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This paper presents a proposal for a desirable industrial organization and
a desirable regulatory framework for converging services in telecommunications
and broadcasting (communications) in view of the Japanese case. In general,
converging services are those of close substitutability from different sectors
or industries. Examples are POTS, mobiles, and IP-telephony in telecommunications;
and terrestrial, cable, and satellite services in broadcasting.
The paper starts with a short summary of the Japanese case with regard to convergence.
It then proceeds to explaining a method for constructing a desirable industrial
organization and a desirable regulatory framework for converging services. We
consider two attributes of a communications activity: 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, network services, and contents). Thus, the
entire communications activities will be classified as entries in a two-dimensional
matrix.
The paper then discusses criteria for desirability. The most important one is
to create and maintain competitive markets with level playing field. Other criteria
such as providing universal services, exploiting scale-scope economies, and
minimization of regulatory costs are also considered.
A regulatory framework is an assignment of a mode of regulation (such as competition
with free entries, price-cap regulation, and regulated monopoly) to each of
the communications activities. A desirable regulatory framework may be chosen
among possible frameworks by weighing the properties of each of them according
to the desirability criteria. In other words, the paper intends to present a
target for desirable regulation and industrial organization without taking into
account historical data. Difficulties arising from the presence of converging
services are overcome by separating theoretical analysis from historical consideration.
In the remaining part of the paper, the present regulatory framework and the
present organization of Japanese communications industries is expressed in terms
of the model developed in the first part of the paper. In short, the present
framework of Japan has been formed based on the distinction of communications
activities according to service providers; in particular, it still drags the
old-time monopoly by NTT and NHK. The paper discusses about a possible path
along which the present framework may be transformed gradually into a desirable
one in terms of two examples.
communication, telecommunication, regulation, broadcasting, competition, service layers, vertical division, level-playing field, monopoly
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