The media and telecommunications environment in Japan has undergone significant development in 2014 and early 2015. The country has completed implementation of its broadband infrastructure, with a broadband penetration rate of 100 per cent facilitating a readily accessible high-speed data communication usage environment nationwide. Further, in preparation for hosting the 2020 Olympic Games in Tokyo, the government has sought to develop its telecommunications networks and regulations to better accommodate foreign visitors to Japan. Pursuit of this goal has led to the expansion of free Wi-Fi accessibility, as well as the streamlining of telecommunications regulations to better accommodate foreign visitors’ mobile devices. We expect Japan to continue to develop its telecommunications networks, services and technologies in the coming years in anticipation of the upcoming 2020 Olympic Games.
The government is also increasingly prioritising expanding market access and competition within the Japanese telecommunications industry, with the ultimate goal of reducing mobile device charges for Japanese consumers. Major Japanese companies, such as Rakuten, have increasingly begun to enter the MVNO sector, and this activity has served to both increase pressure on Japanese regulators to facilitate fair competition within the telecommunications industry, as well as incentivise the major telecommunications companies to reduce prices. Increased regulatory activity by Japan’s Ministry of Internal Affairs and Communication (MIC) and other government authorities has led to pressure on the major Japanese telecommunications companies to reduce or eliminate practices perceived as anticompetitive, such as automatically renewing two-year contracts and refusing to unlock SIM cards. Such reforms look to reduce costs for consumers in making full use of Japan’s extensive, high-quality telecommunications networks in future years.
i The regulators
MIC’s broad authority to regulate telecommunications and broadcasting derives from statutes, which are the ultimate source of law in the telecommunications and media sectors in Japan. The core statutes are:
- a the Wire Telecommunications Act, which governs facilities for wired signal transmission, such as wired telephony, wired broadband networks and cable television;
- b the Radio Act, which governs facilities for wireless signal transmission, such as mobile phones, terrestrial and satellite television broadcast infrastructure and high-powered Wi-Fi networks;
- c the Telecommunications Business Act, which regulates telecommunications and media businesses; and
- d the Broadcast Act, which regulates the content that telecommunications and media businesses carry or provide.
The Broadcast Act and the Radio Act were amended in November 2010 to provide for a streamlined broadcast licence regime, including the separation of broadcasting licences from transmission licences.
Prior to the amendment, general broadcasting licences, cable radio broadcasting licences, CATV broadcasting licences and licences to broadcast through third-party facilities were granted by MIC under different statutes using different procedures. Under the amended Acts, the statutory licensing provisions for these activities are consolidated into the Broadcast Act and the Radio Act, and broadcasting is divided into two major licensing categories: ‘main broadcasting’, consisting of terrestrial broadcasting, and broadcasting through broadcasting and communication satellites located over 110 east longitude; and ‘regular broadcasting’, consisting of broadcasting through other satellites, CATV and IPTV.
Prior to the amendment, terrestrial broadcasting licences were granted only to broadcasters that provided their own broadcast content and operated the wireless transmission facilities used to distribute it. Under the amended Acts, broadcasters are now able to distribute their programming through third-party terrestrial wireless transmission facilities, just as they already were permitted to distribute their programming through third-party satellites and third-party cable television providers.
These reforms are expected to help lessen the regulatory burdens on telecommunications and broadcasting companies, to provide flexibility to the management of those companies and to open up competition by decoupling the ownership of broadcasting facilities from the production of broadcasting content.
ii Regulated activities
MIC exercises its regulatory power in numerous ways. MIC has the authority to grant broadcasting licences (for facilities such as television and radio stations that produce or broadcast media content), wireless transmission licences (for mobile phones and facilities such as mobile phone base stations and satellites) and telecommunication business licences (for traditional wired communications as well as mobile phone providers and ISPs), and monitors the businesses conducted with such licences.
MIC also allocates radio spectrum and has adopted detailed regulations to monitor and establish technical standards applicable to spectrum users and their licensed facilities and businesses. MIC’s decision-making process in exercising this authority has often been criticised as opaque and arbitrary. For example, the allocation of radio spectrum to private sector users is based on the ‘overall judgement’ of MIC, not on any clear set of factors, leaving applicants unsure of what is required and opening MIC to accusations of favouritism or political manipulation. Spectrum policy in Japan is further discussed in Section IV, infra.
Currently under the Radio Act, use of mobile devices that do not fulfil the requirements of Japanese technology standards with respect to radio waves in Japan, and for which the manufacturer has not obtained authentication in Japan, is prohibited by law. Therefore, many foreign visitors’ use of their own mobile devices in Japan is substantively illegal, although there are no known cases of any foreign visitor being accused of Radio Act violations. However, the Radio Act was amended in the legislative session of 2015, and once this amendment becomes effective, foreign visitors to Japan will become allowed to use their own mobile devices not authenticated in Japan for up to 90 days so long as such devices meet equivalent standards to Japanese technology standards. The amendment was implemented as a measure to encourage foreign tourists to visit Japan in anticipation of the Olympic Games in Tokyo in 2020. There used to be concerns that devices not authenticated in Japan may adversely affect the radio use environment. However, MIC concluded that the possibility of non-authenticated foreign devices adversely affecting the radio use environment would be minimal.
iii Ownership and market access restrictions
Foreign ownership and management of broadcasting licence holders, wireless transmission licence holders and Nippon Telecommunication and Telegraph Corporation (NTT), the semi-privatised national telecommunications service provider, is restricted by statute.
