U.S. Telecommunications Policy Delegation

UNCLAS SECTION 01 OF 07 TOKYO 001117

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E.O. 12958: N/A
TAGS: ETRD ECON JA ZO EAGR
SUBJECT: U.S. Telecommunications Policy Delegation
Meetings in Tokyo, October 16-18

SUMMARY
--------------


1. (SBU) A USG delegation visited Tokyo October 16-
18 for telecommunications policy consultations at the
Ministry of Internal Affairs and Communications (MIC)
and for meetings with U.S. and Japanese Telecom/ICT
industry representatives. U.S. Coordinator for
International Communications and Information Policy
Ambassador David Gross led the delegation, which
included FCC Chairman Kevin Martin, USDOC/NTIA
Assistant Secretary for Communications and Information
John Kneuer, FCC Deputy Chief of Staff Emily
Willeford, FCC Acting International Bureau Chief John
Giusti, Deputy Assistant USTR Jonathan McHale, Senior
Advisor to USDOC Under Secretary for International
Trade Alex Feldman, State/EB/CIP Director for East
Asia/Pacific Communications and Information Policy
Richard O'Brien, and USDOC/NTIA Telecom Policy
Specialist Ashley Heineman.


2. (SBU) The delegation's half-day meeting with MIC
focused on agenda items for the November ITU
Plenipotentiary Conference and on other topics of
mutual interest, including broadband deployment,
growth of IP based applications, and mobile market
competition. Both sides noted significant overlap in
views on preventing mission creep at the ITU, with its
associated budget increases and undesired forays into
Internet governance. MIC explained its new
Competition Program 2010, which, if is as
comprehensive as advertised, could solve a number of
competition and market entry problems in Japan's
telecom market. A luncheon reception hosted by MIC
followed the consultations, with all of MIC's vice
ministers in attendance, along with CEOs and senior
officers from most of the major Japanese telecom
operators and equipment manufacturers. The delegation
also met with members of the U.S. Chamber of Commerce
in Japan for an overview of Japan's commercial and
economic environment and its implications for ICT
industries. Additional meetings with NTT, Softbank,
KDDI, NTT DoCoMo, and eAccess provided the delegation
with perspectives on the Japanese market from the
country's top telecom/ ICT companies. Embassy Tokyo
Emin Hans Klemm, Econ Counselor Daniel Fantozzi,
Econoff Nicholas Hill, and Econoff Marilyn Ereshefsky
attended various meetings with the delegation. End
Summary.

MIC CONSULTATIONS
--------------


3. (SBU) PRELIMINARIES -------------- The MIC meetings
began with a courtesy call on Minister Suga. The
Minister welcomed the delegation and expressed
appreciation that key personalities in the USG's
telecom policy team had traveled to Japan to meet with
MIC. In congratulating the Minister on his recent
appointment to the post in the new Japanese
government, Amb.Gross noted the close working
relationship they had already established while Suga
was a Vice Minister. Chairman Martin and A/S Kneuer
both noted the value in exchanging views on various
approaches to telecom policy and regulation. Minister
Suga expressed confidence in the continued U.S.-Japan
telecom/ICT relationship, both bilaterally, and in
multilateral fora such as the ITU. He expressed his
hope that the United States would support Dr. Yuji
Inoue, Japan's candidate for Director of the ITU's
Telecommunications Standardization Bureau. Following
the meeting with Minister Suga, the delegation joined
the MIC team for a half day session of consultations
on multilateral issues and topics of mutual bilateral
interest. Participants on the MIC side included:

Hideo Shimizu, Vice Minister for Policy Coordination
Hiroya Izumi, Director, Intl Affairs Dept.
Masaaki Sakamaki, Director, Mobile Satellite
Communications Div.
Chono Hikaru, Director General, International Affairs
Department
Yasu Taniwaki, Director Tariff (Competition Policy)

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Division, Telecom Bureau

Highlights of the discussions as follows:


4. (SBU) ITU BUDGET -------------- Amb. Gross noted that
the United States is a strong supporter of the ITU but
believes that the Union has not achieved all the
possible efficiencies and economies that are possible,
nor has it sufficiently prioritized its activities to
maximize effective use of limited resources. The
Union's management needs to do everything possible to
achieve full efficiency and effectiveness in its
delivery of activities related to its core
competencies and mandate within existing resources.
He said the U.S. view is that each Sector, with
membership input, must reexamine its budget and
programs to make sure that the activities in which it
engages offer the maximum value to members and the
most efficient use of its resources. For that reason,
the United States has a policy of zero nominal growth
and therefore believes that the contributory unit
should be maintained at the current level of 318,000
Swiss francs.


