With regard to the recommendations contained in the "Report of the Study Group on Interconnection Charge Calculation" issued on July 30, 1999, NTT East and NTT West have studied the revisions made in the ordinances of the Ministry of Posts and Telecommunications and reviewed the directives of the Ministry of Posts and Telecommunications concerning specific measures to be taken. Pursuant to this, NTT East and NTT West have decided to take the following measures, which will be included in the revised Articles of Agreements Concerning Interconnection to Designated Telecommunications Facilities.

1. Expected Return on Equity Used in Computation of Interconnection Charges

The calculation period for the expected return on equity was previously five years. In light of current economic conditions, this period will be shortened to three years.

Following a comparison of the estimated expected return on equity and the return on equity used in computing charges for telecommunication service, it was decided that the lower of the two (return on equity used in computing user charges) would be henceforth used.

2. Co-Location Conditions

The following procedures shall apply when an interconnecting carrier requests co-location. The interconnecting carrier shall first determine whether the equipment and the like which is applied to install is indispensable to interconnection. If so, the carrier must then attach an explanation of pertinent reasons to its application to NTT East or NTT West.

Regarding co-location charges, it was decided that computation formulas based on book-value figures be included in the Articles of Agreements Concerning Interconnection. In addition to this, charges for buildings with a past record of usage shall be noted in the Articles of Agreements.

3. Scope of Interconnection Charges Computed on the Basis of Projected Cost/Expected Demand

It was decided that the projected cost/expected demand method be applied to the computation of ISM switching functions for ISDN services and Subscriber line transmission function for IP routing network connection leased line service, which experienced a sharp growth in demand during fiscal 1998.

Regarding the ratios to be used in the computation of network modification charges and charges for conduits, ducts and buildings, it was decided that the expected ratios of the administration and management costs of designated facilities and related administrative cost ratios be used.

4. Application of Interoffice Transmission Function Charge (for exclusive use)

It was decided that the charge for the interoffice transmission function (for exclusive use) be applied for 24 lines (equivalent to 1.5Mb/s).

5. Computation of Expenses for Works and Procedures

Regarding labor-unit costs comprising job-unit costs, a special survey was conducted on utilization frequencies in facility maintenance operations in order to compute labor-unit costs in the facility maintenance sector. In addition, it was decided that the estimated ratios for the current fiscal year would be used in the computation of non-personnel expenses and common management expenses.

It was also decided that concurrent to annual revisions in interconnection charges, regular consultations would be held with counterparties to review expenses for works and procedures.

6. Use of Bundled Networks

It was decided that consultations be held with carriers requesting discount schemes to discuss the specific contents of their requests, and to commence necessary system modifications to launch services by the end of fiscal 2000.

7. Verification of Internal Cross-Subsidization

A comparison was made between user charges and carrier interconnection charges of NTT East and West in intra-prefectural competitive markets for subscriber telephones, ISDN and high-speed digital transmission. The pertinent report was submitted to the Ministry of Posts and Telecommunications.