As discussed in Section II.i, supra, the Broadcast Act and the Radio Act, each amended in 2010, now divide broadcasting into two categories: main broadcasting and regular broadcasting. Under the Acts, no foreign national, foreign entity or Japanese entity that has either a non-Japanese director or 20 per cent or more of its voting shares directly owned by foreign nationals or entities may hold or receive a licence for main broadcasting. Further, indirect foreign ownership of 20 per cent or more through a subsidiary or affiliate is not permitted for terrestrial (non-satellite) main broadcasting licences. If foreign nationals or entities acquire 20 per cent or more of the voting shares of a main broadcasting licence holder, the licence will be cancelled. To avoid cancellation, any main broadcasting licence holder whose shares are traded on a stock exchange is permitted by statute to refuse to recognise the transfer of its shares if the transfer would cause it to violate foreign ownership restrictions. In contrast, foreign investment in regular broadcasting licence holders is not restricted. As a result, several foreign-owned broadcasters now broadcast into Japan through cable television and third-party satellites.
Ownership of multiple broadcast outlets is also restricted by the Broadcast Act and related regulations. This restriction on the concentration of ownership is intended to support press freedom and diversity of speech in broadcasting. The restriction includes limits on ownership of shares in, and board seats of, multiple main broadcasting licence holders, as well as upper limits on the use of satellite transponder capacity. However, in response to worsening business conditions for radio broadcasters, MIC amended regulations in 2011 to relax cross-ownership restrictions on radio broadcasting licence holders, allowing entities to control up to four licence holders. Cross-ownership of newspapers and broadcasters has not been restricted in Japan. Newspaper companies often hold large ownership stakes in broadcast companies – in fact, each major private Japanese television broadcast network is affiliated with a major newspaper.
iv Transfers of control and assignments
In addition to foreign ownership and management, and cross-ownership limits, MIC approval is required for mergers and acquisitions that result in a new entity holding main broadcasting or wire transmission licences. Therefore, a statutory merger involving a licence holder or the divestiture of a business conducted under such licence generally requires MIC approval. The MIC review is primarily to determine whether the transferee of a licence would be eligible to independently qualify as a new licensee.
Further, the Telecommunications Business Act was amended in May 2015 to require the major telecommunications companies to renew their telecommunications business registration when such companies engage in mergers or share acquisitions. The telecommunication industry in Japan is monopolised by three major private telecommunication companies – NTT DOCOMO,2 KDDI and SoftBank – and this amendment allows MIC to review any proposed merger or share acquisition’s potential anticompetitive effects on business operations and fair trade. The amendment came into effect in 2016.
In addition, pursuant to Japan’s Foreign Exchange and Foreign Trade Act, certain acquisitions of shares in broadcasting licence, wireless transmission licence and telecommunication business licence holders by non-Japanese parties are subject to prior filing and waiting periods.3 Ordinarily, this is a pro forma requirement where no national security concerns are present.
III TELECOMMUNICATIONS AND INTERNET ACCESS
i Internet and internet protocol regulation
In Japan, MIC regulates internet and IP-based services (such as high-speed internet and VoIP), along with wired telephony and mobile phones, under the Telecommunications Business Act. The Act and the regulations thereunder emphasise protection of the secrecy of communications and the reliable and non-discriminatory provision of telecommunication services.
The Act not only regulates service providers that operate their own network facilities, but also regulates service providers that provide services to facilitate telecommunication between users but do not operate their own network facilities, such as dedicated hosting services on which clients can operate an email server. Internet-based services that are not designed to facilitate telecommunication, such as internet banking and internet-based newsletter and media subscriptions, are not considered to be a ‘telecommunication’ and therefore are not regulated under the Act.
ii Universal service
Under the Telecommunications Business Act and the NTT Act, the NTT group must provide wired telephony services (analogue or IP over optical fibre), pay phone services and emergency call services to all areas in Japan. NTT East and NTT West provide services to depopulated areas, and a telecommunications trade association comprising the major telecommunications companies in Japan reimburses NTT East and NTT West for any cost deficits incurred by NTT’s provision of such service. National law requires every landline and mobile phone user (customer) to pay a small fee (approximately ¥2 to ¥8, varying from year to year) as part of their monthly telephone service bill to cover these costs.
There is no similar law requiring universal broadband service. However, as of 2014, the penetration rate of broadband infrastructure (3.5G, satellite internet, 3.9G, DSL, optics fibre/FTTH, etc.) in Japan has already reached 100 per cent, and super-broadband (data transmission speed over 30Mb per second, including 3.9G, DSL, optics fibre/FTTH, etc.) infrastructure has reached 99.9 per cent penetration in Japan.