5. (SBU) Regarding sector membership, Amb. Gross
said that the United States also believes that the
role of the sector members in the ITU is vital to
helping the ITU retain its preeminent role in the
telecommunications field. Raising the level of
contributory unit for Sector Members would discourage
participation and the important contributions that
Sector Members make, particularly in the
Radiocommunications and Standardization sectors.


6. (SBU) Amb. Gross pointed out that the ITU Council
plays an extremely important role as the mechanism for
member states to provide active oversight of the ITU's
management and financial administration between
Plenipotentiary conferences. He said the United
States believes that it is absolutely essential for
member states to exercise this responsibility in order
to maintain the integrity and reputation of ITU
worldwide. He asked for support in adopting a
balanced Financial Plan, linked to the Strategic Plan
that will be adopted, that meets the Union's
priorities while maintaining the level of contributory
unit unchanged at 318,000 CHF per unit and the ratio
of contributory unit for the Sector Members at one-
fifth.


7. (SBU) The Japanese side also expressed great
concerns with ITU budget, but was of the view that it
was critical that contributions increase to address
problem, perhaps by increasing both the number of
sector members and their contributions. MIC noted
that the Radiocommunication (ITU-R) and
Standardization (ITU-T) sectors are pillar issues for
the ITU and it does not want them to slow down work as
result of a budget deficit. MIC said it is working on
a proposal to prioritize issues. Japan's official
stance is to work hard not to increase contributions
and not burden sector members too much. Considering
the situation, MIC believes some sort of increase is
unavoidable because it is extremely important for the
ITU to continue core functions. Personnel costs are
increasing, which are necessary to conduct activities.
As a first step, any contributory increases should be
voluntary.

Amb. Gross noted that members need to be cautious
whenever revamping cost structures and that it is
still not clear why such a large portion of the budget
goes toward personnel costs. MIC shared the U.S. view
on this point, and stressed the need to focus on
budget priorities with increases only as a last
resort.


8. (SBU) ITU ELECTIONS -------------- Amb. Gross said the
United States considers the leadership of the ITU to
be a critical issue for the Plenipotentiary Conference
and is highly interested in potential candidates for
the various leadership positions. He expressed the
United States' highest regard for Japan's candidate

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for Director of the ITU's Telecommunications
Standardization Bureau. He thanked Japan for putting a
candidate forward, noting that the bureau would be
well served if Dr. Inoue were elected, given his
strong management skills. Amb. Gross promised that
the United States would consider all candidates
carefully, particularly with respect to their
performance in the field as well as the positions and
views expressed by their governments on a range of key
policy issues. Regarding U.S. candidacies, Amb. Gross
pointed out that the U.S. has held a seat on the ITU
Council for many years and is a candidate for another
four year term. In addition, the U.S. has held a seat
on the Radio Regulations Board (RRB) as a
representative of the Americas for the last eight
years, and has a candidate for the seat, Ms Julie
Zoller, whom we hope Japan will support. MIC said
Japan would support the U.S. candidate and hope for
U.S. support for Inoue.


9. (SBU) FUTURE OF THE ITU -------------- Amb. Gross told
MIC that the United States believes the current
structure of the ITU is sound and provides sufficient
flexibility to respond to the needs of the membership.
At the same time, the ITU must continue to implement
measures to improve the oversight and accountability
of its functions. In the U.S. view, the ITU Council
should play an important role as the mechanism for
Member States to provide active oversight of the ITU's
management and financial administration between
Plenipotentiary Conferences.


10. (SBU) Amb. Gross said the ITU should collaborate
with other relevant organizations to ensure that the
growth in IP networking delivers maximum benefits to
the global community and he referenced several U.S.
submissions being made to the ITU on Resolution 101
(IP)-based networks; Resolution 102 on Management of
Internet domain names and addresses; Resolution 133 on
the Role of administrations of Member States in the
management of internationalized (multilingual) domain
names; and Resolution 130 regarding the Role of the
ITU in information and communication network security.


