Reform of Communication and Broadcasting is Abandoned

According to Yomiuri, the MIC would postpone the submission of "Information and Communication Act" that integrates communication and broadcasting industries and regulate them by layer.

Broadcasters have argued against the ICA, saying that it would threaten the freedom of speech, although the ICA doesn't regulate the content layer. Broadcasters argue that the separation of layer would strengthen the government's intervention. Laughable. On the Internet, where layers are separated, unlimited freedom of speech is realized.

Their true aim is to protect their vested interests by blocking the stratification that lets more newcomers enter into the broadcasting industry. They propose to use the white space for "mobile broadcasting" by broadcasting licenses.

In the language of Japanese bureaucrats, postponement means abolishment. And the task force that have talked about the ICA (including my friends) would be disbanded to be replaced by a new task force that consists of general merchants and government-favorite economists. Thus Japanese Internet, once a top runner of the world, would be far behind Asian countries and the United States.

Creating the "Japanese FCC"

The Japanese government will establish an independent body that would have jurisdiction over the fields of communications and broadcasting, so-called "Japanese FCC". The government will soon set up a study group to examine the transfer of authority. It plans to submit a bill to create the new institution in next year's ordinary Diet session at the earliest, and hopes to launch the body in 2011.

The DPJ has been promoting such an institution for a long time. American government has put it on the top of of the demand list to Japan. However, in the U.S., Larry Lessig recommends abolishment of the FCC. Declan McCullagh, quoting Peter Huber, also insists to kill it. Alex Tabarrok agrees with Declan.

The problem is not creating but abolishing the central-planning regulation. Once George Guilder said that the computer industry would be still dominated by the mainframes of IBM if there were the Federal Computer Commission that regulated the IBM to deliver "universal services".

Haraguchi Kazuhiro, the Minister of Internal Affairs, justifies the establishment of the independent commission claiming that it is inappropriate for the government to regulate broadcasting stations that monitor the government. Hirose Michisada, the director of the National Association of Broadcasting, is skeptical about Haraguchi's claim. He prefers Broadcasting Ethics & Programming Organization, an NPO funded by broadcasters.

It's an odd reform to create a regulatory body that many people want to dump. Naturally Haraguchi, supported by the Vice Minister who was working for NTT labor union and the Parliamentary Secretary who was working for the MIC, is the more popular minister for bureaucrats than any minister from the LDP.

Willcom would Fail

According to Nikkei, Willcom, the PHS (personal handyphone system) carrier possessed by Carlyle Group, would fail. In 2007, the government gave 20MHz to Willcom with a beauty contest. It was amazing that Willcom was awarded the license because it was "financially stable" more than NTT docomo.

Japan Is Considering Spectrum Auctions...at Last

Many expect that the Democratic Party of Japan will win the election. They promised that they would "introduce spectrum auctions if appropriate" in their Policy Index.

The MIC (Ministry of Internal Affairs and Communications), which decided not to adopt the auction recently, is embarrassed. But they started a "study group" to consider the adoption of spectrum auctions. An official said that they would not resist if the ruling party decides to do.

However, it's uncertain whether the DPJ decides to do. Masamitsu Naito, the Chief of Policy Research Group for the ICT is an upper house member who was a Union leader of NTT. He is reluctant to implement the auction when he explained the policy. When I asked "Do you mean you are going to do the auction as minimal as possible?", he answered yes.

But the headquarter of the DPJ is more favorable about the auction, because they are attacked by the Liberal Democratic Party that the DPJ has no plan to compensate the huge spending for children and farmers. Spectrum auctions might generate more than 1 trillion yen, so they are considering the auctions seriously.

Now the prospect is unclear because NTT and KDDI are against the auctions, but Softbank is neutral. Foreign companies are very favorable, of course. Japan is slowly trying to catch up the US after 15 years...

3.9G Bands Are Going to Be Allocated with Command and Control

Japanese government is going to allocate the "3.9G mobile" licenses of 1.5 GHz band to four incumbents with command and control.

They divide 45 MHz to four bands, 10MHz*3 + 15MHz, because there are four incumbents in Japan, NTT docomo, KDDI, SoftBank, and e-Mobile. Mobile terminal manufacturers are concerned because the performance of Long-Term Evolution, the technology which is likely to be the standard of 3.9G, is maximized when it is used in 20 MHz. Consumers are also concerned because the four bands would be allocated to four incumbents for free even without beauty contests.

Once the MIC, the counterpart of the FCC, argued that there should be two or three operators in such a narrow area. But it changed mind suddenly. It's a shame that the MIC is still sticking to "spectrum socialism" that most OECD countries abandoned ten years ago.

They seek public comments. You can comment.