Meanwhile, MIC has been planning and implementing improvements to public Wi-Fi services so as to increase foreign visitors to Japan. In particular, MIC has been managing the implementation of the ‘SAQ24 JAPAN Project’ (SAQ is an acronym for ‘selectable’, ‘accessible’ and ‘quality’) since June 2014. The goals of the SAQ2 JAPAN Project include improving preparation of free Wi-Fi and facilitating the use of such Wi-Fi; facilitating the acquisition and setting up of Japanese SIM cards by foreign mobile phone users in Japan; reducing international roaming fees for foreign mobile phone users in Japan; and implementing multi-language interpretation systems (i.e., translation applications). In November 2013, an NTT group affiliate started to provide a smartphone application, ‘Japan Connected-free Wi-Fi’, which allows users to connect to approximately 130,000 public Wi-Fi access points,5 including access points at airports, train stations, convenience stores and tourist spots in Japan, with one-time user registration. This NTT affiliate also continues to install more Wi-Fi access points.
Separately from the above free Wi-Fi service improvements, major Japanese mobile phone service providers are currently cooperating to establish an emergency disaster service set identifier (SSID), ‘00000JAPAN’. This SSID will enable every Wi-Fi user to use all Japanese mobile service providers’ Wi-Fi networks during natural disasters regardless of the provider to which a user is currently subscribed.6
iii Restrictions on the provision of service
The telecommunications business in Japan is dominated by NTT East and NTT West and by the three major private telecommunication companies: NTT DOCOMO, KDDI and SoftBank. Telecommunication regulations, in combination with antitrust law, facilitate competition among telecommunication service providers. Because providers can become dominant to the exclusion of new entrants once their network or technology standard has been adopted by a critical mass of users, MIC and the Japan Fair Trade Commission have jointly adopted guidelines to regulate anticompetitive practices by providers that have high market shares. For example, such guidelines state that it would raise antitrust issues if a telecommunications service provider, such as a mobile phone carrier, with a high market share contractually restricts its customers from switching to another service provider or charges an excessive cancellation fee.
Under the Telecommunications Business Act, prices charged to end users by NTT for wired telephony services and payphone services are subject to a cap determined by MIC. This is to prevent these companies from abusing their near monopoly over these fundamental services and encourage them to improve efficiency. Prices charged by NTT for certain services, including optic data services, are subject to prior notification obligations to MIC. If MIC finds the pricing scheme inappropriate because it is anticompetitive or otherwise significantly unreasonable, MIC may require the carrier to change the pricing scheme. Otherwise, prices charged to end users of telecommunications services and other terms of service are not regulated. However, Prime Minister Shinzo Abe and other governmental officials have recently begun putting pressure on the major telecommunications companies to reduce prices for mobile phone services.
As a general rule, all telecommunication business licence holders must provide access to any other carrier that seeks to interconnect with their network. However, prices for, and methods of, interconnection have been areas of public controversy and regulatory scrutiny. Telecommunications companies have pressed for greater access to NTT’s infrastructure, including its optical fibre network. Previously, NTT only provided access to its fibre-optic network on a bulk basis; however, on 1 February 2015, NTT East and NTT West respectively launched single-line fibre-optic wholesale to other carriers, including to non-traditional telecommunication companies such as Sohgo Security Services (ALSOK) and Tsutaya, a rental video company. This fibre-optic wholesale is designed to improve fibre-optic use by reducing fees for fibre-optic use at the end user level. As of September 2015, 271 operators have commenced utilising such fibre-optic wholesale services. Before the commencement of this fibre-optic wholesale, there were competition concerns regarding NTT group companies’ fibre-optic service, because NTT East and NTT West and the counter service provider execute contracts for the provision of fibre-optic wholesale service and do not disclose the contracts to the public. Therefore, other major telecom service providers such as KDDI and Softbank expressed concern that NTT East and NTT West provide their fibre-optic wholesale service with lower prices to NTT group companies than to other unrelated companies, so that those NTT group companies can in turn provide fibre-optic services to end users at lower prices. In response to these concerns, MIC prepared guidelines with regard to the provision of fibre-optic wholesale that prohibit unfair treatment of specific service providers and provide for potential enforcement by MIC. However, MIC is not currently examining any fibre-optic wholesale agreements, although KDDI, Softbank and other service providers have requested that MIC or a third party perform such examinations.
To date, the introduction of fibre-optic wholesale has not yet resulted in significant price reductions due to increased competition or new entrants from other industries; however, it is likely that more time is required for such effects to occur. MIC announced in March 2015 that increased competition and resulting price reductions had not yet occurred as a result of the fibre-optic wholesale service. A survey by MIC shows NTT DOCOMO obtained 46.6 per cent of the fibre-optic service share and NTT Communications (a data communication company of NTT group) obtained 18.1 per cent (the total of these two companies’ share is approximately 65 per cent). This share concentration within NTT group is prominent, although NTT group companies do not provide fibre-optic services at lower prices than their competitors. To address concerns with respect to its high market share, NTT announced on 7 July 2015 that they will reduce the price of their fibre-optic connection fee from approximately ¥2,900 per line to ¥2,000 in stages until 2019, and target expansion of fibre-optic service to new customers.
