other than Internet telephone service)

It is necessary for the following actions to be taken by the time ISR is deregulated:

(1) Abolish the present discriminatory regulatory process for new or revised tariff between type 1 carriers and type 2 carriers and allow type 1 carriers only to notify the Ministry of its tariff, instead of requiring an approval, as type 2 carriers are permitted to do.
(2) Require type 2 carriers to submit reports on revenues and telecommunication traffic that the Ministry requires type 1 carriers to submit, and keep track of the entire international telephone market to ensure fair and effective competition.
(3) When a foreign company wishes to establish a type 2 carrier subsidiary or affiliate to provide international telephone services, the Ministry should require the carrier to disclose its accounting records and submit a copy of the business agreement with the foreign company to prevent the foreign company from giving preferential treatment to its subsidiary or affiliate or from unfairly evading the payment of accounting rates. Also needed is a framework for preventing discrimination in such quality-related aspects as operation and maintenance standards and maintenance service intervals.
(4) The agreement reached at the WTO on the timing of deregulation (to be implemented in January 1998) should be respected. Before the deregulation takes place, it is necessary for the Ministry to set the framework described above.

2. International Internet telephone service

(1) International Internet telephone service is considered to be the same as the basic voice service by ISR. In light of the aspects common to these two services, it is necessary for the Ministry to institute measures to ensure fair and effective competition, such as by requiring type 2 carriers that provide the service to submit reports on revenues and traffic.
(2) If the Ministry plans to set different deregulation timings and measures ensuring fair and effective competition between ISR and international Internet telephone service, it must clearly define how the two services differ. KDD has no objection to the Ministry deregulating international Internet telephone service before it deregulates ISR, so far as the prerequisites for the deregulation are met, including setting up the report items and defining the international Internet telephone service.

3. Miscellaneous

KDD desires the Ministry to take the following actions on issues that the Ministry stated it will consider in the future:

(1) The Ministry should keep track of type 2 carriers' traffic relayed via third countries as currently done with type 1 carriers'.
(2) The Ministry must require type 2 carriers to request for approval for business agreements with entities in final destinations via third country as it requires type 1 carriers to do.
(3) If the international special type 2 carrier is an affiliate of a foreign business, the Ministry must implement safeguards to prevent the two parties from agreeing on an unfairly preferential network configuration or circuit connection.