Japan Cellular Telephone And Third Party Radio Agreement (1989)

[June 30, 1989]

[letterhead]

THE UNITED STATES TRADE REPRESENTATIVE

Executive Office of the President

Washington, D.C. 20506

June 30, 1989

His Excellency Nobuo Matsunaga

Ambassador

Embassy of Japan

Washington, D.C.

Dear Ambassador Matsunaga:

I was pleased to learn that as a result of the recent talks concerning cellular telephone and third-party radio system telecommunications issues, the Ministry of Posts and Telecommunications will take the measures set forth in the letter and its attachment of June 30, 1989, to Ambassador Williams fromVice Minister Okuyama. I can confirm our mutual understanding that these measures will resolve these important telecommunications issues that were the subject of the U.S. Government's determination under section 1377.

This is an excellent start to our mutual resolution of trade issues between our two governments under the Bush Administration. I look forward to further discussions of telecommunications matters in a spirit of mutual cooperation.

Sincerely,

[signature]

Carla A. Hills

[letterhead]

EMBASSY OF JAPAN

WASHINGTON, D.C.

June 30, 1989

Dear Ambassador Hills:

It is my pleasure to note the satisfactory resolution of two important telecommunications issues between our governments. As a result of the recent bilateral talks, the Ministry of Posts and Telecommunications will take the measures specified in the letter and its attachment, dated June 30, 1989, from Vice Minister Okuyama to Ambassador Williams.

Let me add that I trust our governments will work together in the future to resolve issues quietly and in the spirit of cooperation.

Sincerely yours,

[signature]

Nobuo Matsunaga

Ambassador of Japan

The Honorable

Carla A. Hills

United States Trade Representative

600 17th Street, N.W.

Washington. D.C. 20506

[letterhead]

Ministry of Posts and Telecommunications

3-2 Kasumigaseki 1-chome

Chiyoda-ku Tokyo 100, JAPAN

June 30, 1989

Dear Ambassador Williams:

I have the honor to refer to recent bilateral talks between our two Governments concerning cellular telephone and third party radio system telecommunication issues. As a result of these talks and in order to further enhance market access opportunities in the field of telecommunications, the Ministry of Posts and Telecommunications (MPT) will take measures concerning cellular telephone and third-party radio systems as written in the attachment to this letter. In addition, I can confirm that implementation of these measures will reflect the principles of the MOSS Telecommunications Arrangements including the principles of transparency, national treatment, comparable market access and non-discrimination. The measures undertaken with respect to third-party radio systems reflect MPT's intention to continue to treat them as a private radio service. With regard to cellular telephone systems, MPT has taken measures which enable roaming of the North American type analog cellular telephone system into Nippon Telegraph and Telephone's systems in accordance with the MOSS Telecommunications Arrangements.

At this juncture, I also state that MPT has faithfully implemented the MOSS Telecommunications Arrangements including the review of the Telecommunications Business Law, in particular that of the distinction between Special Type II and General Type II carriers.

We are pleased that these measures will accomodate your requests regarding cellular telephone and third-party radio systems. We are convinced that these measures will promote the good economic relationship between Japan and the United States.

Yours sincerely,

[signature]

Yusai Okuyama

Vice Minister of

Posts and Telecommunications

The Honorable Sidney Linn Williams

Deputy United States Trade Representative

600 17th Street, N.W.

Washington, D.C. 20506

Attachment

ATTACHMENT

I. THIRD-PARTY RADIO

1.Future frequency allocation and assignment of frequencies for additional third-party radio systems in the Tokyo metropolitan area.

a. Ministry of Posts and Telecommunications (MPT) will assign frequencies in the 834-838 MHz (which is temporarily used for third-party radio systems) and the 850-860 MHz bands to Japanese* and foreign** systems in the following manner:

(1) It is our fundamental policy that frequencies in the 800 MHz band allocated for Japanese or foreign third-party radio systems shall be assigned to any applicant on a nondiscriminatory basis according to the size of actual demand (including forecasted demand). It is not our policy to assign frequencies merely on an arbitrary one-to-one basis.

With respect to actual frequency assignment, MPT will accept applications for the next system when the preceding approved system or pending applications are loaded with over 2,000 units.