Along with the introduction of a fibre-optic wholesale service, in recent years mobile line wholesale services, MVNO, have been expanding in Japan. MVNO has existed since 2001, but until recently service providers and subscribers have been very few in number. In 2007, MIC’s guidelines regarding MVNO were amended to clarify the rights and obligations between MVNO and MNOs, and a dispute settlement procedure was established. After this amendment, the number of MVNO service providers using MNOs’ mobile lines or WiMAX lines increased. In 2013, there was another amendment in the MVNO guidelines that clarified the extent to which MNOs could solicit information regarding MVNO business plans in connection with granting such MVNOs access to their networks, and established an opinion submission procedure to MIC. Further, in 2014, the guidelines for operation of Type II designated telecommunication facilities were amended, which included a change in the calculations for mobile line wholesale pricing. These changes in calculations are expected to lead to reductions in mobile line wholesale prices, to the benefit of MVNOs. These changes have spawned a recent increase in MVNO activity. In FY2013, 15 MVNOs provided only data communication service, and seven MVNOs provided both data communication services and voice communication services. However, in FY2014, the number of MVNOs providing both services increased to 14, while the number of MVNOs providing only data communication services decreased to 12. The number of MVNO subscribers was 7.17 million in December 2013, increasing to 10.87 million subscribers by December 2014. However, MVNO service subscribers still only constituted 5.8 per cent of all mobile service subscribers in December 2014 despite this recent increase.
In connection with the recent expansion in MVNOs, controversy has emerged among mobile phone providers regarding the issues of SIM unlock and two-year contracts with automatic contract renewal.
MIC has been requesting mobile service providers to provide an option for SIM unlock to mobile phone customers, as they believe SIM lock prevents consumers from freely choosing mobile phone carriers and causes competition stagnation, and MIC prepared guidelines for the implementation of SIM unlock in June 2010. However, the guidelines did not include a direct or indirect obligation of mobile service providers to implement SIM unlock. Therefore, NTT DOCOMO was the only operator that implemented SIM unlock at that time.7
MIC, as part of its regulatory enforcement powers, has the authority to issue a business improvement order to telecommunications companies that significantly disrupt the sound development of telecommunications services. Taking advantage of this authority, MIC amended the guidelines regarding SIM unlock in December 2014. This amendment indicated that MIC shall consider telecommunications companies that fail to address requests for SIM unlock without any reasonable grounds for doing so as having engaged in action sufficiently disruptive to the sound development of telecommunications services to constitute grounds for issuance of a business improvement order against them. Therefore, mobile service operators are now substantially obligated to provide SIM unlock. These amended guidelines apply to devices that are released after May 2015.8 It is expected that customers’ choice of mobile carriers and competition among major mobile service operators as well as MVNO service operators will be facilitated by this SIM unlock policy.
Abolishment of two-year contracts, however, has not shown significant progress. Two-year contracts, in which customers receive certain discounts subject to two years’ continued use of the same service provider, enable customers to purchase expensive smartphones effectively for free or discounted prices. However, the two-year contract system has been identified as reducing customers’ freedom of choice in mobile service carriers since customers are required to pay approximately ¥10,000 for early termination of such two-year contracts. In July 2015, a council of advisers to MIC stated that binding customers over two years raised concerns, but they did not raise any specific issues with respect to binding customers for two years and simply mentioned that ‘contract period binding agreements could be regarded as an anticompetitive market structure or action and we need to consider it further’. In addition to the discussion regarding two-year contracts, the advisers mentioned automatic contract renewal as a concern and raised the issue, stating that ‘automatic contract renewal has the effect of making two-year contracts four-year contracts or six-year contracts by the extension of contracts’ and ‘in that sense, we cannot deny that the current automatic contract renewal system deprives customers of freedom of choice of services’. The automatic contract renewal system has been regarded as a problem, since customers can terminate their two-year contracts only in the 25th month from the beginning of their contracts with no charge, and customers are once again required to pay a termination fee due to early termination of a renewed two-year contract after the 26th month from the beginning of their original contract, so that mobile service operators force their customers to use the same operator for another two years.
The council of advisers to MIC concluded ‘it is appropriate to establish a plan where two-year contracts are not renewed after the initial binding period so that customers can terminate their contracts with no charge’. However, this conclusion does not substantially affect current operators, because failure to comply with this recommendation would not result in issuance of a business improvement order by MIC. Therefore, the abolishment of two-year contracts with automatic contract renewal remains unlikely in the near future.
Separate regulations exist in Japan restricting unsolicited texts and emails and unsolicited phone calls. With respect to unsolicited texts and emails, the Act on Regulation of Transmission of Specified Electronic Mail prohibits:
- a the transmission of emails using false sender information as a means of advertisement for the sender’s own or another person’s sales activities;
- b the transmission of emails using fictitious email addresses for the purpose of sending multiple emails to promote the sender’s own or another person’s sales activities; and
- c the transmission of emails to persons who refuse to receive such specified emails.
