A Comparative Analysis On The Development Of Network Neutrality Policy In Japan And The Us

The aim of this paper is to analyze the development of the policy on network neutrality in Japan in comparison with the U.S. case. This paper will argue how Japanese and American policy frameworks on network neutrality are different, and how they are similar. I conducted several interviews with those who are dealing with the issues in the U.S. and Japan. So, this paper shows the result from based on the qualitative research with public documents and interviews. This paper was originally delivered as an invited paper at the International Conference on Network Neutrality Issues in Singapore in November, 2011. And, that conference paper is going to be published in Seoul National University, CeLPU's Journal of Law and Economic Regulation in May, 2012. However, I added more interviews with Japanese government officials and interest groups for TPRC. In the U.S., network neutrality has been a controversial issue for a long time not only in the Congress but also at the FCC. Even after the FCC adopted new rules to preserve Internet freedom and openness, which is well-known as network neutrality, and the rules became effective on November 21, 2011, there are still various opponents such as Verizon Communications, Republican Congressmen and Tea Party groups. They argue against the regulations from the aspect of lack of the FCC's authority over network neutrality issues. Moreover, the FCC is currently facing strong criticism not only from opponents but also from supporters of network neutrality rules in courts. In contrast, in Japan we have completed legal frameworks for ensuring network neutrality based on the Telecommunications Business Law. However, we haven't completed detailed rules by the government regarding network neutrality under the legal frameworks. The paper also shows how the guideline for packet shaping was developed in Japan. Telecommunications operators such as NTT DOCOMO, au (KDDI) and Softbank implement packet shaping on data communication in accordance with the guideline. In discussion & conclusion, I will indicate similarities and differences regarding network neutrality policy between Japan and the U.S. In Japan, internet traffic increased rapidly with broadband penetration so that network management has become more and more important to broadband providers. Then, based on the principles under the Telecommunications Business Law, the MIC directed discussions regarding network neutrality at the Working Groups, however; the MIC hasn't established detailed rules. Instead the council formed by four business associations established the independent guideline for packet shaping pursuant to the Business Law, and ISPs adhere to the guideline. Thus the MIC watches for the sequel to the guideline. On the other hand, in the U.S., following the decision on classifying cable modem services as information services in March 2002, the FCC classified broadband internet access services including DSL services as information services, out from under Title II regulatory framework in August 2005. The Communications Act regulates telecommunications carriers, as common carriers under Title II. In short, although the FCC insists on “having jurisdiction necessary to ensure that providers of telecommunications for Internet access or Internet IP-enabled services are operated in a neutral manner,” the classification as information services may shake the foundation of the FCC's authority on regulating broadband internet services. Moreover, in March 2007, the FCC issued declaratory ruling on wireless broadband internet access services classified as information services under the Communications Act of 1934. Thus the FCC's authority on regulating broadband internet service providers has been challenged in court since 2008. Therefore, it is visible that there is a difference on legal grounds regarding network neutrality between the MIC and the FCC, and the MIC is highly unlikely to confront the same kinds of troubles as the FCC is fighting in court. Next, the principles on network neutrality in Japan share similarity with the principles in the U.S. The FCC's rules on network neutrality consist of three fundamental ones; (1) transparency, that is, effective disclosure of broadband providers' network management practices, (2) no blocking lawful content, applications, services, or non-harmful devices, (3) no unreasonable discrimination. Let's remember five legal principles regarding network neutrality in Japan. (1) Prohibition of unfair discriminatory treatment in relation to the provision of telecommunications services (Article 6, Article 29/Paragraph 1/Item 2). This principle is common to the FCC's rule No. 3, no unreasonable discrimination. (2) Accountability on terms and conditions (Article 26). This principle shares similarity with the FCC's rule No.1, transparency. (3) Prohibition of unreasonable restriction on utilization conditions of telecommunications circuit facilities (Article 29/Paragraph 1/Item 7). This principle is common to the FCC's rule No. 2, no blocking. (4) Obligation to comply with requests for interconnection of other carrier's telecommunications facilities (Article 32, Article 35). This principle is common to the FCC's rule No. 2, no blocking some services. (5) Obligation not to refuse requests for connection from the user terminals (Article 52). This principle shares the similarity with the FCC's rule No. 2, no blocking non-harmful devices. However, there are some differences between Japanese principles and the FCC's rules. It is notable that the FCC's rule No. 3 does not cover mobile broadband internet services. In the Report and Order, the FCC says “mobile broadband is an earlier-stage platform than fixed broadband, and it is rapidly evolving.” The FCC decided not to treat fixed broadband and mobile broadband equally. That is why Free Press filed a lawsuit against the FCC's decision as mentioned above. In Japan, if the MIC finds unfair discriminatory treatment in relation to the provision of telecommunications services, that is, including mobile broadband internet services, the Minister of MIC shall issue a business improvement order. As I described policy development and legal frameworks regarding network neutrality in Japan in comparison with the U.S. case, we can understand the MIC shares common principles with the FCC. However, obviously we can see differences on legal grounds to regulate broadband internet services and details such as covering mobile broadband internet services. Finally, in Japan, so far, telecommunications operators adhere to the guideline for packet shaping and we don't have any litigation regarding this although the guideline is not binding. However, as I mentioned, internet traffic increased rapidly with broadband penetration. Besides, we see the increase of mobile communications failure as the growth of penetration of smart phones and use of data communications. Therefore, the day when we have to review our attitude of network neutrality will come before long.

In this paper, we compare and contrast the regulatory approaches to addressing Network Neutrality in three countries which represent three roughly different approaches. In the United States, which has suffered the most obvious Network Neutrality problems, the national regulator has promulgated a set of four policy principles aimed at preserving the open characteristics of Internet. These principles ensure Internet users the rights to: access lawful content; run lawful applications; attach lawful and non-harmful devices; and to have competitive alternatives. The U.S. FCC is currently considering extending those policy principles with two new ones. However, it has had significant problems attempting to codify and enforce actionable, legally binding rules. In October 2007, the Japanese MIC introduced Network Neutrality principles as an amendment to the “New Competition Policy Program 2010”. The policy requires that IP networks be accessible to content, to terminal equipment, and equally to all users, at reasonable prices. Network Neutrality also includes the concept of utilizing IP networks with the proper allocation of costs, and without discrimination. This is similar in concept to the “reasonable network management” exception embodied in the U.S. approach. In addition, a working group of four telecom business associations was created in September 2007 to develop a “Guideline for Packet Shaping”. The guidelines cover basic conditions for when packet traffic shaping is permitted, including measures to cancel heavy users' contracts. Packet shaping should only be allowed in exceptional situations. The guidelines include the basic concept that ISPs should increase network capacity in line with increases in network traffic. As opposed to crafting ex-ante rules which describe the contours of permissible network practices, EU policy seeks to constrain market power by creating sector-specific rules designed to stimulate competition. The intention behind the EU approach is that competition will punish anticompetitive deviations from Network Neutrality. We observe two approaches which seek to ex ante determine the bounds of permissible conduct by IP-based networks and one approach which eschews direct intervention in the problem. We analyse these three approaches, identifying the relative strength and weaknesses of each in the body of this paper.

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