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This paper presents a regulatory framework for converging services in telecommunications and its application to the Japanese case. Converging services are those of close substitutability from different sectors or industries. Examples are POTS and IP-telephony, cable and satellite services, etc.
The paper starts with explaining a method for constructing a desirable regulatory framework for converging services, and then applies it to the Japanese case emphasizing the process of moving from the present regulatory framework to a new desirable one.
The first part of the paper begins with classifying the communications activities comprising a network. It considers two attributes of a communications activity as the criteria for classification: the first is the location of a communications activity in the network considered as a planar graph (such as access lines, routers, and trunk lines), and the second is the location of a communications activity in the network considered as a stack of functional layers (such as infrastructure, IP or ATM system, and information contents). Thus, each communications activity is classified into an entry of a two-dimensional matrix.
A regulatory framework is an assignment of a mode of regulation (such as competition with free entries, price-cap regulation, etc.) to each entry of the matrix. A regulatory framework is evaluated according to its properties which include (i) the appropriateness of the mode of regulation,(ii) the degree of the prevalence of competition over regulation in the mode assigned, and (iii) the cost of regulation. A desirable regulatory framework is chosen among possible frameworks by weighing the properties of each of them.
In the second part, the present regulatory framework for the Japanese communications industry is formulated in terms of the theory developed in the first part, and a regulatory framework desirable in the coming age of converging services is constructed. The present framework in Japan has been formed based on the distinction of the communications services by their providers; in particular, it drags the trace of the old-time monopoly by NTT and NHK. A desirable framework, constructed on the two attributes of a communications activity, is very much different from the present one. The paper discusses about a path along which the present framework may be transformed gradually into the desirable one.
Regulation, Regulatory Framework, Convergence, Horizonal Separation, Vertical Separation, Structural Separation, Accounting Separation, Functional Regulation.
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