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Japan Network Channel Terminating Equipment Agreement

EMBASSY OF JAPAN

WASHINGTON, D. C.

July 31, 1990

Dear Madame Ambassador:

It is my pleasure to note the satisfactory resolution of important telecommunications services and equipment issues subject to the bilateral talks beginning after March 30, 1990 concerning international value-added network services (IVANS) and Network Channel Terminating Equipment (NCTE). As a result of our recent discussions on these matters, the Ministry of Posts and Telecommunications (MPT) has decided to take the measures specified in the letters and the Attachments, dated July 31, 1990 from Deputy Minister Igarashi to Ambassador Williams and Under Secretary Farren.

Let me confirm that the Government of Japan and the Government of the United States will meet, at the request of either party, to discuss issues relating to the implementation of the measures specified in the Attachments to the letters.

The resolution of these issues has proved that our cooperation and joint efforts are most appropriate in addressing our bilateral trade problems. I hope that we will work even harder in the future to maintain and further develop our important economic relations.

Sincerely yours,

[signature]

Ryohei Murata

Ambassador of Japan

The Honorable

Carla A. Hills

The United States Trade Representative

Washington, D.C. 20506

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THE UNITED STATES TRADE REPRESENTATIVE

Executive Office of the President

Washington, D.C. 20506

July 31, 1990

His Excellency

Ryohei Murata

The Ambassador of Japan

2520 Massachusetts Avenue N.W.

Washington, DC 20008

Dear Mr. Ambassador:

I was pleased to learn that, as a result of the recent discussions beginning after March 30, 1990, concerning international value-added network services (IVANS) and Network Channel Terminating Equipment (NCTE), the Ministry of Posts and Telecommunications (MPT) has decided to take the measures described in the letters and the Attachments of July 31, 1990, from Deputy Minister Igarashi to Ambassador Williams and Under Secretary Farren.

I also wish to confirm that the Government of the United States and the Government of Japan will meet, at the request of either party, to discuss issues relating to the implementation of the measures specified in the letters and Attachments.

I look forward to further development of telecommunications relations in a spirit of mutual cooperation and joint efforts.

Sincerely,

[signature]

Carla A. Hills

July 31, 1990

The Honorable Mitsuo Igarashi

Deputy Minister for Policy Coordination

Ministry of Posts and Telecommunications

3-2 Kasumigaseki 1-chome

Chiyoda-ku Tokyo 100-90. JAPAN

Ambassador Sidney Linn Williams July 31, 1990 Deputy United States Trade Representative [date hand written] Executive Office of the President Washington, D.C. 20506

The Honorable J. Michael Farren Under Secretary for International Trade U.S. Department of Commerce Washington, D.C. 20230

Dear Ambassador Williams and Under Secretary Farren:

With reference to the recent discussions between our two Governments regarding the issue of Network Channel Terminating Equipment (NCTE), I am pleased to inform you that the Ministry of Posts and Telecommunications (MPT) has decided to establish the policies and to take the measures described in the Attachment to this letter, Policies and Procedures Regarding Network Channel Terminating Equipment, to allow customer provision of NCTE.

I confirm that MPT will take all available measures to ensure that Type I carriers implement the policies and procedures described in the Attachment and to allow the choice of NCTE at the user's discretion. In addition, I can confirm that these measures will be implemented on an open, transparent and non-discriminatory basis.

I also wish to confirm that our two parties will meet, at the request of either party, to discuss issues related to the implementation of these Policies and Procedures Regarding Network Channel Terminating Equipment.

I also confirm that MPT will take the measures specified in the Policies and Procedures Regarding Network Channel Terminating Equipment as of the date of this letter.

Yours sincerely, [signature in Kanji] Mitsuo Igarashi Deputy Minister for Policy Coordination

Attachment

POLICIES AND PROCEDURES REGARDING NETWORK CHANNEL TERMINATING EQUIPMENT

Consistent with the principles of the MOSS Telecommunications Arrangement and to support the objective of ensuring that the regulatory process of Japan operates so as to afford to the U.S. and other foreign firms the same equitable treatment in the Japanese market that Japanese and other foreign firms enjoy in the U.S. market, the Ministry of Posts and Telecommunications (MPT) has taken or will take the actions described below to ensure that the choice of Network Channel Terminating Equipment (NCTE) is left to users.