11. (SBU) MIC replied that Japan also believes the
current structure of the ITU should be maintained, but
wants to avoid situations where too much power is
given to one person or country. MIC is also concerned
that under the current structure, it takes too long to
reach decisions (in Council for example),making the
ITU is ineffective in some ways. Amb. Gross agreed
that the Council needs to become re-focused on policy
issues, and that it needs to be supported by elected
officials who can work together. He noted that
Council would benefit from sub-groups to work on some
issues such as finances.


12. (SBU) ICANN -------------- A/S Kneuer provided an
overview of the transition of the technical management
of the Internet to the Internet Corporation for
Assigned Names and Numbers (ICANN),and explained how
the MOU has functioned as the vehicle for transition.
A/S Kneuer also noted the public consultation
conducted prior to the recently updated MOU known as
the Joint Project Agreement (JPA) and he credited wide
support of ICANN's management with its willingness to
deal with concerns about transparency and
accountability. He said his agency's role is to now
make sure ICANN follows through and that it
incorporates the views of its constituents --
including governments as it moves forward. He
welcomed Japan's participation in the ICANN Government
Advisory Committee, as well as on a bilateral basis
with the USG. A/S Kneuer noted that ICANN will report
on its progress twice annually, which should not be a
simple reporting exercise but rather a mechanism for
ensuring real progress.


13. (SBU) MIC replied that Japan likes the JPA and
believes it will provide greater accountability and
transparency. MIC called it a "perfect match" to
their comments provided in the consultation process.
MIC offered its support and continued assistance. MIC

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said it understood that the EU will be preparing an
Internet governance proposal for ITU Plenipotentiary
and questioned whether the U.S. has any thoughts on
this.


14. (SBU) Amb. Gross replied that the USG has held
discussions with the EU, but that we don't know for
sure what they will do at Plenipot. In any case, the
USG will hold firm that ITU should focus on
infrastructure and security issues, believing that
this fulfills WSIS obligations and will enhance
cooperation.


15. (SBU) BROADBAND -------------- Chairman Martin provided
an overview of steps taken by the USG to facilitate
continued broadband expansion. He said a key goal of
the FCC is to ensure that no regulations exist to
impede this growth and that the United States had seen
progress in build-out over the past year.


16. (SBU) Mr. Taniwaki of MIC gave an overview of
the current broadband market in Japan, noting the
gradual decline of DSL and increase of fiber,
suggesting that fiber to the home may become
mainstream in the near future. A drastic shift to
broadband and a move from horizontal integration to
vertical was noted as well as a resulting need for a
new competition model to deal with such a shift. MIC
presented its "New Competition Promotion Program
2010," MIC's roadmap for new telecom (including
broadband) policies to be developed and implemented by

2010. Taniwaki said the goal is to strike a balance
between facilities based and service based competition
in order to maximize network capacity and services
available to the public. He said MIC needs to
encourage new technologies like WiMAX, and to get NTT
to open up its next generation networks to competing
services. He added that the transition to Internet
protocol based services, including IPTV, is just one
pillar of the 2010 policy review, but a very important
one. The review also will examine Net Neutrality,
more flexible dominant carrier regulations, and a
regulator model such as the FCC-- i.e., a single,
independent regulator for both telecom and broadcast.
Taniwaki acknowledged that creating such a regulator
would encounter difficult legislative hurdles.

17 . (SBU) Chairman Martin noted that MIC's 2010
program emphasizes the opening up NTT conduits, poles,
etc., as well as fiber networks. He asked MIC how it
intends to approach a policy on requiring NTT to open
its local fiber for competition. Taniwaki replied
that it was too early to say how this would be handled
but in his views, competitors will access to NTT
before they eventually build their own networks.
Currently, there is no requirement for NTT or others
to open up fiber but as an interim measure, it would
be needed. He said MIC has asked local governments to
develop specific plans for opening up government
networks for use by local carriers.


18. (SBU) UNIVERSAL SERVICE -------------- MIC reported that
Japan's universal service fund will start operation
this year. Amounts and contributions will depend on a
carrier's subscription numbers. Only carriers with
public switched networks will receive funding under
current structure. MIC will set up a study group to
look at universal service funding mechanisms and will
have a recommendations and a decision by the end of
next year.