Violators may face penalties of up to one year’s imprisonment or a fine of up to ¥1 million. With respect to unsolicited phone calls, each local prefectural government has established a local ordinance prohibiting unsolicited phone calls. For example, the Metropolitan Government of Tokyo has an anti-nuisance ordinance prohibiting continued unsolicited phone calls and facsimiles, and offenders may be penalised with up to six months’ imprisonment or a fine of up to ¥500,000.
In keeping with Japan’s constitutional protection of freedom of speech and secrecy of communication, the Telecommunication Business Act prohibits ISPs from censoring or infringing on the privacy of communications passing through their networks.
As a general matter, the Law Concerning the Protection of Personal Information (Privacy Act) protects personal information or data that can be used to identify specific living persons, and generally applies to any entity that gathers the personal information of 5,000 or more individuals. Under the Privacy Act, such entities are required to publish a ‘purpose of utilisation’ regarding their use of personal information. Personal information incorporated into a database must be kept accurately, and necessary and proper measures to maintain its security must be instituted. Any person about whom personal data is kept in a database for more than six months has a right to request access to the data, and add to, modify or delete it. In August 2015, the Privacy Act was amended to strengthen protection of personal information, including expanded protection of sensitive personal information and restrictions on transfer of personal information outside Japan; and to establish protocols for use of anonymised data to facilitate ‘big data’ analysis.
Further, MIC has issued Privacy Act guidelines that are specific to telecommunications businesses. Since MIC guidelines also take into account the obligations of telecommunication business licence holders to preserve the secrecy of communications, they provide for a more stringent data protection regime than would apply under the Privacy Act alone. MIC guidelines generally prohibit telecommunication businesses from collecting information related to race, religion, disability or other attributes that may form a basis for discrimination. The guidelines also require such licence holders to specify what length of time they intend to retain personal information and to delete any personal information after the expiry of such period. Under MIC’s Privacy Act guidelines, information related to persons making or receiving communications, such as usage history, identity and user location, may only be disclosed to third parties in very limited circumstances, such as pursuant to a search warrant. In addition, MIC’s Privacy Act guidelines were amended on 2 November 2011, allowing telecommunications business providers to provide users’ locational information to third parties only if they have the user’s consent, a search warrant or other valid justification; and obtain a user’s locational information pursuant to law enforcement agencies’ requests only if a warrant is issued. MIC’s Privacy Act guidelines also require telecommunication businesses to specify what length of time they intend to retain communication log information and to delete such information after the expiry of such period. In June 2015, MIC announced an indicative permissible length of time to retain communication log information (six months to a year, depending on the business reasons for retaining such information).
ISPs are not currently required to proactively delete content that infringes upon the intellectual property rights or privacy of others. However, the Internet Provider Liability Limitation Act, enacted in 2001, provides a safe harbour for ISPs that delete such content. Under the Act, no ISP may be held liable for the deletion of content on its network if the ISP reasonably believes that such content infringes the intellectual property rights or privacy of others, or a third party alleges such infringement and the sender of the content does not respond to the ISP’s inquiry within seven days. ISPs are further protected by the Internet Provider Liability Limitation Act, which shields ISPs from tortious liability for failing to delete infringing content. In reliance on this statutory defence to liability, ISPs generally do not take steps to monitor the content passing through their networks. The Act does, however, authorise persons whose rights are infringed by content delivered over the internet to demand information regarding the sender of the content from ISPs, so that legal action may be taken against the sender. However, as a practical matter, it is often not possible to identify the original sender of such infringing content where content passes through multiple networks.
A statute for the protection of children from harmful internet content, known as the Youth Internet Environment Act, became effective in April 2009. The statute directs governmental bodies to improve internet safety for juveniles (under the age of 18) by encouraging ISPs to use technologies that limit juvenile access to harmful content. The statute targets content glorifying crime or suicide, obscene sexual content, and other depictions of extreme violence or cruelty. The statute further exhorts parents to monitor their children’s internet use, and to limit access to inappropriate content by using filtering software and other measures. The statute requires mobile network service providers to filter internet content for customers that are juveniles, except where a parent has expressly requested that filtering not be used. Under the Act, from April 2010, manufacturers of devices with internet connectivity (other than mobile phones) are also required to pre-install filtering software or otherwise facilitate the use of third-party filtering software or services. In Japan, cybercrime has long been an area of public concern. In recent years, law enforcement has focused efforts to combat cybercrime on computer hacking through the unauthorised use of IDs and passwords, and other attacks on security holes; the distribution of computer viruses, and the input of data and unauthorised commands that can cause damage to computers and data; and other types of crimes facilitated through the internet, such as drug trafficking, prostitution, fraudulent internet auctions and child pornography.
Combating the distribution of child pornography has been an area of particular scrutiny and public interest. The Act on Punishment of Activities Relating to Child Prostitution and Child Pornography and the Protection of Children, originally passed in 1999, prohibits the distribution of child pornography. This Act was amended in 2004 to outlaw the uploading and distribution of child pornography over the internet, and was further amended in 2014 to criminalise the simple possession of child pornography images and to require ISPs to block child pornography.
