An extract from The Technology, Media and Telecommunications Review, 11th Edition

Overview

The media and telecommunications environment in Japan has continued its rapid development throughout 2019 and 2020. While the country has already achieved a broadband penetration rate of 100 per cent, numerous measures have been (and continue to be) implemented to enhance the nation's telecommunications networks.

i Japan's covid-19 response

As in many other countries, the covid-19 pandemic has significantly impacted several aspects of Japanese society, including work life and business operations. Despite the near-100 per cent broadband penetration and near-universal 3G/LTE, and increasingly 5G, coverage throughout Japan, Japanese businesses have lagged behind the government's pandemic-related goal of having 70 per cent or more of each company's employees work from home. That said, many companies have taken this opportunity to re-evaluate their notions of a 'traditional office', which typically has been characterised by long hours at the office and packed commutes, and the necessity of office space, particularly in metropolitan areas like Tokyo where office space is in short supply.

ii Society 5.0

Additionally, the Japanese government has begun pursuing its 'Society 5.0' initiative: the digitisation of the entire society by integrating digital innovations (like artificial intelligence (AI) and big data analysis) into the physical (real) world. In furtherance of this initiative, the Japanese government has pursued a number of programmes and measures in the telecommunications space.

For example, the government is now strongly pushing the rollout of 5G and other cutting-edge technology that is capable of transferring data at even higher rates than is currently possible with LTE. NTT DOCOMO, KDDI, Softbank and Rakuten Mobile were each allocated 5G spectrum by Japan's Ministry of Internal Affairs and Communication (MIC) in April 2019. These four mobile services providers have launched 5G telecommunication services in 2020.

In addition, to combat the spread of covid-19, the Japanese government released the Contact-Confirming Application (COCOA), a social tracing app developed by Microsoft that allegedly does not store personally identifiable information but allows a user to report if he or she has tested positive for covid-19 and notifies any phone with the app installed if it has been in the vicinity of such user's phone. The app reached 4.4 million users in its first week, but registrations have reportedly slowed substantially since its debut.

Society 5.0 will inevitably result in a significant increase in personal data communication, both domestic and cross-border. The security of such data is a key concern with respect to such communication, which the government has addressed through various regulations. That said, the government seeks to strike a balance between the protection of personal data and the potential economic benefits of big data analysis. One approach that the government has been exploring is the creation of a personal-data-store-type regime known as personal information banks, which would entail personal data being collected by a trusted entity (i.e., the 'personal information bank') and such entity providing service providers with access to such data in accordance with the data subject's instructions.

iii Recent digitisation efforts

The Japanese government is also pursuing a number of efforts aimed at digitising government services and making them more easily accessible to residents. For example, the MIC has pursued 'Open Data' initiatives with respect to governmental data, encouraging all governmental agencies (including municipal ones) to allow citizens to easily access and use governmental data in digital format for free. However, as of the end of 2019, 63 per cent of municipal governments have taken no measures to address the Open Data initiative.

Additionally, to allow Japanese residents to access more government services online or more conveniently, the Japanese government has rolled out personal identification cards known as 'My Number' cards. Among other services, My Number card holders are able to make certain tax filings online (electronically authenticated with My Number card data) and receive family, tax, residency and other records at convenience stores (which are ubiquitous in most Japanese cities) rather than at their local city hall or ward office. That said, despite being introduced in 2015, the adoption of My Number cards has been sluggish – reportedly only 17 per cent of Japanese residents have My Number cards as of July 2020 and the government's incentive programme that rewards ¥5,000 of cashless payment credit (e.g., PayPay credit) to registrants has attracted less than 10 per cent of expected applicants as of September 2020.

Even where residents have received My Number cards, there have been hiccups in the implementation of programmes attempting to leverage the system. Notably, the Japanese government offered an online application option for the Japanese government's ¥100,000 special covid-19 stimulus payment to residents with My Number cards. However, local municipal offices were flooded by requests to reset My Number card passcodes (required to log into the government's application page) from residents who forgot them and many residents reported having trouble accessing the application page even with correct passcodes – in some cases, it was simply quicker for residents to post a physical application. Additionally, even when residents were able to submit an application online, all applications were reportedly reviewed by government officials by hand, meaning an online application was not necessarily processed any more quickly than a physical application.