19. (SBU) DIGITAL TV -------------- Chairman Martin provided
a U.S. DTV update. He noted that the U.S. standard is
not suitable for use with personal mobile handsets.
A/S Kneuer explained the U.S. voucher program for
transitioning households to DTV, as well as public
safety interoperability and advanced wireless
components of the DTV transition process. Legislation
makes NTIA responsible for administering a set top box
assistance program for consumers with non DTV sets.
He said that by early 2007, NTIA expects to have rules
in place for issuing assistance coupons, well in
advance of the required 2008 deadline.

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20. (SBU) MIC noted that 98% of households in Japan
can receive DTV.

MEETING WITH AMCHAM
--------------


21. (SBU) In a meeting with representatives of the
U.S. Chamber of Commerce in Japan, delegation members
briefed on their meeting with MIC and on their
upcoming meetings in Beijing. AmCham members stressed
that the USG must continue its economic engagement
with Japan and express hopes for a reinvigorated
bilateral economic dialogue leading to an Economic
Integration Agreement. Members suggested that given
U.S. telecom companies' lack of success in Japan, it
would take major reforms in the telecom sector to
attract new interest. Whether Prime Minister Abe
would move in that direction was unclear at such an
early stage in his term of office. Amb. Gross
underscored the USG's commitment to maintaining a high
level of engagement with Japan across the entire range
of our relationship.

MEETINGS WITH JAPANESE ICT COMPANIES
--------------
--------------

22. (SBU) Thanks to excellent advance work by
Embassy Tokyo, the USG delegation met with the CEOs
and senior executives of Japan's top telecom and ICT
companies. In discussions with NTT, Softbank, NTT
DoCoMo, KDDI, and eAccess the common theme on the
Japanese side was bringing broadband (fixed and
mobile) to all of their customers and moving into
deployment of fourth generation mobile services that
would converge the fixed and mobile networks. At
DoCoMo and KDDI showrooms, the delegation saw
demonstrations of mobile phone television and other
cutting edge applications now making their way into
the Japanese market. The delegation was particularly
impressed by Softbank's presentation on technology
that permits hi-quality video applications (movies,
games, etc.) to run over standard copper wires to
customers' residences.



23. (SBU) NTT MEETING -------------- The USG delegation met
during the afternoon of Oct. 16 with NTT President and
CEO Norio Wada and his most senior executive staff.
Discussions focused on challenges NTT faces in rolling
out fourth generation mobile services while trying to
manage fixed-to-mobile convergence in an uncertain
regulatory environment. The meeting underscored the
similarity of questions facing regulators and
incumbents in both our countries. The meeting, which
lasted for well over an hour, was also notable for NTT
including virtually its entire senior management team.


24. (SBU) During the meeting, NTT officials noted
that they are seeing declining market share in fiber
to the home due to competition with utilities. To
stay on top of the market, NTT will begin next
generation network (NGN) trials for its employees in
December 2006, and will expand to its regular customer
base in 2007.


25. (SBU) NTT frustration at not being permitted to
benefit from the efficiencies of sharing DoCoMo
services with NTT West & East. NTT also noted that
there needs to be incentives for sharing of network
facilities, which in the company's view, applies to
the network neutrality issue of burdening the carrier
with the cost of the network while the content
providers ride for free.

Amb. Gross questioned NTT on what they hope to
accomplish by moving to NGN. NTT response was that
they hope to achieve cost reductions, integration, and
new services. NTT said they are experiencing a
"hollowing out" in the public switched network and
that traffic is shifting to IP. Chairman Martin
enquired into NTT's experience with fixed-mobile
convergence (FMC). NTT replied that it is frustrated

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here, too, because while they are prevented from
offering FMC services - even a simplified bill - KDDI
can.


