An extract from The Technology, Media and Telecommunications Review, 10th Edition
The media and telecommunications environment in Japan has continued its rapid development throughout 2018 and 2019. While the country has already achieved a broadband penetration rate of 100 per cent, numerous measures have been (and continue to be) implemented to prepare the nation's telecommunications networks and regulatory regimes for hosting the 2020 Olympic Games in Tokyo. To accommodate the increased number of foreign visitors that will attend the Olympic Games, both the government and private mobile service providers have focused their efforts on the expansion of free Wi-Fi accessibility. Concurrently with this increase in free Wi-Fi availability, long-standing restrictions on the use of foreign mobile devices in Japan have been liberalised, with the result that overseas visitors may temporarily bring and use their personal devices without registration.
The government, the three main mobile services providers and, more recently, Rakuten Mobile have announced their intent to offer next-generation 5G cellular data services by 2020. In furtherance of this goal, 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 each announced plans to invest significant sums toward the proliferation of 5G access. We expect Japan to make significant developments to its telecommunications networks in the months leading up to the Olympic Games, and to continue developing its infrastructure thereafter.
The government is also increasingly prioritising the expansion of market access and competition within the Japanese telecommunications industry, with the ultimate goal of reducing mobile device charges for Japanese consumers. Recent regulations and policy guidelines issued by the MIC have led to a significant increase in the number of active MVNOs, which has also resulted in a number of major Japanese companies entering the MVNO sector. The increase in MVNO service availability has served to both further increase pressure on Japanese regulators to facilitate fair competition within the telecommunications industry, as well as incentivise the major telecommunications companies to reduce prices.
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.
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 decided during its final meeting in October 2018 not to schedule further discussions on the topic. Reports speculate that the IPSHQ may discontinue entirely its discussions on regulations to block access to piracy websites.
Regulationi 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:
- the Wire Telecommunications Act, which governs facilities for wired signal transmission, such as wired telephony, wired broadband networks and cable television;
- the Radio Act, which governs facilities for wireless signal transmission, such as mobile phones, terrestrial and satellite television broadcast infrastructures and high-powered Wi-Fi networks;
- the Telecommunications Business Act, which regulates telecommunications and media businesses; and
- 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 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, 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 in the case of licence renewals or new applications.
Further, the Telecommunications Business Act was amended in May 2015 to require the major telecommunications companies 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, 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. When there are no national security concerns present, this is ordinarily a pro forma requirement.