(2) Given the special situation of the Tokyo metropolitan area, where sufficient demand is forecasted, MPT will take the following measures; and through these measures, it is expected that market opportunities of U.S. companies would be further enhanced provided that they make sufficient efforts:

(a) Ten systems: With respect to the first 10 third-party radio systems, in the event that MPT approves 5 new Japanese third-party radio systems before it approves 5 new foreign third-party radio systems, MPT will not approve applications for additional Japanese third-party radio systems until 5 foreign third-party radio systems also have been approved. If 5 foreign third-party radio systems have not been approved within one year after the fifth Japanese third- party radio system has been approved, the remainder of the systems, if any, will be licensed in accordance with the fundamental policy either for Japanese systems or foreign systems, whichever first meets actual demand under free competition.

(b)Six systems: With respect to the remaining 6 third- party radio systems, in the event that MPT approves 2 new Japanese third-party radio systems before it approves 2 new foreign third-party radio systems, MPT will not approve an application for the third Japanese system until 2 foreign third-party radio systems have been approved. If 2 foreign third-party radio systems have not been approved within one year after the second Japanese third-party radio system has been approved, the remainder of the systems, if any, will be licensed in accordance with the formula set forth in (a) above.

(c) For expansions of existing third-party radio systems, 4 systems will be made available during the one year from the date of the letter transmitting this document provided that there is sufficient demand for both Japanese and foreign systems. At the end of one year from the date of the letter transmitting this document, the remainder of the systems will be licensed according to the formula set out in (a) above.

(d) In the event more than 20 systems are made available in the 800 MHz band in the Tokyo metropolitan area, the systems will be licensed according to the formula set out in (a) above. If a point is reached where Japanese systems are licensed for half the number of the above systems, based upon actual demand, further licensing of Japanese systems will be suspended for one year to see whether applications of a foreign third-party radio system will be filed during that period.

(3) Transparency will be ensured in the process of frequency allocation through holding hearings, specifying the proposed allocation band, and allowing interested parties, including foreigners, to be heard in the drafting process. In the process of drafting or revising frequency allocations at the Radio Regulatory Council, representatives of foreign interests will always be allowed to participate in the sessions and state their opinions. In advance of the hearing, MPT will provide notice in an official gazette, and furthermore, will send a letter to the representatives of foreign interests, foreign embassies concerned and chambers of commerce. A copy of the current spectrum allocation chart is attached herewith. MPT will provide copies of the then-current spectrum allocation chart upon request.

* A Japanese system means a third-party radio system developed and standardized by the Radio Technology Council and introduced to the market in 1982.

** A foreign system means a third-party radio system introduced to Japan in 1987 which incorporated its own proprietary protocols, or other foreign-developed system approved by MPT.

2. Processing time

a. MPT will grant or deny license applications for new third-party radio systems within approximately four months of the submission of an application. The processing time required for single and multiple licensing will be equivalent. MPT will normally review the application for conformity with the format specified by MPT and accept the application on the same day as the application is submitted, except in the unusual circumstance of an extremely complicated submission.

b. Upon request of the applicant, MPT will explain the status of the application at any time after its submission. This explanation can be made either orally or in writing at the request of the applicant.

c. MPT will make efforts to further expedite the processing of third-party radio license applications.

d. If more than one application for a new third-party radio system is pending at one time, such applications will be processed simultaneously.

e. Upon receipt of an application, MPT may require certain specific types of technical information regarding a proposed third-party radio system plan. The system plan will be an integral part of the application. In that case, the information will be required on a non-discriminatory basis for all applicants, and considered within the four-month processing time.

f. MPT will grant or deny an application for the channel expansion of an existing third-party radio system within approximately two months of the submission of an application.

3. Processing agency

a. License applications for channel expansion for currently-licensed third-party radio systems may be filed with and processed by the Regional Bureaus of Telecommunications.

b. License applications for new frequencies may be filed with the Regional Bureaus of Telecommunications, but that part of the processing of the applications regarding frequency assignment and related matters will be processed at the MPT main office in Tokyo.

c. Licensing requirements and procedures will not discriminate between foreign and Japanese third-party radio systems.