In order to combat increasing threats against cybersecurity, the Basic Act on Cybersecurity was enacted in November 2014. The Act prescribes the concept of cybersecurity and defines the roles and responsibilities of the government. In January 2015, the Cybersecurity Strategic Headquarters (Headquarters) and National Center of Incident Readiness and Strategy for Cybersecurity (NISC) were established to facilitate programme planning, policy formulation and overall coordination for cross-cutting cybersecurity measures. The Headquarters will define the uniform standard of cybersecurity protection applicable to government agencies and, based on such standard, each agency will establish and manage security policies customised for such agency, and will also streamline its structure and organisation to enforce newly implemented security measures.
Amid mounting concerns regarding cybersecurity, in May 2015, over 1.25 million sets of personal pension records were leaked after a cyberattack on the management system of Japan Pension Services, a special public corporation entrusted by the Minister of Health, Labour and Welfare with public pension system operations. Based on its authority set forth in the Basic Act on Cybersecurity, NISC announced in August 2015 its evaluation of the measures and policies to combat material breaches of cybersecurity within government agencies. The government will be implementing the My Number system under which every resident in Japan will receive his or her own 12-digit individual number (nicknamed ‘My Number’) that will be used for administrative procedures related to social security, taxation and disaster response beginning in January 2016. The Japan Pension Services incident has raised concerns regarding information security, and the coupling of pension information with My Number will be delayed until proper cybersecurity preventive measures have been implemented.
With respect to government authorities’ ability to monitor the content of telecommunications, law enforcement authorities are currently allowed to utilise wiretapping during criminal investigations of organised crime for murder, drug-related crimes, arms possession or stowaway smuggling by obtaining a wiretap warrant pursuant to the Act for Wiretapping for Criminal Investigation (Wiretapping Law). A proposed amendment to the Wiretapping Law has been introduced in the legislature that would allow wiretapping to be used in any criminal investigation of organised crime regardless of the suspected offence. Legislators hope this amendment will allow authorities to better address organised criminal fraud, which has particularly affected the elderly and cost victims billions of yen each year over the past five years. As of September 2015, this proposed amendment is still under discussion.
IV SPECTRUM POLICY
The need for access to the radio spectrum has steadily increased with the proliferation of new technologies utilising wireless data transmission. The number of licensed wireless stations and devices increased from 3.8 million in 1985 (a majority of which were for amateur radio stations and handheld two-way radios), to 146 million in March 2013 (over 98 per cent for mobile devices).
MIC holds broad discretion to determine how the radio spectrum is allocated in Japan, and describes its decision-making process as open and collaborative – including consultations with the public, scholars and industry experts. However, MIC decision-making has been criticised by some as arbitrary and opaque. This has led to some calls for spectrum auctions as a fairer method of allocation. Despite such criticism, MIC has yet to establish a system that provides transparency over spectrum policy and spectrum allocation decisions. While there was some movement toward implementing a spectrum auction system and a bill that would have implemented such system was submitted to the legislature in March 2012, the bill lost momentum after a change in the controlling political party in Japan took place in December 2012, and the bill has since been rejected.
As an example of MIC’s ability to exercise discretion in allocating spectrum, in December 2014, MIC issued 3.5GHz 120MHz bandwidth spectrum licences to each of NTT DOCOMO, KDDI and SoftBank. This was the first spectrum allocation since MIC amended its policy restricting submissions of multiple licence applications from companies that operate their spectrum as a ‘group’. Prior to the amendment, companies that held more than one-third of the voting rights of another company were restricted from submitting licence applications together with such affiliate companies. However, MIC expanded this restriction on multiple licence applications by group companies to take into consideration additional factors in determining what companies constitute a group, including non-voting capital structure, decision-making authority and the business relationship between the companies, in order to reduce multiple applications by de facto group companies and facilitate greater entry into the spectrum market. Due to this amended restriction, YMobile, which was not previously considered a group company of SoftBank but was now considered a member of SoftBank’s group under the new policy, was unable to submit an application, and applications were accepted from NTT DOCOMO, KDDI and SoftBank only.
As MIC planned to allocate 40MHz of the 120MHz available to each of the three applicants, it was always clear that each of the three applicants would receive an equal allocation. However, there was some competition in this allocation scheme in which MIC exercised discretion. The 120MHz bank is divided into ‘high’ ‘medium’ and ‘low’ components, and NTT DOCOMO’s first choice was the ‘low’ component, while both KDDI and SoftBank preferred the ‘high’ component. MIC determined that it would grant Softbank the ‘high’ component because KDDI failed to specify in its application when they would be able to start operation of speeds of more than 1Gbit/per second.
ii Broadband and next-generation mobile spectrum use
In most areas of Japan, the 3.9G (up to 300Mb per second) service has been standardised, and the 3G (up to 7.2Mb per second) service now functions as a backup spectrum. In addition, mobile phone companies are in the process of expanding 4G services (LTE-Advanced or WiMAX2), which will enable data transmission speeds of up to 1Gb per second. In March 2015, NTT DOCOMO, the first among the major Japanese mobile phone companies, launched its LET-Advanced next-generation mobile communication service called PREMIUM 4G, which uses carrier aggregation technology. PREMIUM 4G’s initial maximum transmission speed remains at 225Mb per second, but NTT DOCOMO plans to continuously improve the transmission speed, aiming to accelerate to a maximum 300Mb per second towards March 2016. KDDI (au) and Softbank, which are the other major mobile phone companies, have also begun implementing the same service.
