NTT gets green light to raise interconnection rates

31 Mar 2003

Japan’s dominant fixed line operator NTT has been granted far greater control over the tariffs it charges rivals to interconnect with its local network following a ruling from the Telecommunications Advisory Panel. The government body rejected complaints from 18 of NTT’s competitors, including KDDI and Britain’s Cable & Wireless, which claimed that the incumbent’s rates were already twice as high as those in many other industrialised countries. At the same time it approved a Telecoms Ministry proposal to allow NTT to raise interconnection rates by around 5% across the board.

NTT has claimed that it needs to raise its charges due to the cost accounting system it uses which calculates interconnection fees by dividing the cost of infrastructure by the amount of traffic on the network. Under the system, which NTT introduced in 1994 following strong pressure from the US government, tariffs increase when the volume of traffic falls. NTT says that the migration of an increasing proportion of voice traffic from its fixed line infrastructure to the country’s mobile networks means that it is currently failing to cover its costs.

By October 2002 NTT Group had 50.64 million PSTN lines in service, down from 52.1 million a year earlier. Although the PSTN subscriber base has fallen for five consecutive years, losses have been offset by increases in ISDN connections, cellular subscriptions and rising demand for data transmission services; at the end of September 2002 NTT claimed 10.74 million 64kbps equivalent ISDN lines, down from just over eleven million at the end of September the previous year. It has stressed, however, that the decline in ISDN numbers has been anticipated due to a shift towards DSL-based services.

Japan