Revision of NTT Law: Review Rules from Pre-internet Days, Think Strategically on Sale of Shares

Debate has begun over the sale of government-held shares in telecom giant Nippon Telegraph and Telephone Corp. The issue was raised by a proposal to use the proceeds from the sale as a source of funding for defense spending, but it is more important to review old regulations from the viewpoint of increasing NTT’s international competitiveness.

Under the law that governs NTT, the government is required to hold at least one-third of NTT shares. A revision of the law would be a prerequisite for any sale of the shares.

To discuss the pros and cons of such a sale, the ruling Liberal Democratic Party’s task force to study the NTT law held the first meeting of its executive members. Separately, the Internal Affairs and Communications Ministry also plans to set up an expert panel to discuss topics including what the NTT law should be like.

The government holds NTT shares with a market value of nearly ¥5 trillion. The proposal to use the sale of those shares as a source of funding for defense spending was made when the LDP was discussing how to secure financial resources for that purpose. Some argue that the shares should be sold over a period of about 20 years to provide a long-term financial resource without affecting the stock prices.

However, this would not be a permanent financial resource. Moreover, if all shares are sold, the government would be deprived of the more than ¥100 billion a year in dividends that it currently receives. It cannot be said to be appropriate to consider the sale of shares as an easy way to secure financial resources.

If the government were to sell its NTT shares, the economic security perspective is also essential. NTT is responsible for critical telecommunications infrastructure.

To avoid a situation in which NTT could be bought out by foreign capital, it is necessary to establish an effective framework by utilizing relevant laws, such as the Foreign Exchange and Foreign Trade Law that regulates foreign investment in Japanese companies.

On the other hand, apart from debate over the sale of the government’s NTT shares as a source of funding for defense spending, it is necessary to discuss whether the NTT law should remain unchanged.

The NTT law was established in conjunction with the privatization of NTT in 1985. It requires that the internal affairs and communications minister approve the appointment of directors and decisions on business plans. It also stipulates that NTT’s research results shall be made public to promote the spread of telecommunications technology.

The aim of the law was for the government to monitor NTT, which had a monopoly on the fixed-line telephone network, to prevent the telecom giant from hindering competition. But the environment has changed significantly since then, as mobile phones and the internet now play a leading role in telecommunications. It is quite natural that regulations should be reviewed as well.

In particular, the provision under the law that technology developed by NTT should be released to other companies is highly problematic.

NTT has been conducting research and development on the Innovative Optical and Wireless Network (IOWN), which is next-generation communications infrastructure that uses optical communications technology. This shows NTT’s high level of technology. But if the technology were to be used by foreign firms, NTT’s competitiveness would be greatly impaired.

In the information and telecommunications field, the U.S. information technology giants collectively known as GAFA have emerged, while Japanese firms have little presence. For NTT to compete with such companies, it is desirable to remove restrictions that would limit its growth.

(From The Yomiuri Shimbun, Aug. 24, 2023)