4. Licensing Systems

a. Third-party radio systems may be established by either the single or the multiple licensing procedures at the option of the applicant.

b. The preloading requirement (the minimum number of mobile and dispatch units required at the time of licensing of a relay station) is 160.

c. Under the single licensing system, the requirement shall be met by stating the expected number of units.

d. Under the multiple licensing system, the requirement shall be met with the submission of a list of expected user(s) who has (have) signed (shomei) to notify the intention to use 160 units or more in total. A change in the expected users list will not affect the licensing of the relay station, or the processing time, provided the preloading requirement continues to be met. Under the multiple licensing system, a single user meeting the preloading requirement based on its expected users list may apply for a relay station license, provided that remaining user(s)constituting the multiple license also apply before the end of the processing time.

e. To facilitate foreign companies' use of the single license procedure, MPT will authorize the formation of a non-profit foundation upon receipt of the documents specified below as required by the Civil Code and the MPT ordinance (*). Within approximately one (1) month after the acceptance of the application, MPT will authorize the formation of the foundation. Upon its formation, a foundation will be allowed to operate nation-wide, and no more than one foundation need be formed for this purpose. The imposition of membership fees to maintain thefoundation's activities is not inconsistent with the non-profit status of the foundation.

*Major documents to be attached to an application for formation of a juridical foundation

Prospectus of the foundation Act of endowment

Type and total value of assets (Value of assets will be based upon the framework used for a single regional MRC foundation. The highest value of assets for a MRC is Yen 60 million.)

Certificate of rights and value of assets

Activity plans and preliminary balance sheets for the lst and 2nd fiscal year

The name of a founder

The names, addresses and career of board directors or representative

Others as described in Sec. 2 of the MPT ordinance

f. Under the single licensing procedure, users will also be able to apply for a relay station licensing as a group.

g. A user group or the foundation will be allowed to contract with a separate entity for the operation, management and control of the system. The membership fee of the foundation can include the charges under this contract.

5. Number of channels per system

MPT will assign sixteen channels at the time of license approval, if the applicant has satisfied the preloading requirement and indicates that more than 3,000 mobile and dispatch units are expected on that system by not later than the end of the fourth year after the date of the issuance of a license.

6. Exemption from inspection/inspection fee

No inspection will be made and no inspection fee will be assessed when a relay station is added to a currently-licensed third-party radio relay station.

7. Ownership and operation of relay stations

When a company owns third-party relay station facilities, its related company may be entrusted by users to operate the relay station, provided that: (1) the related company is a legal entity different from the facility owner; (2) the related company was not created for the sole purpose of circumventing the restriction on ownership/operation (i.e., the teikan of the related company includes purposes in addition to ownership or operation); and (3) the related company is not otherwise indistinguishable from the company that owns third-party relay station facilities in terms of capitalization, management, business activities, employees, and other reasonable parameters of a corporation.

8. Connection of third-party radio to PSTN

a. Each user of a third-party radio system may connect its private telecommunications system to the Public Switched Telephone Network (PSTN) at the relay station. In this case, each user is required to contract with the said PSTN to obtain a separate telephone number. The owner or trustee of operation of the third-party radio system may provide the users with equipment that jointly enables the users to connect their private telecommunications systems with the PSTN; provided that such equipment connects each user by means of its PSTN subscriber number solely by identifying that number, and does not have the function of switching.*

b. Each user of a third-party radio system may connect its private system to the PSTN at its dispatch point.

c. Technical experts of Japan and the United States will exchange views on the operation of third party radio systems regarding matters related to (a) and (b) above.

* This equipment may be regarded to have no function of switching between hard line users, i.e., switching itself is done at the PSTN side, if the equipment directs the signal ensuring that the communication will be received within the same private group.

While it is not clear at this point whether such equipment will actually work when it is connected to the PSTN of Japan, details of connection will be considered in connection with the processing of the application.