Werbach Was Named as the FCC Transition Team

Obama named Susan Crawford and Kevin Werbach to lead the FCC transition team with the responsibility of advising the incoming administration on policy.

Congratulations!

FCC to Vote on White Spaces

FCC Chairman Kevin Martin said OK to the white space, and the FCC will vote on November 4, according to Google. Many people guess the vote will be positive.

It's a good news for Japan because Japanese bureaucrats do whatever American counterpart did.

Open Spectrum Auctions

I proposed the Open Spectrum Auction in OpenSpectrum mailing list:

The idea is simple: the government mandate winners of auctions to open the spectrum for every MVNO with pre-determined (cheap) prices and open the terminals for every manufacturers in the world.

It would lessen the profit so that winning prices will be cheaper. I think it would be a middle ground between commons and property parties.

David P. Reed, a father of the Internet, commented:

It's an interesting proposal, but I don't quite get the technological implementation you have in mind. In particular, an MVNO is a communications service that uses a licensee's infrastructure, paying for that use a "marked up" price, and the licensee still retains the right to allow or block terminals based on any criteria they can think of.

Did you have in mind that anyone can be an MVNO without any discrimination? That would require a system that provided an MVNO interface (API or gateway) that merely took money in exchange for service, but was completely open.

In any case, the thing that worries me here is that this does nothing to facilitate innovation in actual radio technologies, since the incumbent licensee has complete control over the technology used. In that sense, it is the same as "analog TV" - the incumbent has no incentive to do a better system, and now has many, many customers (MVNOs) that will be supporting the lack of innovation.

I replied:

Thank you for a nice comment. It's true that MVNO can't change the physical layer, so the innovation would be limited. However, pushed by recent financial turmoil, Japanese politicians are hungry for money. And the MoF urges the MIC to make money themselves.

So this is a good chance to change the command-and-control framework of Japanese policy. And we can leapfrog the U.S. by exploiting this chance, because the incumbents aren't so powerful in the U.S. Google's proposal for 700-MHz auction is a good starting point:

• Open applications: consumers should be able to download and utilize any software applications, content, or services they desire;
  
• Open devices: consumers should be able to utilize their handheld communications device with whatever wireless network they prefer;
  
• Open services: third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms;
  
• Open networks: third parties (like Internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee's wireless network.

Economically, it's legitimate for the government to mandate pro-competitive conditions for bidders in advance. For example, API should support IP and be opened with GPL to make physical layer irrelevant. And the tariff should be determined in advance so that no "markup" can be gained by resale. As it will make bidding price cheaper, operators will welcome it because they are afraid of the winner's curse.

I wrote such idea in my old article "The Spectrum as Commons".

Japanese Government Considers Spectrum Auctions

Japanese government is considering spectrum auctions for UHF and satellite bands, an official said. In 2011, when the analog broadcasting is expected to stop, nearly 100 MHz in UHF will be opened, but many would-be operators rushed to the band so that beauty contests are hard to hold.

On the other hand, the MIC is asking 200 billion yen for the transition to DTV in the budget that will be debated in the next Diet. Since Japan's public deficit is the worst in the OECD countries, the Ministry of Finance is reluctant to subsidize TV stations with public money.

Auctions can solve both problems. It's a self-selection mechanism in which the operators who use the spectrum most efficiently will win the bid, as many economists have researched extensively. It's purpose is to make the spectrum market competitive, but it enables the government to make huge money. In Japan, Prof. Hajime Oniki of Osaka Gakuin University estimated the value of spectrum 13 billion yen per MHz. There are many vacant bands:

• 470-710MHz: 200MHz is the white space or evacuated by SFN
  
• 710-770MHz: allocated to mobile operators
  
• 770-806MHz: vacant

Bottomline: more than 300MHz can be opened. If it's run most efficiently, the spectrum auction can raise enormous windfall revenues more than 3 trillion yen (30 billion dollars) for the government.

New entrants get spectrum, the government receive money, and broadcasters can be subsidized by the auction fee for their transition costs. Nobody will lose. Why don't they do it?

"Dubbing Ten" Is Illegal

As reported in this blog, B-CAS is dead. Larry Lessig welcomed it. However, the MIC considers to prolong the DRM named "Dubbing Ten" for free broadcasting. This is strange because the Broadcast Law forbids NHK from such regulation:

Article 9(11): NHK shall not take any action, whatever the pretext may be, to regulate or interfere with the business of the manufacturers of, dealers in or repairers of radio devices, such as to certify broadcast radio receiving devices or vacuum tubes or component parts thereof, or to designate authorized repairers of broadcast radio receivers.

As I pointed out, such DRM for free broadcasting is the non-tariff barrier to exclude foreign manufacturers such as Vizio and Samsung - larger makers than Sony in American market. The USTR is watching the MIC's conclusion.