# Telecommunications Liberalization and Growth of the ICT Industry

## Section 1 30 Years Since Telecommunications Liberalization: System, Service, and Market Transitions

In this section, we provide a general chronological overview of the growth of the ICT industry, from the telecommunications liberalization in 1985 to the present day, while touching on a few landmark events and turning points. For our discussion, we divided the 30 years from 1985 to 2015 into three major periods: (1) the age

### 1. Period 1: The age of the telephone

## (1) Summary of the telecommunications liberalization

The Japanese government presented three bills on telecommunications reform to the National Diet, which were approved in 1984 and went into force in 1985. The reform bills' aim was to affect far-reaching reformation of the telecommunications system, which had been predicated on a centralized system, and to proactively introduce private-sector dynamism, based on market competition principles, to the telecommunications sector. With these steps, the government hoped to stimulate the telecommunications business and boost its efficiency and to bring technological innovation to the telecommunications sector as well as engender social and economic development and progress in internationalization.

The Nippon Telegraph and Telephone Public Company, a government corporation, was reorganized into an incorporated public company, and the Nippon Telegraph and Telephone Corporation (NTT) was established, based on the Act on the Nippon Telegraph and Telephone Corporation. Establishing a new corporation was an undertaking to further stimulate and improve the efficiency of the company's management.

## (2) Transformations resulting from telecommunications liberalization

### a. Succession of new entrants

A succession of new companies entered the liberalized telecommunications market. In June 1985, three long-distance carriers—the DDI Corporation, Japan Telecom Co., Ltd., and the Teleway Corporation—and two satellite carriers—Japan Communications Satellite Co., Inc. and the Space Communications Corporation—were the first to be licensed as Type 1 telecommunications businesses after the business act was enacted. These were followed by two international carriers and nine regional (electric power) carriers.

### b. Dramatically lower prices

Telecommunications prices fell dramatically due to the of the telephone (roughly 1985 to 1995), (2) the age of the Internet and the mobile phone (roughly 1995 to 2005), and (3) the age of broadband and the smartphone (roughly 2005 to present). Below, we sort through the distinctive transformations that occurred in systems, services, and market structures in each of these periods.

escalating competition among carriers. In the long-distance communications market, for example, price-cutting competition broke out centering on the Tokyo, Nagoya, and Osaka markets and the routes joining these three largest domestic markets. Although the primary telecommunications services offered at the time were telephones and leased lines, competition focused on telephone services because of the market size.

The highest long-distance rate initially in 1985 had been 400 yen for three minutes, but this tumbled to 180 yen for three minutes 10 years later (Figure 1-1-1-1).

### c. Emergence of new services

After telecommunications liberalization, new services, such as computer communications and facsimile communications, emerged, and gradually their members and subscriptions grew in number. In 1991, there were 1.15 million computer communications users, which soon swelled to 3.69 million in 1995 and 5.73 million by 1996 (Figure 1-1-1-2). The number of facsimile service subscriptions also soared during this time frame (Figure 1-1-1-3). The main factors behind these increases were the rising value of using networks, fueled by a mounting need for recorded communications and service area expansions, and long-distance communications prices that were inexpensive compared to using the telephone network.

## (3) Recap of Period 1

In the first 10 years after the introduction of competition with the telecommunications liberalization in 1985, many new carriers entered the telecommunications market and competition among carriers drove down prices and diversified services.

During this period computer communications, mobile phones, facsimiles, and other services started to expand as new businesses in the ICT field. This period also saw fiber optics and other technologies advance and, most importantly, the first signs of the Internet (broadband) and mobile communications, which would evolve into