WASHINGTON-The United States and Japan will resume talks this fall in hopes of heading off a full-blown trade dispute concerning foreign access to Japan’s booming next-generation pocket telephone business, which American trade officials argue is subject to a major telecommunications accord agreed to by each nation last October.
The decision to hold further discussions on Personal Handyphone Systems came at a July 21 meeting in San Francisco between Japanese and U.S. Trade Representative negotiators held to review a 1994 agreement to liberalize telecommunications equipment procurement practices of Nippon Telegraph and Telephone Corp., which privatized in 1985 but still is two-thirds owned by the Japanese government.
USTR argues that one of the three PHS consortia licensed by the Japanese Ministry of Posts and Telecommunications, NTT Personal Communications Network Inc., is bound by terms of last year’s bilateral procurement pact because NTT owns 76 percent of the wireless telephone partnership, exercises some control over the affiliate and maintains business ties with it.
Cable & Wireless plc, Marubeni Corp. and Itochu Corp. each own a 5 percent share of NTT Personal, while Japanese banks hold the remaining 9 percent. Procurement procedures applied to NTT are mandatory, but are voluntary as they relate to NTT Personal. USTR said NTT Personal has ignored repeated requests to comply with NTT procurement requirements.
“We found that to be unacceptable,” said a USTR official. “We hope to resolve the issue at the working level,” added the official, who would not rule out other options if neccesary.
Japan believes NTT Personal is not bound by the NTT procurement procedures because it is a brand new company comprised of NTT and various private firms as opposed to being a spinoff, like NTT Mobile Communications Inc., which provides cellular service.
“It’s [PHS market] going to be very competitive,” said Haruka Saito, a Washington, D.C., representative for Japan’s MPT. “Subjecting the NTT subsidiary to various procurement guidelines would not be fair because they have to compete with other companies,” added Saito.
PHS, which took Japan by storm last month, is cheaper than cellular service but otherwise technologically limited. Calls cannot be switched between the small, low-power base stations, or microcells, found every couple blocks or so in Tokyo and Sapparo today. Service is expected to be implemented in Osaka by October. As a result, the small pocket phones do not work in cars or for pedestrians who want to walk and talk.
Personal communications services, the next generation of pocket phones in the United States, will have all the operational capabilities of cellular and perhaps more. But in densely populated areas, like Tokyo, PHS works just fine. Sales are booming, prices of competing cellular carriers are plummeting and the Japanese government optimistically predicts 38 million PHS customers by 2010. For that reason, U.S. firms want a piece of the action.
“NTT has a choke hold on this market and pretending that these are independent companies (with NTT Personal Communications Network) does not make it so,” said Chris Padilla, a spokesman for AT&T Corp.
The other two PHS consortia are DDI Pocket Phone, a unit of long-distance carrier DDI Corp. and the Astel Group.
In Tokyo last month, representatives from both sides also reviewed separate 1994 trade accords covering non-NTT government procurement of telecommunications equipment and cellular phones. Working-level talks also focused on telecommunications deregulation in Japan.
While some American telecommunications sectors are unhappy with results from those trade agreements, Motorola Inc. said cellular subscribership on the North American analog system it built to serve the Tokyo-Nagoya region has increased tenfold (363,000 customers of March 1995) in the year since the highly publicized 1994 cellular trade agreement between Japan and the United States.
Given that success and high hopes for PHS in Japan and the Asia-Pacific region overall, it appears unlikely U.S. officials will let up in their effort to gain a solid foothold in the lucrative PHS market.
