WASHINGTON—The Bush administration and Japan made little progress last week in talks on interconnection fees charged by NTT DoCoMo, putting on hold a relatively minor dispute with potentially enormous trade implications as phone traffic steadily migrates to wireless systems around the world.
Working-level talks between the two sides were held here last Monday. While U.S. and Japanese officials did not resolve the matter, trade policy moved forward on another front as the U.S. Senate approved fast-track trade legislation late Thursday.
The trade legislation, which includes provisions to aid U.S. workers hurt by global competition, now goes to a conference committee to reconcile differences between House and Senate bills. U.S. telecom equipment vendors, anxious to sell to high-growth wireless markets abroad, have lobbied aggressively for congressional passage of trade promotion authority legislation.
President Bush wants to sign legislation into law before a key World Trade Organization (WTO) ministerial meeting in November in Doha, Qatar.
The U.S. government contends mobile-phone interconnection charges in Japan and Europe are too high and not based on cost. Japan replies that DoCoMo’s interconnection fees, while higher than those in some countries, are still lower than those charged by mobile-phone operators in Europe.
Indeed, in Europe, the outcry over wireless interconnection fees is only dwarfed by the massive failure of firms that bid on third-generation (3G) mobile-phone licenses.
The difference, said a U.S. trade official last week, is that European regulators—like the United Kingdom’s Oftel—take the mobile-phone interconnection issue seriously. Japan, he said, does not. The official said interconnection fees charged by DoCoMo to complete calls on its network (10 U.S. cents a minute) are higher than those charged in Korea, Israel, Brazil, Russia and Taiwan. He said mobile-phone interconnection fees in the European Union range from 11 U.S. cents to 18 U.S. cents.
AFX News last week reported Oftel decided to give the European Competition Commission six more months to complete its investigation of mobile-phone call termination fees.
Japan argues its labor costs are higher than in other countries and that it is actually reducing wireless interconnection charges. The Embassy of Japan did not return a call for comment, but government and DoCoMo officials previously called U.S. interconnection complaints baseless.
The interconnection issue has caught fire in Europe and other regions where the party calling a wireless subscriber pays and where mobile-phone penetration is extremely high. U.S. wireless carriers have not adopted or been forced to adopt the calling-party-pays approach, so it is hard to compare overseas interconnection fees with the cost to carriers of terminating mobile calls in the states.
U.S. trade officials early next month plan to travel to Japan for more negotiations on DoCoMo’s interconnection fees. Then, in late June, the U.S. trade representative (USTR) will issue a report on the status of U.S.-Japanese telecommunications trade issues, including mobile interconnection.
In an April report on trade barriers, USTR said DoCoMo—the high-profile Japanese mobile-phone carrier—and others are setting interconnection fees too high.
“There is no explanation of how these exorbitant rates are calculated,” the USTR report stated. “In addition, DoCoMo has used its market power (serving 39 million subscribers) to insist that it be allowed to set prices for both incoming and outgoing calls for its network. This puts new entrants at a severe disadvantage, as they are unable to compete on price—one of their most important strategies.”
On the surface, the DoCoMo interconnection trade dispute between the United States and Japan appears to be about mobile-phone service competition in Japan. On one level, it is. The Japanese government still holds considerable interest in NTT DoCoMo, the number-one wireless operator there. As such, the Bush administration fears DoCoMo can use its market dominance to leverage what others pay to connect to its network.
But on closer examination, the trade dispute is about something bigger—the realignment of telecommunications sectors here and overseas. Wireless is becoming the dominant communications technology around the world, giving wireless carriers enormous economic clout.
It is telling who brought the DoCoMo interconnection issue to the attention of USTR. It was not the U.S. wireless industry. No U.S. wireless firm has publicly lobbied USTR to lean on Japan.
So who is making all the fuss about mobile-phone interconnection fees in Japan and Europe? Turns out, U.S. wireline carriers—including Wall Street-battered long-distance firms with falling profit margins—are driving the issue. More calls originating on wireline networks are being terminated on wireless systems. That trend is expected to continue. The wireline firms are feeling the pinch.
“Due to poor policy and lack of regulation, mobile operators have abused their dominant position to turn mobile termination into a ‘cash cow,’ ” CompTel, a trade group of local and long-distance competitive carriers, told USTR earlier this year.
But there’s another view. Gregory Sidak of the American Enterprise Institute has questioned the wisdom of using USTR to influence domestic regulatory policy of another country. GW