NTT DOCOMO plans to launch the next generation mobile communication service 5G, which will enable data transmission speeds of up to 10Gb per second sometime in 2020, the year in which the Tokyo Olympic Games will be held.
iii Spectrum auctions and fees
MIC imposes spectrum usage fees on broadcasters, mobile phone carriers and other businesses that use radio spectrum, as provided for in the Radio Act. The formulae used to establish the usage fees have been criticised as unfairly favouring broadcasters at the expense of mobile service providers. Until 2005, the fees were determined, in the case of broadcasters, per broadcaster, and in the case of mobile phone carriers, by the number of base stations and subscriber handsets. Even after changes were made in 2005, 2011 and 2014, the formulae still favour broadcasters, satellite operators and other ‘vested’ rights holders. The total amount of spectrum fees MIC imposed for the fiscal year ending March 2015 was approximately ¥74 billion (up from ¥68 billion in 2010), 74 per cent of which was paid by mobile phone carriers and only 8.9 per cent of which was paid by broadcasters, even though the bandwidth of spectrum occupied by mobile phone carriers is narrower than that occupied by broadcasters.
While spectrum fees are purportedly charged to cover spectrum administration costs, such as monitoring illegal spectrum use, MIC has been criticised for using the fees to pay for ‘miscellaneous’ expenses that appear to have little connection to spectrum administration. In August 2010, MIC’s committee to explore reform of spectrum usage fees announced a policy to strengthen links between the amount of spectrum usage fees and the bandwidth of spectrum occupied by fee payers, and to use the spectrum usage fees more efficiently. In May 2011, a bill to amend the Radio Act to implement the revised spectrum usage fee scheme was passed.
An action plan published in November 2010 by MIC’s study group on spectrum allocation recommended that MIC consider the introduction of spectrum auctions as a way to allocate spectrum licences more efficiently and transparently. However, the plan also warned that the transition would raise questions of fairness such as those between existing licensees who did not pay for their licences at auction and future licensees who would bear this additional cost, and a related concern for consumers that the cost of auction fees would be ultimately passed on to the public in increased fees for services. MIC has held a series of meetings led by scholars since March 2011 to consider the implementation of spectrum auctions, and in March 2012 submitted a bill to amend the Radio Act to include spectrum auctions. The amended Act would have established a mechanism in which MIC would conduct an auction to grant the licence to the applicant with the highest bid price. The spectrum auction was envisaged to be first used for the licensing of the 3.4GHz to 3.6GHz band, which was planned to be used for 4G mobile phones from 2014. However, the discussion on the bill was put on hold in anticipation of the change of government from the Democratic Party of Japan (DPJ) to the Liberal Democratic Party (LDP), which took place in December 2012. In January 2013, the Minister of Internal Affairs and Communications under LDP Prime Minister Abe announced that the LDP government would not resubmit the bill for spectrum auctions. DPJ resubmitted the bill, but it was voted down. DPJ was able to obtain LDP’s consent to adopt a non-binding resolution by a committee of the legislature acknowledging that spectrum auctions have benefits and detriments and should be reviewed through public hearings. Efforts to implement spectrum auctions as a method to provide greater transparency of MIC’s spectrum allocation process have effectively returned to square one.
i Restrictions on the provision of service
While freedom of broadcasting is an underlying premise of the Broadcast Act, the Act includes certain content requirements, such as an obligation to be politically impartial; a prohibition on reporting ‘manipulated facts’; an obligation to present diverse opinions on controversial issues; and an obligation to provide closed captioning, audio commentary or other aids for the impaired where possible. Main broadcasting licence holders are also required to provide a balance of entertainment, news and educational programming.
ii Internet-delivered video content
The internet and dedicated networks are widely used to deliver video content. Internet television services available in Japan vary widely, from simultaneous transmission of terrestrial and satellite television broadcasts, to exclusive IPTV channels with programming provided by domestic and foreign third-party programme providers, to VOD services. The methods of video delivery vary from free video-sharing sites (such as YouTube), to membership-based video-sharing sites (such as Nikoniko Douga), to partially fee-based video delivery sites (such as Gyao!) and to full fee-based video delivery sites (such as Hulu and Netflix). Traditional television stations (i.e., NHK and commercial television broadcasters) also have VOD service, and are streaming broadcast programmes through personal computers and smartphones. The Supreme Court ruled that services that record and forward Japanese television programmes and those that provide real-time streaming of Japanese TV programmes via the internet breach the originating television station’s copyright, and therefore the third-party recording or streaming of Japanese television programmes without a licence constitutes a breach of Japanese copyright law.
