Summary of the Report by the Telecommunications Council of MIC Excerpts on the subscription fee

(Reference 9)

Summary of the Report by the Telecommunications Council of MIC
(Excerpts on the subscription fee)

1. On Lowering the Subscription Fee

In consideration of the following points, the subscription fee has outlived its purpose and may become a barrier to new customers, and so if NTT East and NTT West wish to change it, or even abolish it, as part of their pricing strategy, they should be allowed to do so.

1. Purpose of the Subscription Fee

While the number of subscribers was increasing, this fee was necessary to ensure smooth expansion of the network by raising capital. In recent years, however, the number of subscribers is declining, as is new investment in subscriber line equipment, which removes much of the reason for raising investment capital in advance. The fact that the majority of new subscribers are now opting for the Lite Plan indicates that this fee is a large burden on subscribers.

2. Effects on the Subscription Rights Market Price

-	This reduction of the subscription fee is expected to have an impact on the price of subscription rights in the resale market, but this is not considered sufficient reason not to change the fees for the following reasons:

2. Effects on the Subscription Rights Market Price

In the court case over the abolishment of the subscription fees for NTT DoCoMo mobile phones, the court said "inclusion in the tax laws does not directly support an argument for these assets in civil law," and "the right to use a mobile phone merely constitutes recognition by society of a certain financial value of these assets, but this does not mean that the subscription price for telephone service cannot be lowered or abolished."

3. Fairness to Existing Customers

-	If a difference arises between the prices paid by existing subscribers and new subscribers as a result of lowering the subscription fee, if done for a good reason, it cannot be construed as a violation of the fair use regulations in the Telecommunications Law, or as prejudicial treatment.

4. Changes in the Competitive Arena

-	Since other telephone service providers are not required to collect a subscription fee from new subscribers, NTT East and NTT West must lower their subscription costs as soon as possible to be able to compete in the market place.

2. Issues Related to Lowering Subscription Fees

NTT East and NTT West

-	Changing the subscription fee is a management decision to be made by NTT East and NTT West.
-	Taking into consideration the existing subscribers, trends in the subscription rights resale market, and the financial effects on their company, it is appropriate for them to make their own decisions on pricing strategy in order to remain competitive in the market place.
-	In order to gain broad public support, they must strive to keep the public fully informed in advance, and fulfill their duty to explain the reasoning behind their decisions and gain public understanding.
-	When changing the fee, it is important to do so taking into consideration the existing customers and related markets (such as giving sufficient prior notice and making changes gradually).
-	In setting the period over which the subscription fee will be phased out, they must take into consideration that the loan period for financing secured with telephone lines is usually less than five years (about 80% of them), and that the subscription fee for new mobile-phone customers was phased out over five to six years.
-	Users normally require an explanation of the nature of the subscription fee. To prevent a false perception of the subscription fee, they must strive swiftly to provide a proper explanation of the system to all users and teach their employees how to respond appropriately to customers.

Changes in Legislation (Government Measures)

-	Changing the subscription fee may require corresponding changes in laws that make some provision for the handling of subscription fees or subscription rights.
-	If the subscription fee is abolished, the government may have to consider changes to the tax laws that consider subscription rights as non-depreciable assets.
-	As NTT East and NTT West make changes in the subscription fee, the Ministry of Internal Affairs and Communications will have to coordinate with the affected government institutions to make the necessary amendments to related laws.