I. NCTE Usable with Services Currently Available to the Public

1. MPT has requested Type I carriers to revise their tariffs for digital telecommunications services currently available to the public within Japan and between Japan and overseas points to give customers the option to provide their own NCTE or to acquire NCTE from the carrier. This includes, but is not limited to, NCTE used with leased (i.e., private) line circuit transmission services, as well as other NCTE used with any other services currently available to the public.

2. MPT will ensure that the tariff revisions referred to in paragraph 1 above are authorized for services, including but not limited to the services listed below, according to the following timetable:

a. Public Switched Data Network services offered by NTT and KDD on April 26, 1990 and June 26, 1990, respectively.

b. Digital leased circuit services (i.e., Code Transmission Series Circuit services) offered by NTT and other Type I carriers on May 25, 1990 and June 26, 1990, respectively.

c. Integrated Services Digital Network (ISDN) services and high speed digital leased circuit services using the same interface currently offered by means of metallic cables by NTT and other Type I carriers (if any) by August 27, 1990.

d. ISDN services and high speed digital leased circuit services using the same interface currently offered by means of optical fibers by NTT and other Type I carriers ( if any) no later than September 30, 1990.

3. MPT will ensure that the tariffs authorized under Paragraph I-2 above will be implemented as soon as possible, but not more than six (6) weeks following authorization .

4. MPT has required or will require Type I carriers to publish or otherwise immediately make available to all interested persons when the tariff is revised, all information on the specifications for the interconnection and interoperation of NCTE to and with their services ("functional specifications") in sufficient detail that will permit such interested persons to manufacture NCTE that meet those functional specifications.

5. No later than seven (7) days following MPT authorization of a tariff under Paragraph I-2 above, MPT will establish technical standards and/or authorize technical requirements for the attachment of NCTE and instruct the Japan Approvals Institute for Telecommunications Equipment (JATE), within five (5) days of MPT establishment of technical standards and/or authorization of technical requirements, to start to apply such technical standards and technical requirements compliance approval ("technical standards compliance approval") to NCTE. When the tariff is implemented, MPT will require Type I carriers to permit attachment of any NCTE that has received JATE technical standards compliance approval to the Type I carrier's network.

6. MPT will continue to limit requirements that NCTE must meet in order to be attached to the network to "no harm to the network".

7. MPT will require the JATE to process all applications for technical standards compliance approval of NCTE in the same non-discriminatory manner and in accordance with the existing JATE procedures for other terminal equipment, regardless of whether the NCTE is provided by customers or Type I carriers.

8. To prevent cross-subsidization in the provision of services which will be used with carrier-provided NCTE, when authorizing a tariff revision described in Paragraph I-2 above and pursuant to other authority granted to MPT by the Telecommunications Business Law and related ordinances:

a. MPT will not allow a Type I carrier, directly or through an affiliate, to cross-subsidize from the service category to the NCTE; and

b. MPT will require the Type I carrier to unbundle NCTE from the provision of circuit facilities and institute separate, cost-based charges for each.

9. MPT will ensure that Type I carriers do not discriminate in the provision, maintenance, or pricing of their services based on the identity (customer or Type I carrier) of the provider of the NCTE.

10. MPT will require Type I carriers not to impose any conditions or take any measures which would restrict user choice or use of NCTE and will take appropriate actions, if such conditions are imposed or such measures are taken, to ensure compliance with this requirement.

11. When a Type I carrier other than NTT applies for the establishment or revision of tariffs to provide a service covered by Paragraph 2 above, using currently available interfaces, MPT will ensure that such services upon their initiation will be treated as services currently available to the public and will require customer provision of NCTE consistent with the provisions of Section I, including the time requirements set forth in Section I. The authorization of the tariffs will be made as expeditiously as possible, but normally within 45 days of application. The tariff will be implemented within six (6) weeks following authorization of the tariff, unless the applicant has indicated a later date for implementation.

II. NCTE Usable with New or Changed Services Available to the

Public

1. MPT will take all necessary measures to allow customer provision of all NCTE usable with services that are new or changed on and after August 1, 1990.

