The Japanese Spectrum Policy and collusion

Introduction – Soviet ministries in U.S and North Korea Monarchy in Japan

Walt Mossberg, the journalist of Wall Street Journal, was invited to the Telecommunication Law class on March 11, 2008 as a guest speaker. He called two giant cell phone companies,Verison and AT&T, “Soviet Ministries” as a metaphor because these companies have controlled the telecommunication business platform and not allowed the innovative business challenges by other business entities. They have decided what kind of cell phones get made, who can run applications on them. Mr. Mossberg thinks this retards innovation and hurts consumers, and the FCC has been taken captive by these so-called Soviet Ministries.

This metaphor reminds me of the Japanese notorious governmental department,the Radio policy department of the Ministry of Internal Affairs and Communications (MIC). Among the policy-makers in Kasumigaseki( the central city of governmental institutions in japan like Washington D.C in U.S) , we call this division “the radio village governed by the North Korea empire” as a joke. It is the most undemocratic governmental department in the democratic country.

Japanese Spectrum Policy promotes collusion?

The roots of the Japanese Spectrum policy started from the 1950s, right after the loss in World War II. Before WW II, no private company was allowed to broadcast because of the regulation of the Imperial Japan. After Kakuei Tanaka, a powerful prime minister, opened up the market for private company in the early 1950s, many companies applied for TV and radio licenses. Because there were too many applicants for the limited number, he made the rule that gives the license to the applicant if many companies collude to one. Since then, collusion has been the official rule of “ the radio village.”

This collusion protects the incumbent broadcasters from competition by the new entrants. Most of the major networks obtained the license in the early 1950s. Since then, there has been no substantial changes in this industry. No bankruptcy, almost no merger & acquisition. Players have always been the same in this fifty years. The incumbent broadcasters which obtained licenses in1950s have enjoyed the position of oligopoly for more than half century.

It also enables MIC to do “command and control” approach toward the broadcasters. Instead of having freedom of management, the broadcasters have decided to accept so many restrictions by MIC. They have accepted the detailed regulation by MIC in order to protect them from competitions. They also accept an amakudari (descendant from the ministry). This notorious custom ruined the sound relationship between regulators and licensees. The government official cannot be going up against the company which havs their superiors because it will put their future life at risk. Therefore, regulators have been reluctant to open up the market for new entrants, which promote more competition and contribute to more active trade of speech and expression. In addition, the broadcasters succeeded in blocking their competitors with their strong political power. This collision formed by broadcasters, regulators and politicians have been maintained by each player in order to protect each player's interest.

Challenges against the collusion

Since this collusion seems perfect to outsiders, there have been a few challenges by private companies who attempted to break this collusion. One of challenges was brought by Softbank, which is the software venture starting in the early 1980s and also the primary shareholder of Yahoo! Japan. They tried to change the allocation policy of spectrum. In Japanese spectrum policy, MIC always makes a final decision of how to give a radio license without having any open and fair hearing. Usually, MIC accepts the applications, reviews them in a closed room with the limited members of “the radio village”, and just notifies who the winner is. In 2004, MIC planed to give the licenses of the 800 MHz band to two companies they selected in the closed room. Then Softbank, who applied for the broadcasting license of 800 MHz, cried foul regarding the whole review process by MIC. This is regarded as “taboo”. Softbank went even further. It brought the law suit against MIC for an unfair licensing process, which was the first time for MIC to be sued regarding their review process.

The other challenge was brought by Livedoor, an ambitious internet portal service provider. Takafumi Horie, the president of Livedoor, did not apply for a license but tried to acquire a radio station in order to get into the broadcasting business. In this case, MIC could not interfere with this transaction because this issue was completely private. Instead, many broadcasters colluded and argued against the bid. Most of broadcasters started to criticize Mr. Horie's ambition and his past conduct. In the end, Mr. Horie was arrested in charge of "creative accounting" at last.

Unfortunately, both challenges did not work.

The Structure of Japanese Mass Media chokes democracy

There are two features regarding the structure of the Japanese media industry: cross ownership of different media and monopoly of governmental information. Most TV stations' largest shareholders are newspaper. Usually, TV stations own the radio broadcasting and local TV broadcasting. So newspapers don't criticize TVs and vice versa. This situation diminishes the variety of the press and localism. Moreover, as the "reporter's clubs" in the government agency are monopolized by newspapers and TVs, they can cover up the stories which are harmful to them. For instance, no newspapers, TV and radio broadcasters reported news when the U.S government loosened the regulation of cross ownership because the Japanese media industries were worried about whether they might be criticized.

As I explained above, collusion continues to keep entrants away from this market. Moreover, both cross ownership and monopoly of governmental information lead to the degradation of news quality, choke the free competition of expression, and stifle the right to free information access for citizens. It is crucial to break the collusion in order to use spectrum more efficiently and more publicly. Thinking about the desperate situation in the Japanese media, only the Internet has potentical to reveal the "inconvenient truth".

-- FumihiroKajikawa - 30 Mar 2008

• A perfectly clear, and (for US readers) very informative, description of the absurd situation in Japan. That situation is very much like the situation elsewhere in the "developed" societies, just a little bit worse. But it is indicative of the horrendous problems centralized broadcast media have caused throughout the world's richest and potentially most democratic societies.

• Your conclusion is correct, but it has to be also explained that MIC has exercised the strongest control on Earth over foreign firms building communications hardware, threatening with criminal penalties the engineers working for foreign companies that build hardware out of compliance with Japanese specifications, e.g. building Wi-Fi gear with user-modifiable software inside. That means MIC also hopes to control the development of Internet infrastructure, potentially exercising control over content, or at least of the disruptive potential of user-generated infrastructure. NTT and MIC do not want a VOIP revolution that frees Japanese customers from telephone bills, for example, or makes listening to ordinary voice communications difficult. So MIC will continue to attempt control over Internet developments that might undermine the radio/TV oliogopoly.