9. Interconnection of third-party radio systems

a. A user of one third-party radio system who is also a user of another third-party radio system may interconnect at the relay station its private telecommunications systems, for the purpose of providing intra-city and inter-city coverage of third-party radio, data and shared private paging services, using leased circuits obtained from telecommunications carriers or using private radio facilities.

b. When two or more users seek to interconnect their private telecommunications systems in accordance with 9(a) , they may enter into a joint contract with a telecommunications carrier for a shared leased circuit. The cost of the leased circuit service will be shared by the users. Each user can only communicate within its private group through the interconnection.

c. Each user of third-party radio systems that interconnects its private telecommunications systems by means of leased circuit service should take necessary steps at the relay station to ensure that only those users communicate via the leased circuit.

10. Frequency assignment for private paging

a. MPT has allocated four frequencies in the 27 MHz band for paging on private premises. These frequencies are available for private paging.

b. Private paging services will also be permitted utilizing frequencies assigned to land mobile services. In this case, a user of land mobile radio services may apply for a private paging license in these frequencies at the same time or at a subsequent time as the land mobile radio license application is submitted to the Regional Bureau of Telecommunications. The private paging license will be approved in conjunction with, and at the same time as, or subsequently in the case of subsequent applications, the land mobile radio license, and will be subject to the same procedures designed to provide transparency, as described in item 2.

11. Protocols for third-party radio systems

a. Third-party radio using the 1-3 GHZ submicrowave band is expected to be introduced in two years, in view of the current congestion of the 800 MHz band.

b. For this purpose, the Telecommunications Technology Council was asked on June 26 to deliberate on the technical requirements. Foreign company-affiliated personnel will participate in the study group set up by the Council as an expert member.

c. The deliberations of the Telecommunications Technology Council are not aimed at setting standardized protocols. While it is expected that various views would be presented in the Council deliberations, MPT will make final conclusions by giving due respect to views that proprietary protocols should be preserved.

d. MPT will not change the current policy on protocols for the third-party radio using 800 MHz band.

II. Cellular Telephone

1. The digitalization of cellular telephone systems is expected in the near future. It is important for Japan and the United States to work for the early realization of a unified digital system in Japan and a unified digital system in the United States. To that end, we propose meetings of Japanese and American experts to study the technical details in order to prevent the emergence in the future of such issues as the current one.

2. MPT will take the following measures which enable the use of a total of 5 MHz of spectrum in the bands from 843-870 MHz and 898-925 MHz, as set forth in (a) below, primarily for roaming by the users of the North American analog cellular telephone system:

a. In the Tokyo/Nagoya area and the corridor in between, MPT will immediately permit the use of 2 MHz of spectrum out of 10 MHz, which is allocated to IDO, with the signalling channels identical to those existing in the DDI system, for a North American-type analog cellular telephone system. MPT will make available the additional 3MHZ to IDO in its territories and the same 3MHz to DDI in its territories (i.e., nationwide) in order to satisfy user needs, when the 2 MHz is forecasted to be fully utilized.*

b. With respect to the new nationwide 3 MHZ allocation, for the sake of transparency, necessary procedures will be initiated following the transmittal of this document for the allocation of the additional 3 MHz, including the referral to relevant councils for deliberation.

c. MPT will give all equipment manufacturers (domestic or foreign) and operators adequate technical information about the location of the 3 MHz to enable the operator and manufacturers to design and manufacture subscriber and infrastructure equipment for the 2 MHz in such a way that they will not be required to redesign, modify or replace the subscriber equipment or infrastructure when the 3 MHz becomes available.

d. When the situation of full utilization is anticipated, i.e., 6 months beforehand as measured by reference to projected future demand, installation of infrastructure equipment shall be permitted so as not to impede the start of service in the additional 3MHz band on a nationwide basis as justified by attaining full utilization.

e. MPT will choose the location for the 3 MHZ so as to minimize the separation between that spectrum and the 2 MHz made available immediately. The maximum separation between the 2 MHz and the 3 MHz will be 27 MHz.

f. While the actual method of executing the above will be decided through negotiations between the operator and the U.S. affiliated company, both the Japanese and the U.S. sides will give support, where appropriate, so that the operator will be able to start the cellular telephone service as soon as possible. MPT will advise and encourage the operator in various matters including the installation of an analog cellular telephone system of 5 MHz capacity.

g. MPT is now undertaking a study to enable subscriber customer-owned-and-maintained equipment to be marketed in addition to the system operator providing leased equipment. When this is realized, it will apply both to Japanese and foreign suppliers without discrimination.

