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OECD-Korea RCC, Regional Antitrust Workshop On Competition Cases
Case Study (Japan)
~Abuse of Dominance~
June 29, 2007
Ryoichi Inoshita*
Investigation Bureau,
Japan Fair Trade Commission
(JFTC)
*The views expressed here are those of the speaker, not those of the JFTC.
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Outline of this presentation
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1. Overview of the case
2. What is FTTH service?
3. Companies Concerned
4. NTT’s position
5. Exclusionary conduct
6. Application of the Law
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1. Overview of the case
NTT East
(dominant firm)
Other companies
Market
(FTTH service for detached houses
in the Eastern area of Japan)
TEPCO
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2. What is FTTH service?
・ “Fiber To The Home” service: broadband
Internet access service with optical fiber.
・ FTTH enables us to download movies etc.
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3. Companies Concerned
(1) NTT East
・ A big telecommunications company
providing telephone services, internet
connection services etc. in the Eastern
area of Japan.
・ It owns a large optical fiber network.
・ Users need to pay an Internet service
provider as well as NTT for connecting the
Internet.
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3. Companies Concerned
(2) TEPCO
・ The Tokyo Electric Power Company
・ A big power company providing electricity, FTTH
service, etc in part of the Eastern area of Japan.
・ It owned much smaller optical fiber network.
・ Users need to pay an Internet service provider
as well as TEPCO for connecting the Internet.
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3. Companies Concerned
(3) Other companies
・ Unable to start a FTTH service without lending
NTT’s optical fiber network and paying NTT
interconnection charge etc. because of very high
cost and very long time to lay optical fiber
network by themselves.
・ Telecommunications Business Law requires that
companies owning such networks have to lend
their networks if asked to.
・ Users need to pay an Internet service provider
as well as the telecoms company for connecting
the Internet.
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4. NTT’s position
(1) Market Shares etc.
・ There were three companies in the market; NTT,
TEPCO, and the other one.
・ NTT’s network covered 75~80% of the area.
・ NTT held more than 70% of all the optical fiber
networks in the area.
・ NTT held 85~90% of all the FTTH users in the
area.
・ TEPCO’s network covered much smaller area
and was inconvenient to interconnect for others.
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4. NTT’s position
(2) Dominance
Therefore,
• NTT’s network was an essential facility for
companies trying to enter the market.
• NTT’s user fee, interconnection charge
and the kind of service had a strong
influence on the market.
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5. Exclusionary conduct
(1) the Entry of TEPCO
• In 2001, NTT planned to provide 100Mbps FTTH
service for less than 6000JPY partly because
TEPCO was expected to start FTTH service for
6000 JPY from 2002.
• NTT had already provided 100Mbps FTTH
service for 9000JPY with “direct cable connection
system” (a facility set where one optical
subscriber cable is occupied by one user.), and
the interconnection charge of this service was
more than 5000JPY.
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5. Exclusionary conduct
(2) NTT’s reaction to the entry
• If NTT cut the price from 9000JPY to less than
6000JPY, they had to reduce the interconnection
charge as well in order to secure fair competition.
• Instead of cutting the price, NTT introduced a
new service with “split system” (a facility set
where one optical fiber of 100Mbps was split into
maximum 32 users.) for 5800JPY, but the actual
facility set was “direct cable connection system”,
because there was not enough demand to
introduce “split system”.
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5. Exclusionary conduct
(3) difficulties for others to enter
Therefore,
• Other companies could not start a FTTH service
with “direct cable connection system” because
they had to pay NTT around 6300JPY as the
interconnection charge etc.
• Other companies could not start a FTTH service
with “split system” as well because there was not
enough demand, just as NTT did not adopt “split
system”.
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5. Exclusionary conduct
(4) additional price reduction
• In 2003, NTT cut the price of the new service
from 5800 to 4500JPY by changing the nominal
facility set, partly because TEPCO was expected
to reduce its price from 6000 to 4500JPY.
• Therefore, it got even more difficult for others to
start a FTTH service.
• As a result, almost no company entered the
market until NTT changed the interconnection
charge etc. after the recommendations issued by
the JFTC.
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6. Application of the Law
(1) provisions applicable to this
case
• Article 2(5) of the Antimonopoly act says that a
term “private monopolization” used in this act
means such business activities, by which any
entrepreneur, individually or by combination or
conspiracy with other entrepreneurs, or by any
other manner, excludes or controls the business
activities of other entrepreneurs, thereby
causing, contrary to the public interest, a
substantial restraint of competition in any
particular field of trade.
• Article 3 bans this “private monopolization”.
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6. Application of the Law
(2) “substantial restraint of
competition”
・ “substantial restraint of competition”
means “competition in a market has been
reduced and an entrepreneur or a group of
entrepreneurs can dominate the market by
freely controlling its price, quality, quantity,
and so on.” according to the settled case
law.
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End
•Questions:
[email protected]
•Antimonopoly Act:
http://www.cas.go.jp/jp/seisaku/hou
rei/data/pmm.pdf
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