Network effect, open access,and standards strategyToshiya Jitsuzumi, Dr.Kyushu University
Fruits of the Market Maximizing Maximizing corporate consumers’ profits welfare Without governmental intervention
Conditions for market dynamism• Perfect/Sufficient Information• Inclusiveness • No externality • No public goods• Perfect Competition http://www.dot- communications.co.uk/assets/images/HeadersLogos /terms_and_conditions.jpg
Features of the telecom industry Network Effect http://www.bourncreative.com/wp- content/uploads/2012/09/capitalize-on-uniqueness.jpg Natural Monopoly
Network Services Quality of experience (QoE) depends on the variety of services: The more the variety is, the better the QoE becomes.http://www.imagine-net-tech.com/images/network.jpg
Impacts of network effect 2 The winner takes all Wider in a matured market. service variety More Potential More friends for better attractive profitability network Larger Largerinstalled installed base base More customers More friends
TBL in Japan: Duty to interconnect Article 32 (Interconnection with Telecommunications Circuit Facilities) Any telecommunications carrier shall agree to the request for interconnection of its telecommunications circuit facilities being installed by said telecommunications carrier from other telecommunications carriers with telecommunications facilities of said other telecommunications carriers, except the cases listed in the following items: i. Where there is a risk of hindering the smooth provision of telecommunications services ii. Where there is a risk that said interconnection may unfairly impair the interest of said telecommunications carrier iii. Where there are due reasons specified in the applicable ministerial ordinance of the MIC in addition to the cases listed in the preceding two items
TBL in Japan: Designated Telecom FacilitiesArticle 33 • Interconnection with Category I Designated Telecommunications FacilitiesArticle 34 • Interconnection with Category II Designated Telecommunications Facilities
TBL in Japan: Designated Telecom FacilitiesArticle 35 (Order, Etc. Concerning Interconnections of Telecommunications Facilities)1. Where a telecommunications carrier, in spite of other telecommunications carriers proposal to enter into an agreement to interconnect telecommunications facilities of said telecommunications carrier with telecommunications facilities of said other telecommunications carrier, does not accept entering into a consultation or where said consultation fails to come to an agreement, the Minister shall, upon petition of said telecommunications carrier who proposed said agreement, order said other telecommunications carrier to start or reopen the consultation, except the cases where it is deemed that such interconnections fall under any item of Article 32 and an application for arbitration is filed under the provisions of Article 155 paragraph (1).2. Where, in addition to the cases stipulated in the preceding paragraph, in spite of ones proposal to enter into an agreement to interconnect telecommunications facilities between telecommunications carriers , the other party does not accept entering into a consultation or where said consultation fails to come to an agreement, the Minister may, upon request of one of said telecommunications carriers, order the other telecommunications carrier to start or reopen the consultation when it is deemed such interconnections especially necessary and appropriate to promote the public interest, except the cases where an application for arbitration under the provisions of Article 155 paragraph (1) is filed.3. Where a consultation between the parties concerned about the interconnections to telecommunications facilities of a telecommunications carrier fail to come to an agreement with respect to such details as the amount of money to be received and paid by them or other details including terms and conditions of interconnections, a telecommunications carrier who installs telecommunications facilities to be connected to said telecommunications facilities of the telecommunications carrier may apply for an award to the Minister. However, in the cases where the parties filed an application for arbitration in accordance with the provisions of Article 155 paragraph (1), this shall not apply.4. When consultations between the parties concerned, except the cases stipulated in the preceding paragraph, after an order has been issued in accordance with the provisions of paragraph (1) or paragraph (2), fail to come to an agreement with respect to such details as the amount of money to be received and to be paid by them or other details including terms and conditions of interconnections, the party (or parties) may apply for an award to the Minister.….
TBL in Japan: Technical standardsArticle 41 (Maintenance of Telecommunications Facilities)(1) Any telecommunications carrier installing telecommunications circuit facilities shall maintain its telecommunications facilities (except those specified in the applicable ministerial ordinance of the MIC as those having a minor influence on the users benefit in the cases of damage or failure, etc. thereof) for use of its telecommunications business in compliance with the technical conditions specified in the applicable ministerial ordinance of the MIC.(2) Any telecommunications carrier providing universal telecommunications services shall maintain its telecommunications facilities (except telecommunications facilities stipulated in the preceding paragraph) for use of its telecommunications business for providing said universal telecommunications services in compliance with the technical conditions specified in the applicable ministerial ordinance of the MIC.(3) The technical conditions of the preceding two paragraphs shall be so specified as to ensure the following matters: i) The provision of telecommunications service shall not be extremely hindered by damage or failure of telecommunications facilities. ii) Quality of telecommunications services shall maintain an appropriate level. iii) Secrecy of communications shall not be violated. iv) Telecommunications facilities of users or other telecommunications carriers connected shall not be damaged or impaired, nor shall functions thereof be impaired. v) The demarcation of responsibilities between the telecommunications facilities of a telecommunications carrier and those of others shall be clearly stipulated.
TBL in Japan: Technical standardsArticle 42 • Self-Confirmation of Compliance of Telecommunications Facilities by Telecommunications CarriersArticle 43 • Order to Comply with Technical Conditions
Accelerated penetration of mobile service Mobile phone penetration PHS penetration At the end of Fiscal Year Source: MIC（www.soumu.go.jp/joho_tsusin/eidsystem/ market01_01.html）