*The criterion for additional capacity will be ten thousand stations (mobile units) per MHz for a narrow band system or five thousand stations (mobile units) for a wide band system for the 23 wards in Tokyo, after making necessary allowance for signalling channels.

[letterhead]

DEPUTY UNITED STATES TRADE REPRESENTATIVE

EXECUTIVE OFFICE OF THE PRESIDENT

Washington, D.C. 20506

June 30, 1989

The Honorable Yusai Okuyama

Vice Minister of Posts

and Telecommunications

Ministry of Posts and Telecommunications

Tokyo, Japan

Dear Minister Okuyama:

Thank you for your letter of June 30, 1989, and its attachment concerning measures that the Japanese Ministry of Posts and Telecommunications (MPT) will take with respect to cellular telephone and third-party radio system issues and to further enhance market access opportunities in the field of telecommunications. I am pleased to confirm our mutual understanding that these measures will satisfactorily resolve these aspects of the problems that led to the U.S. Government's determination under section 1377 of the Omnibus Trade and Competitiveness Act of 1988. We particularly appreciate your efforts and those of your staff in working with us on these important matters, and we are pleased that they have been resolved.

Resolution of these problems represents, we believe, an important step in achieving more competitive access to the Japanese telecommunications market for foreign companies. We look forward to working together, in the context of the MOSS process, on other telecommunication trade matter, including restrictions on digital terminal equipment, the distinction between Special Type II and General Type II Carriers and also a review of the Telecommunications Business Law. As we discussed during our meetings, we must also note, in order to avoid any future misunderstandings, that it is the position of the U.S. Government that the imposition of standardized protocol requirements or other limitations on the use of proprietary protocols for third-party radio in the submicrowave band would constitute a violation of the MOSS Telecommunications Arrangement.

Again, please accept our appreciation and our wish to continue to work together in a spirit of mutual cooperation.

We look forward to working with you in the future.

Sincerely yours,

[signature]

S. Linn Williams

[related press release follows]

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

EXECUTIVE OFFICE OF THE PRESIDENT

WASHINGTON , D.C.

20506

For Immediate Release Contact: Claire Buchan

June 28, 1989 (202) 395-3230

HILLS ANNOUNCES TELECOMMUNICATIONS AGREEMENT

United States Trade Representative Carla A. Hills announced today that recent consultations with the Government of Japan have resulted in Japan's adoption of important market-opening changes to its telecommunications policy and regulations. These changes will occur in both cellular telephone and third party radio markets.

"The measures should provide immediate improvments for U.S. companies in these two high-growth segments of the Japanese telecommunications market. There should be significant additional benefits when fully implemented," Hills said.

"Even though this resolution covered only cellular telephones and third party radio, we hope the results will be a precedent for the entire telecommunications market in Japan.

"As a result of these decisions, it is no longer necessary for the U.S. Government to consider retaliation against Japanese exports to the United States under section 301 of the Trade Act of 1974.

Under section 1377 of the Omnibus Trade and Competitiveness Act of 1988, the United States reviewed its bilateral Telecommunications agreements with Japan, including the Market Oriented Sector Selective (MOSS) Telecommunications Agreements. On April 23, the Office of the United States Trade Representative determined that certain practices of Japan were not in compliance with its commitments under the MOSS Telecommunications Agreements. The finding was limited to the areas of cellular telephone and third-party radio. As a result, procedures were initiated which could have resulted in the imposition of retaliation against Japanese exports of goods or services.

As a result of the consultations, the Government of Japan informed the United States that it was taking a number of specific actions which are expected to achieve more competitive access to the Japanese telecommunications market for foreign companies. The specific decisions taken by the Japanese Government include improved transparency in licensing procedures for third party radio businesses, streamlining of licensing procedures for third party radio, improved access to spectrum necessary to provide third party radio and cellular telephone by foreign firms, and adoption of other rules which will treat foreign third party radio companies on a more equitable basis.