1 Case Study Abuse of Dominance in Japan Kazuyuki KATAGIRI Japan Fair Trade Commission OECD-Korea Regional Centre for Competition Regional Antitrust Workshop on Abuse of Dominance 23 April, 2008

2 Table of contents 1. Backgrounds of the case against NTT East (1) Services concerned (2) Related Entrepreneurs (3) Situation of the FTTH service market in Japan 2. NTT East’s conducts and results 3. Building and presenting of evidence 4. Application of the law

3 (1) Services  FTTH (fiber to the home) service = one of broadband internet access services, which permits transmission over longer distances and at higher data rates than other forms of communications.  For this communication, optical fiber network is established between a telecom office and an optical network unit at an end-user’s home.

4 Types and technologies of FTTH  There are two types of FTTH services, FTTH service for business and those for private home.  FTTH service for private home has two technologies, FTTH (fiber to a detached home) and FTTB (fiber to an apartment house).

5 FTTH (fiber to the home) types, Single Star and Double Star  Single Star Telecom Office End User’s Home ONU

6 FTTH (fiber to the home) types, Single Star and Double Star  Double Star Telecom Office End User’s Home ONU splitter

7 (2) Entrepreneurs Higashinihon Denshin Denwa Kabushiki Kaisha (NTT East)  Japanese corporation providing regional telecommunications services in the east areas of Japan

8 Competitors of NTT East TEPCO  Japanese corporation. It provides electric power in Kanto areas of Japan Japanese corporation. USEN Broad  Japanese corporation. It is the biggest wired radio broadcasting company in Japan.

9 (3) Situation of FTTH service market ○ Net-work share of NTT EAST and its competitors in FTTH service area except FTTB, in the east areas of Japan NTT East 86.9% NTT East’s competitors 13.1% （ available lines in September 2004 ） NTT East’s competitors ・ TEPCO and USEN Broad

10 Situation of FTTH service market  Share of NTT EAST is quite huge.

11 Background  NTT East possesses high speed fiber-optic networks over eastern Japan.  It is not easy for other telecom carrier to access to NTT East’s competitors’ fiber-optic networks.  It is hard for other telecoms to build new fiber networks on their own. It is difficult for the telecom carriers to offer an FTTH service without accessing the fiber-optic networks owned by NTT East.

12 NTT East’s fiber-optic network NTT East End User’s Home Other Telecom Carrier FTTH Service Access to NTT East’s network

13 Access fee and user charge NTT East End User’s Home Other Telecom Carrier User charge Access fee

14 NTT East’s FTTH service named “B-FLET’S” NTT East End User’s Home Other Telecom Carrier Access fee B-FLET’S 6,344 yen per month

15 2. NTT East’s conducts and results Conducts of NTT East  NTT East set a discounted user charge lower than the actual access fee (\6,344 per month).  NTT East made it quite difficult for other telecoms to enter into the detached houses market and eliminated it from the market.

16 How to set a lower user charge -1- NTT East End User’s Home Other Telecom Carrier Access fee 6,344 yen per month Single Star User charge

17 How to set a lower user charge -2- NTT East End User’s Home Other Telecom Carrier Access fee Much lower per each end user Double Star User charge Lower charge

18 B-FLET’S named “New Family Type” NTT East End User’s Home Other Telecom Carrier Access fee New Family Type estimated \4,906 per a user User charge 5,800 yen On the assumption that double star is adopted

19 Actual Situation NTT East End User’s Home Other Telecom Carrier Access fee New Family Type 6,344 yen per a user User charge 5,800 yen Actually, single star is adopted

20 Actual Situation after discounting NTT East End User’s Home Other Telecom Carrier Access fee New Family Type 6,344 yen per a user User charge 4,500 yen

21 Market Effect of NTT East’s Conducts ○ The total amount of contracts of NTT East’s FTTH service for detached houses Increasing by 68% in a half year September 2003March 2004 Total amount193,000324,000

22 No other telecom’s entrance NTT East End User’s Home Other Telecom Carrier Access fee \6,344 New Family Type User charge \4,500

23 3. Building and presenting of evidence The record of statement The JFTC recognized the fact by the evidence, mainly the records of statement written on the interviews with an employee of the concerned company. Presenting in the Hearing Procedure In the procedure of the hearing, the investigators presented the evidences concerned to prove the JFTC’s findings with regard to the case.

24 4. Application of the law in the decision Section 3 of the Antimonopoly Act “No entrepreneur shall effect private monopolization or unreasonable restraint of trade.” The definition of “private monopolization” in the Antimonopoly Act The term "private monopolization" as used in this Act shall mean such business activities, by which any entrepreneur, individually or by combination or conspiracy with other entrepreneurs, or by in any other manner, excludes or controls the business activities of other entrepreneurs, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade. (para 5, Section 2).

25 “Substantial restraint of competition”  A situation in which competition itself has significantly lessened and thereby a specific firm or firms can control the market by determining freely, to some extent, prices, qualities, volumes, and various other terms on its or their own volition (December 9, 1953, Tokyo High Court)

26 Elimination measures No elimination measure was ordered.

27 Thank you for your kind attention! Web site for NTT East Case; page/pressreleases/2003/December/031204ntt.pdf