The government is nevertheless expected to continue pursuing data and digitisation initiatives. Yoshihide Suga, prime minister of Japan, voiced a commitment to further digitise government services and 'allow people to receive government services 24 hours a day, 7 days a week so long as they have a My Number card.' In furtherance of this goal, Prime Minister Suga has instructed the Digital Transformation Minister, Takuya Hirai, to establish a new governmental agency named the Digital Agency. The bill establishing the Digital Agency will be submitted to the legislature in January 2021.

Under the current bureaucratic system, the responsibility for digitisation measures is scattered among several governmental agencies, based on whether such measures relate to the sectors within such agency's purview. Some have said that such decentralised responsibilities partially account for the slow progress of Japan's digitisation efforts, particularly when compared to other countries. For example, agencies have implemented different IT systems and data formats, rather than coordinate standardised systems and formats. This disparity reportedly made it more difficult for governmental agencies to share covid-19 data.

While the final details regarding the Digital Agency will depend on the bill that is ultimately passed by Japan's legislature, the Digital Agency will seek to consolidate responsibility and authority for digitisation efforts into one centralised agency. The aim is to facilitate more efficient implementation of digitisation efforts and help agencies share data and coordinate more smoothly by standardising IT systems and formats.

Other initiatives that the Digital Agency is planning to pursue include consolidation of various identification cards into the My Number card (e.g., public health insurance cards). This will enable citizens to reduce the number of identification cards that they must carry to receive services. Additionally, Digital Transformation Minister Hirai announced that he seeks to have the Digital Agency serve as a 'control tower' to expedite digitisation in the private sector as well as the public sector. Few public details about this initiative are available at the time of writing.

iv Expansion of telecommunications market access and competition

The government is also increasingly prioritising the expansion of market access and competition within the Japanese telecommunications industry. For example, the government is looking to equalise competition between Japanese service providers and non-Japanese service providers. In 2020, telecommunication regulations were amended to ensure the government may enforce such regulations equally between domestic and foreign service providers.

The MIC and other government authorities have taken steps to eliminate, or rigorously regulate, various business practices considered by many to be anticompetitive, such as SIM card locking and automatically renewing two-year service contracts. The MIC and other governmental agencies remain committed to improving high-quality telecommunications network access and reducing associated costs for consumers, and we foresee significant regulatory reforms on the horizon to accomplish these goals. In addition, digital platform businesses have recently drawn additional scrutiny from government regulators who are concerned with the fairness of transactions. In 2020, a new law was enacted to ensure fairness of digital platform businesses, mainly via disclosure requirements.

v Digital piracy prevention initiatives

Recently, the Intellectual Property Strategy Headquarters of the Cabinet Office (IPSHQ) expressed significant concern about the growing number of websites promoting and enabling the piracy of media content in Japan, which the IPSHQ views as harmful to its 'Cool Japan' policy. In 2018, the IPSHQ announced its intent to adopt more concrete regulations during 2019 designed to block access to piracy websites. The IPSHQ's proposal was vigorously debated among politicians, scholars and industry insiders, and eventually the IPSHQ's approach did not result in legislation. Instead, the Agency for Cultural Affairs (ACA) addressed this issue by amending the Copyright Act.

Regulation

i The regulators

The MIC's broad authority to regulate in the telecommunications and broadcasting spaces is derived from a series of statutes, which are the ultimate source of law in these sectors in Japan. The core statutes conferring this authority include:

  1. the Wire Telecommunications Act, which governs facilities for wired signal transmission, such as wired telephony, wired broadband networks and cable television;
  2. the Radio Act, which governs facilities for wireless signal transmission, such as mobile phones, terrestrial and satellite television broadcast infrastructures and high-powered WiFi networks;
  3. the Telecommunications Business Act, which regulates telecommunications and media businesses; and
  4. 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 a more streamlined regime for the review and granting of broadcast licences, which included the separation of broadcasting licences from transmission licences, previously a single licence, in order to make the process of receiving a licence easier for applicants.

Prior to this amendment, general broadcasting licences, cable radio broadcasting licences, CATV broadcasting licences and licences to broadcast content through third-party facilities were granted by the MIC under different statutes using different procedures that had developed over time as the underlying technologies were developed and implemented. The statutory licensing provisions for these activities were consolidated into the amended versions of the Broadcast Act and Radio Act, under which broadcasting activities have been divided into two major licensing categories: main broadcasting, consisting of both terrestrial broadcasting and broadcasting through broadcasting and communication satellites located over 110 east longitude; and regular broadcasting, covering broadcasting through all other satellites, CATV and IPTV.