For regulatory purposes, MIC has taken the view that video delivery over the internet is not a ‘broadcast’ under the Broadcast Act, and consequently the content restrictions under the Act discussed in Section V.i, supra, do not apply. While ‘broadcast’ is defined in the Broadcast Act as ‘transmission of telecommunication for the purpose of being directly received by the public’, MIC’s position is that video delivery over the internet does not fall within this definition because it requires a request to send that results in receipt by a specific recipient, and not the public. This interpretation allows internet content providers to distribute multimedia offerings without being regulated as traditional broadcasters. However, such technical distinction has been criticised as resting on shaky ground, and calls have been made for clearer legislation clarifying that content restrictions will not apply to internet broadcasts.
iii Mobile services
Video broadcasting services for mobile devices in Japan began in 2006. The first service, still popular today, is known as ‘One-Seg’ because it uses one out of the 13 segments that constitute the spectrum bandwidth allocated to each terrestrial digital television broadcasting channel. The other 12 segments are used for traditional television broadcasts. In 2013, mobile devices that can receive ‘Full-Seg’ broadcasting were introduced. ’Full-Seg’ is named in contrast to ‘One-Seg’ as it uses the traditional 12 segments for television broadcasting. Mobile devices with ‘Full-Seg’ receiving functions allow their users to enjoy high-definition television broadcasts through mobile devices at the same level of quality as traditional terrestrial television. Currently, One-Seg and Full-Seg services are generally limited to the simultaneous delivery of DTTV broadcasts to mobile devices. VOD services provided by mobile networks to subscribers are also widely available. Major mobile carriers offer VOD services free of charge or at a low price, mainly to attract subscribers to their network and not as a significant revenue source.
The next-generation multimedia broadcasting service ‘Moba-Cas’ provides viewers with high-definition broadcasts mostly equivalent to the Full-Seg service, and allows users to store content delivered through the dedicated spectrum band to their mobile devices.
VI THE YEAR IN REVIEW AND OUTLOOK
2015 was an important year for Japan’s ICT industry, as it was the 30th anniversary of the privatisation of Nippon Telegraph and Telephone Public Corporation (known as NTT post privatisation). Since NTT’s privatisation, and through active competition among the ICT companies, the ICT industry has become one of Japan’s fastest growing sectors. Increased entry into the telecommunications market by MVNOs, as well as increased regulation of anticompetitive practices within the industry, will allow the ICT industry to continue to expand and provide increasingly effective service at reduced prices for consumers.
Japan also continues to develop new telecommunications and media technologies to be implemented in future years. MIC announced its vision for the Tokyo Olympic Games in 2020 to be broadcast in 4K and 8K ultra-high-definition formats. To achieve such a goal, in September 2014 MIC announced a roadmap for encouraging use of 4K and 8K broadcasting. The roadmap aims for actual broadcasting of 4K broadcasting through CS, cable television and IPTV to start in 2015, test broadcasting of 4K and 8K broadcasting through BS to start in 2016, and actual broadcasting of 4K and 8K through BS to start in 2018. In line with this roadmap, actual broadcasting of 4K started in March 2015.
In addition to seeking to expand access to free public Wi-Fi, MIC has also announced its vision to have 5G mobile technology in place ahead of all other countries in anticipation of the 2020 Tokyo Olympic Games. The public and private telecommunications sectors in Japan are combining strength as an ‘All Japan’ platform to achieve this goal. Development of media and telecommunications policy and technology in Japan has seen a resurgence over the past year, and further significant progress is likely in the near future.
1 Hiroki Kobayashi is a corporate partner and Shintaro Ojima is a transactional associate at Latham & Watkins Gaikokuho Joint Enterprise. This chapter is accurate as of October 2015. The authors would like to thank Saori Kawakami and Daniel Senger, former transactional associates at the firm, who contributed to the writing of this chapter.
2 NTT DOCOMO is publicly traded, but NTT Corporation holds approximately 60 per cent of shares in the company. NTT Corporation is 32.47 per cent owned by the Japanese Ministry of Finance as of 30 June 2015.
3 Regulated transactions include an acquisition of 10 per cent or more shares in such licence holder whose shares are traded on a stock exchange or over-the-counter market; and an acquisition from a Japanese party of any shares in such licence holder whose shares are not traded on a stock exchange or over-the-counter market.
4 This application was prepared primarily for foreign visitors’ use, but Japanese residents are also able to use the application.
5 As of November 2014.
6 Normally, users can only use the Wi-Fi network of the service provider to which they are currently subscribed.
7 However, NTT DOCOMO required customers to pay a fee of ¥3,000 for SIM unlock, and the SIM unlock provided was incomplete.
8 However, each operator provides SIM unlock service with no charge only after six months from users’ purchase of devices, and each provider generally requires a charge of ¥3,000 for SIM unlock within six months after users’ purchase of devices. MIC has not invoked a business improvement order against any operator’s policy at this stage.