26. (SBU) SOFTBANK MEETING -------------- At Softbank, the
delegation was treated to a demo of new on-line home
entertainment services and a discussion of the
company's market strategy conducted by Masayoshi Son,
founder and CEO. Son stated that Softbank is the
first telecom company in the world to be totally IP
based and because of this, has not had to wait to
employ ITU NGN standards recommendations (Softbank
uses Cisco routers and other existing IT solutions).
One hundred percent of Softbank's broadband
subscribers are using VoIP, which has no charge for
domestic calls, $.02 per minute for international
calls, uses regular handsets, and according to Son,
consistently has the same quality as calls on the
public switched network. Son spent a significant
amount of time explaining its technology that permits
hi-quality video applications to run over standard
copper wires to customers' residences, and very little
time discussing mobile services. Son claims that
running copper on the last loop only, at distances up
to 1km, he can deliver 30MB service to a customer, but
that the majority of his applications need as little
as 4MB, with 8MB providing satisfactory capacity to
nearly any private consumer. He stated repeatedly
that he could accomplish comparable performance levels
in the United States, even with unconditioned wire and
with the longer drop loops in the United States
compared with Japan.


27. (SBU) Son expressed concern over the danger of
re-monopolization by NTT as it moves from copper to
fiber. For its fixed network operations, Softbank is
completely dependent on the copper in the last mile,
and under current rules, NTT can remove copper from
customer premises with four year notice to customer,
whether or not the customer agrees. Son suggested
that the competition issues created by this situation
should be of interest to the USG. The U.S. delegation
made no reply to that point.


28. (SBU) NTT DoCoMo MEETING -------------- CEO Masao
Nakamura chaired the meeting, which included senior
officers of the company. DoCoMo envisions that it
will phase out 2G services in the near future and will
stop the sale of 2G handsets to spur this transition.
DoCoMo predicts customers will not mind, since they
already replace handsets every 28 months at a price of
approximately 60,000 Yen (about $500). The company
says customers will also reap the benefits of more
efficient network management on 3G. For example, 3G
service is less expensive for data than 2G. DoCoMo
has begun the transition already and its flat rate
Imode package is available on a 3G network but not 2G.
The company hopes to get more spectrum from MIC under
a special allocation program as an incentive for
growing its 3G business. Its current 3G (800 Mhz)
space is close to capacity. Asked about recent
announcements that it would be launching Blackberry in
Japan, DoCoMo said that it would initially be pitched
purely for "business" use. DoCoMo officials noted
that they were preparing to deal with the launch of
local number portability, scheduled to start October

24. Under the new rules, customers can port phone
numbers for a nominal fee, but not their email
addresses served by the mobile provider. Given the
popularity of email addresses tied to mobile
providers, many expect a great reluctance by customers
to switch mobile phone companies.


29. (SBU) KDDI MEETING -------------- Hosted by Vice
Chairman Sadanori Amano and President/CEO Tadashi
Onodera, the discussion focused on KDDI's bid to
become the "ubiquitous solution company." KDDI is the
sole provider of both mobile and fixed line services
in Japan, if NTT and its DoCoMo subsidiary are
considered as separate companies. KDDI's strategy is
to offer triple play services on both of its
platforms, and to continue to look for alternate fixed
line deliver opportunities, such as via fiber owned by

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the TEPCO power company and partnerships with cable
television companies. KDDI has already launched 3G
mobile services and is developing a next generation
fixed and mobile integrated network. KDDI officials
said this "Ultra 3G" will integrate both mobile and
fixed access into the next generation infrastructure
to offer a wide range of services in a seamless
environment for the customer.


30. (SBU) EACCESS MEETING -------------- According to
eAccess founder, Chairman, and CEO Sachio Semmoto, the
key to the company's survival against the incumbent
NTT has been its ability to acquire the means to
compete across several platforms and to implement
innovative and cost effective solutions to technical
challenges. Even so, the company is frequently on the
defensive. Roaming agreements, which will be very
important to attract new customers, are still not
achieved. eAccess sees NTT as the only viable roaming
partner as KDDI is on a CDMA system and eAccess uses
GSM. The company does not think the other GSM
operator, Softbank, has sufficient coverage. So far,
negotiations with NTT have not met with much success.


31. (SBU) As an example of the "nimble and out-of-
the-box" thinking that has allowed eAccess to gain a
foothold in Japan, Semmoto showed the USG group an
Internet protocol residential distribution hub
specially built for the company by the Chinese firm
Huawei. Weighing less than 100 lbs. it replaces a
rooftop unit weighing nearly two tons. Asked whether
the company had tried sourcing from the USA, eAccess
said it contacted U.S. vendors, but only Huawei was
able to meet the specifications at the right price
point.


32. (SBU) This cable has been cleared by the
Washington agencies concerned. The single,
comprehensive cable is at Washington's request.

SCHIEFFER