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Local Calls Get Cheaper Under New System

February 16, 2001
Japan's telecom companies began accepting applications for a carrier selection service called Myline on January 10, 2001. Currently, when accessing a carrier other than the NTT Group, a prefix number is required. But with the introduction of Myline, the connection to the caller's preferred carrier is made automatically. In addition to being more convenient for users, the system allows new common carriers--companies such as KDDI and Japan Telecom--to compete on an equal footing with NTT. Carriers are presently cutting local rates and offering discounts in a frenzied bid to attract customers before the system begins on May 1. Consumers hope for a similar competition regarding long-distance rates. Their wishes may come true as competition heats up following the liberalization of the telecom market.

Attracting Customers
Under the new system, callers will be able to preregister their preferred carriers in four categories: local calls, in-prefecture long-distance calls, out-of-prefecture long-distance calls, and international calls. In the event that users have not registered preferences by the time the new system begins in May, their calls will be handled by the NTT group: either NTT East or NTT West and NTT Communications. Changing and registering carriers are free of charge through the end of October 2001 but will cost 800 yen (6.96 U.S. dollars at 115 yen to the dollar) thereafter.

Consumers have a choice between two types of systems: Myline and Myline Plus. With Myline, callers can use phone companies other than registered ones by dialing the access number or using an automatic carrier routing (ACR) function that can automatically connect the caller with the cheapest carrier. Under Myline Plus, as long as the user does not dial a release code, all calls will be made through the designated carrier. The telecom companies are aiming to get customers to register their company as the carrier for all four types of calls under the Myline Plus system. As all the companies try to lure customers, a fierce competition regarding discounts is underway.

Competition in the field of long distance calls began in Japan in 1985, when NTT was privatized. But by the latter half of the 1990s, criticism was mounting that NTT's continued control of the market was keeping rates high. With this in mind, the Diet revised the NTT Law in 1997, and the breakup and reorganization of the telecommunications giant became a reality in July 1999. During the debate over NTT's breakup, the new common carriers had insisted that the three firms into which NTT was reorganized should also have their own prefix number in order to ensure fair competition. Instead, the need for prefix numbers was eliminated by the Myline system, leading to more convenience for users. This system of preferred carriers began in the United States in 1984 and then spread to Australia, Canada, Germany, France, and other countries.

The Benefits of Competition
The price wars triggered by the introduction of carrier selection services have brought along advantages for users. The biggest battleground is in the area of local calls. For 24 years, NTT had charged the same rate for local calls, 10 yen (8.7 U.S. cents) for three minutes. But rates began dropping at the end of 2000 when KDDI and Japan Telecom announced plans to offer service at the rate of 8.8 yen per three minutes, beginning in May 2001. NTT East and NTT West immediately followed suit, with NTT East taking a two-step approach, cutting rates to 9 yen per three minutes beginning January 10, and then to 8.8 yen in May. Tokyo Telecommunication Network (TTNet) began offering rates of 8.7 yen on January 10.

Because of the connection charges they must pay to NTT East and NTT West, it is clear that the new common carriers will not be able to make a profit from rates below 9 yen. But these companies are all scrambling to attract customers and are considering cutting prices again in the future.

Following local calls, the next focus of price cuts looks to be long distance. Since February 1998, all the major carriers other than TTNet have had the same rate for daytime calls over 100 kilometers (62 miles): 90 yen (0.78 dollars) for three minutes. A wave of change appears to be inevitable in this area as well.

In the midst of all this, Fusion Communications, an Internet phone service backed by a major trading company and other firms, has caused a stir with the announcement that it will begin offering a low, uniform rate of 20 yen (0.17 dollars) for three minutes for all long-distance calls beginning in April. Many people are waiting to see if a new era of price cutting emerges in the long-distance market as well.

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Trends in JapanCopyright (c) 2001 Japan Information Network. Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.