2. If a Type I carrier makes available a new or changed service, MPT will require such carrier to allow customer provision of all NCTE usable with such new or changed service.

3. Where a Type I carrier intends to initiate a new or changed service or other changes, and any such initiation affects, or could affect, the interconnection or interoperation of NCTE to and with the service, the following provisions will apply:

a. MPT will require the Type I carrier to publish or otherwise make the functional specifications available to interested persons based on the following principles:

(1) Type I carriers will provide such information in sufficient detail to allow such persons to manufacture NCTE to meet such functional specifications. (2) Type I carriers will furnish identical information to all prospective suppliers and shall not provide the advantage of advance knowledge to any prospective supplier, with the exception of the manufacturers with whom Type I carriers have undertaken the joint development of equipment for use with the new or changed services, the initiation of which affects, or could affect, the functional specifications of NCTE. (3) Type I carriers will disclose such information in a non-discriminatory manner.

b. Even in cases of joint development, the functional specifications will be made available at the earliest possible time, normally not less than 12 months in advance of the intended initiation of the new or changed service or other changes. Upon justification of need by a Type I carrier, MPT may allow that carrier to initiate the service referred to in this Paragraph in less than 12 months. In no case shall such service be initiated in less than six (6) months.

c. If an application for tariff authorization is necessary to initiate such service, Type I carriers will indicate the existence of that requirement.

d. MPT will take appropriate action to obtain the carrier's compliance with these requirements.

4. MPT will encourage all Type I carriers to make public their information which relates to the timing of introduction, pricing and geographic availability of the services or capabilities referred to in Paragraph II-3 above as soon as possible after applying for the tariff authorization and at the latest in advance of implementation of services. MPT will ensure that such information is made available to all interested persons on a non-discriminatory basis.

5. Within a reasonable period of time following MPT authorization of a tariff, MPT will establish technical standards and/or authorize technical requirements for the attachment of NCTE and instruct JATE, within thirty (30) days of MPT establishment of technical standards and/or authorization of technical requirements, to start to apply such technical standards and technical requirements compliance approval ("technical standards compliance approval") to NCTE. When the tariff is implemented, MPT will require Type I carriers to permit attachment of any NCTE that has received JATE technical standards compliance approval to the Type I carrier's network.

6. MPT will limit requirements that such NCTE must meet to existing "no harm to the network" requirements or, if necessary, to newly developed "no harm to network" requirements that equipment must meet in order to be attached to the network.

7. MPT will require the JATE to process all applications for technical standards compliance approval of NCTE in the same non-discriminatory manner and in accordance with the existing JATE procedures for other terminal equipment, regardless of whether the NCTE is provided by customers or Type I carriers.

8. To prevent cross-subsidization in the provision of services which will be used with carrier-provided NCTE, when authorizing a tariff and pursuant to other authority granted to MPT by the Telecommunications Business Law and related ordinances:

a. MPT will not allow a Type I carrier, directly or through an affiliate, to cross-subsidize from the service category to the NCTE; and

b. MPT will require the Type I carrier to unbundle NCTE from the provision of circuit facilities and institute separate, cost-based charges for each.

9. MPT will ensure that Type I carriers do not discriminate in the provision, maintenance, or pricing of their services based on the identity (customer or Type I carrier) of the provider of the NCTE.

10. MPT will require Type I carriers not to impose any conditions or take any measures which would restrict user choice or use of NCTE and will take appropriate actions, if such conditions are imposed or such Measures are taken, to ensure compliance with this requirement.

11. MPT will make its tariff authorization process for services requiring the use of NCTE for Type I carriers more transparent by publishing and making available to all interested persons all relevant laws, ministerial ordinances and ministerial decisions affecting the provision of NCTE. MPT will ensure public input into its decision-making process concerning the establishment and/or modification of measures within MPT's authority, including, but not limited to, ministerial ordinances affecting the provision of NCTE.

III. For the purpose of these Policies and Procedures Regarding Network Channel Terminating Equipment, the following definitions shall apply. These terms and definitions are not necessarily applicable in other contexts or for other purposes.

