WASHINGTON-While the Bush administration pursues a traditional carrot-and-stick approach to prod Japan into further liberalizing its wireless market, a Japanese telecom firm needing a wireless play is mounting an unorthodox challenge to the Japanese establishment by using high-powered American lawyers to sue the government in hopes of halting plans to give 800 MHz third-generation mobile-phone spectrum to NTT DoCoMo Inc. and KDDI Corp.
Such a legal challenge is not necessarily common in Japan, where the business of government and industry has been governed for years by strict protocol.
But the lawsuit filed this month in Tokyo District Court by Softbank, which wants to add 3G service to its portfolio of landline telephone and broadband offerings, ironically may signal Japan is indeed on the road to recovery in making the kind of structural reforms that Prime Minister Koizumi believes are necessary for the country’s economic rebirth.
The 3G 800 MHz spectrum proposal was announced by Japanese officials in August.
“This is a particularly critical time for the Japanese economy to benefit fully from the technological revolution that is taking place in telecommunications. Unless the competitive bonds are removed from industry, Japan will not have the benefit of the most advanced technology at the lowest cost,” said Robert Dwyer, an attorney on Softbank’s legal team in the United States.
Dwyer helped Kuwait file more than $100 billion in claims against Iraq before the United Nations Compensation Commission as a result of damages from the Gulf War.
Joining Dwyer are his law partner, David Boies, who battled Microsoft Corp. in the government’s antitrust suit against the software giant and represented Al Gore in the recount of the 2000 presidential contest; Henry Goldberg, a telecom lawyer who was general counsel in the old White House Office of Telecommunications Policy during the Nixon and Ford administrations; and Donald Baker, a former antitrust czar at the Justice Department who led efforts to break up AT&T Corp. two decades ago.
“It is important that government apply the principle of `complementary regulation,’ which means giving heavy weight to competition policy and consumer welfare in making decisions affecting new entry and technology,” said Baker.
The Japanese Embassy did not have a comment on the Softbank suit.
To underscore what they believe is favoritism in the 3G 800 MHz spectrum allotments, Softbank’s lawyers pointed to the Japanese practice of amakudari, the post-retirement of government bureaucrats in big business.
In this case, Softbank listed scores of officials from Japan’s Ministry of Public Management, Home Affairs, Posts and Telecommunications who left for executive posts at NTT, NTT DoCoMo, NTT Data and KDDI.
“I have measured the regulatory process in Japan against the standards of fairness and openness that apply in the United States. I regret to say that the process of deciding the 800 MHz license issue is neither fair nor transparent,” said Goldberg.
The Bush administration shares some of the same concerns.
Just over a week ago, the U.S. trade representative issued a 53-page report recommending regulatory reforms it wants to see in wireless, high-tech and other sectors in Japan. Without naming names, the USTR report called on Japan to promote competition in the wireless business.
“Given the high degree of concentration in Japan’s mobile market and high consumer prices, the United States urges Japan to consider expanding opportunities for additional mobile operators to enter this market, including in the 2010 and 800 MHz bands,” stated USTR. “Where incumbent operators are underutilizing spectrum, or are in the process of moving subscribers to new services in different spectrum, MIC [Ministry of Internal Affairs and Communications] should consider re-allocating older spectrum to other operators on a technology-neutral basis.”
There are currently three cellular operators in Japan, DoCoMo, KDDI and Vodafone K.K. DoCoMo and Vodafone both offer W-CDMA services, while KDDI offers CDMA2000 service. In the United States, there are six nationwide wireless carriers. Softbank apparently embraces TD-CDMA for 3G in Japan.
USTR also said Japan should investigate whether NTT DoCoMo’s mobile-phone termination rates are set at reasonable and competitive levels and that it ensures competitive neutrality in retail rate-setting. In addition, USTR urged Japan to make spectrum-management policies (licensing, allocation, testing and fees) more transparent and that it pursue flexible use of license spectrum as a means of fostering efficient and innovative use of the airwaves.
The Bush administration also wants Japan to make unlicensed spectrum available for radio frequency identification technology and to refrain from levying fees on license-exempt devices.
NTT DoCoMo declined to comment on the USTR report.
USTR appears to be trying to apply pressure on Japan, while giving it credit for progress made to date.
“An open, competitive market is critical for our trade relationship with Japan, and regulatory reform is key to achieving that,” said Deputy U.S. Trade Representative Josette Sheeran Shiner. “Our continuing work with Japan to clear away the thicket of regulations that has clogged commerce and hindered growth in that country has worked to create a significantly improved business environment and expanded market access opportunities.”