Prior to the amendment, terrestrial broadcasting licences were granted only to broadcasters that both provided their own broadcast content and operated the wireless transmission facilities used for its distribution. Under the amended Broadcast Act and Radio Act, broadcasters are 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 have lessened the regulatory burdens on telecommunications and broadcasting companies to provide flexibility as 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

The MIC exercises its statutorily conferred regulatory power in numerous ways. For one, it 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.

The MIC is also charged with allocating radio spectrum to licence holders, and has adopted detailed regulations to monitor and establish technical standards applicable to spectrum users and their licensed facilities and businesses. The process through which the MIC exercises this decision-making authority is often criticised as opaque and arbitrary. For example, the allocation of radio spectrum frequencies to private sector service providers is based on the overall judgement of the MIC, and not on any clear set of factors, leaving applicants unsure as to what elements are being considered and opening the MIC to accusations of favouritism or political manipulation. Spectrum policy in Japan is further discussed in Section IV.

The Broadcasting Act requires licensed broadcasters to stay politically neutral and report the 'truth'. In February 2016, the Minister of the MIC stated during a legislative session that a broadcaster would violate the Broadcasting Act if it repeatedly broadcasted lengthy content supporting a particular political view without reporting on other political views. The Minister further indicated that, in the event of such a violation, the MIC could issue an order to suspend such broadcaster's business. This statement was criticised for potential chilling effects on freedom of speech.

iii Ownership and market access restrictionsRestrictions on foreign investment

Foreign ownership and management of broadcasting licence holders, wireless transmission licence holders and the Nippon Telegraph and Telephone Corporation (NTT), a semi-privatised national telecommunications service provider, is restricted by statute.

As discussed in Section II.i, the Broadcast Act and the Radio Act, each amended in 2010, now divide broadcasting activities into two categories: main broadcasting and regular broadcasting. Under the amended Broadcast Act, 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 one or more foreign nationals or entities may hold or receive a licence for main broadcasting. Further, the indirect foreign ownership of 20 per cent or more of a licence holder's voting shares through a domestic 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 the unintended cancellation of its licence, a main broadcasting licence holder whose shares are traded on a stock exchange is permitted by statute to refuse to recognise any transfer of its shares that would cause it to violate the foreign ownership restrictions. By 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.

Restrictions on cross-ownership

Ownership of multiple broadcast outlets is restricted by the Broadcast Act and related regulations. This restriction on the concentration of ownership is intended to support press freedom and the diversity of speech in broadcasting. The restriction includes limits on the simultaneous ownership of shares in, and control over board seats of, multiple main broadcasting licence holders, as well as aggregate upper limits on the use of satellite transponder capacity for owners of multiple main broadcasting licence holders. However, in response to worsening business conditions for radio broadcasters, the MIC amended its regulations in 2011 to relax restrictions on the cross-ownership of radio broadcasting licence holders, now allowing simultaneous control of up to four licences. Cross-ownership of newspapers and broadcasters is not restricted in Japan. Newspaper companies often hold large ownership stakes in broadcast companies: in fact, each major private television broadcast network in Japan is affiliated with a major newspaper.

iv Transfers of control and assignments

In addition to foreign ownership and management restrictions, and cross-ownership limits, MIC approval is required for mergers and acquisitions that result in a new entity holding a main broadcasting or wireless transmission licence. Therefore, a statutory merger pursuant to which a licence holder will not be the surviving company, or the divestiture of a business conducted under such licence, each generally require MIC approval. The MIC's review process focuses on the proposed transferee rather than the transferred broadcasting or wireless business, and primarily involves a determination as to whether that transferee would have been eligible to independently qualify as a new licensee if it had submitted a full application. According to the MIC, it generally endeavours to finish the licence transfer review process within one month, which is significantly shorter than the typical review process for licence renewals or new applications.

Further, the Telecommunications Business Act was amended in May 2015 to require the major telecommunications companies2 to renew their respective telecommunications business registrations when they engage in mergers or share acquisitions. This amendment, which came into effect in 2016, allows the MIC to review the potential anticompetitive effects of any proposed merger or share acquisition on business operations and fair trade. Anticompetitive concerns are particularly important in the Japanese telecommunications industry, which was monopolised by three major private telecommunication companies – NTT DOCOMO,3 KDDI and SoftBank – until Rakuten Mobile entered the market in October 2019.

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 unless the acquiring investor satisfies criteria for exemption from such prior filing requirement.4 When there are no national security concerns present, this is ordinarily a pro forma requirement.