1. The term "NCTE" means equipment, located on customers' premises, which connects digital circuit facilities and other terminal equipment for digital communications. NCTE includes NT 1 equipment as defined by the CCITT, as well as equipment used with private line digital transmission services.

2. The term "functional specifications" means the specifications which are necessary for the interconnection and interoperation of NCTE, to and with services (including switched, leased line and other services) of Type I carriers, based on transmission systems employed by such carriers.

IV. MPT will provide comprehensive materials (such as a pamphlet) explaining the measures described herein, which will be made available to the public no later than October 1, 1990, and will conduct an explanatory meeting for all Type I carriers and interested persons prior to that date. In the interim, MPT will continue to inform all interested persons of the status of the implementation of these Policies and Procedures Regarding Network Channel Terminating Equipment.

V. MPT will not obstruct, hinder, deny or contravene the terms or objectives of these Policies and Procedures Regarding Network Channel Terminating Equipment for customer provision of NCTE, including, but not limited to, the following:

a. A Type I carrier's provision of a non-tariff based service shall not be for the purpose of impairing or affecting the customer provision of NCTE for that service; and

b. The joint development of equipment will not be used for the purpose of impairment of the commitment to provide identical information to prospective suppliers in a non-discriminatory manner, as provided in Paragraph II-3 above.

VI. Type I carriers are required to obtain authorization from MPT to provide Type II carriers with non-tariff based services for which NCTE is used. Neither MPT nor Type I carriers restrict or will restrict customer provision of NCTE used with non-tariff based services, and therefore the choice of the NCTE provider is left and will be left to the parties to the contract.

DEPUTY UNITED STATES TRADE REPRESENTATIVE

EXECUTIVE OFFICE OF THE PRESIDENT

WASHINGTON. D.C. 20506

July 31, 1990

The Honorable Mitsuo Igarashi

Deputy Minister for Policy Coordination

Ministry of Posts & Telecommunications

3-2 Kasumigaseki, 1-Chome

Chiyoda-ku, Tokyo 100

Japan

Dear Deputy Minister Igarashi:

We are pleased to receive your letter of July 31, 1990, with its attachment concerning the measures that the Japanese Ministry of Posts and Telecommunications (MPT) has decided to take with respect to Network Channel Terminating Squipment (NCTE). We are pleased to confirm that MPT will take these measures as of the date of your letter.

We are also pleased to confirm that the two parties will meet, at the request of either party or in established trade fora, to discuss, in the context of the MOSS framework, issues relating to the implementation of the Policies and Procedures Regarding Network Channel Terminating Equipment, attached to your letter.

Very truly yours,

[signature]

S. Linn Williams

[signature]

J. Michael Farren

Excerpt from

THIRD REPORT TO THE LEADERS ON THE U.S.-JAPAN REGULATORY REFORM AND COMPETITION POLICY INITIATIVE

June 8, 2004

(identical text on pages 5-6 and page 59)

Network Channel Terminating Equipment (NCTE):

1. The Governments of Japan and the United States, having exchanged views on the relevance of the 1990 Exchange of Letters on Network Channel Terminating Equipment (NCTE) ("the 1990 Letters"), share the following recognition, based upon which the two Governments propose a process for terminating the procedures established through this exchange of letters:

a. Significant competition among telecommunications carriers has emerged and the development process of terminal equipment has changed substantially.

b. Because of the shortened life-cycle of products, the shortened lead-time of product development, and the increased use of standards, timeframes described in the 1990 Letters for the disclosure of information on specifications for NCTE before the introduction of individual services may hinder prompt supply of advanced services.

2. As a transitional measure, the procedures established through the 1990 Letters will be streamlined as indicated below. Unless sufficient evidence demonstrating the continued need for these revised procedures is introduced, following solicitation of opinions from interested parties, these procedures will cease to be applied beginning in FY2006.

a. Scope of carriers subject to revised procedures: Main carriers that determine specifications of NCTE and provide services (except those of sufficiently competitive areas), using Category I designated telecommunications facilities.

b. Scope of information disclosure under revised procedures: Regarding NCTE where network interface information has been made generally available through a standardization process or by other means, disclosure will not be required.

c. Term of disclosure of technical specifications: In principle, three months minimum, prior to introduction of a new service.