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Regulatory Governance and the Implementation of Universal Service: A Comparative Study of the US and Japan
Unformatted Document Text:  Tracking Number: ICA-1-11804 Regulatory Governance and Universal Service 22 bureaucrats, has the leading authority regarding the telecommunications policy implementation and virtually no obstacle, which in turn, makes policy-making processes much more flexible and expedite. For example, the Japanese Telecommunications Business Law makes no special provisions for judicial review of any MPHPT decisions, and requires only a hearing for enforcement actions against licensees (Noll & Rosenbluth, p.133). The political structure of Japan makes its regulatory incentives much different from those of the US. Government authorities easily engage in ‘expansionary regulation’ in order to prevent the loss of bureaucratic authority, or they simply take advantage of the process to expand their powers when they create a new regulation such as universal service (Vogel, p.18). Thus, it is natural that the Japan’s basic orientation in regulation is characterized as managerial (Vogel, p.51). Because Japanese officials view government intervention as a natural component of economic policy, they believe that the government should actively shape and restructure markets as well as regulate industry. The lack of checks and balances that arise from an independent executive and a small, coequal legislative branch makes the Japanese regulators have relative autonomy. Japanese ministries, here MPHPT, practice “market-conforming intervention” and they discourage “excess competition” among the telecommunications players because they are more concerned with market stability than efficiency or fair competition narrowly defined (pp.51- 52). Also, the legislators do not have many incentives to serve their constituencies compared to those of the US due to the nature of the electoral system. Furthermore, the concentration of authority in the national government is inherently less favorable to consumers and other localized interests (Noll & Rosenbluth, p.124). Therefore, rather than trying to increase competition among firms, ministry officials in Japan restrict it through an elaborate system of licenses, permits, and other regulations since they think competition beyond a certain point becomes unnecessarily disruptive. Thus, the Japanese approach to regulation is strategic in the sense that Japanese ministries integrated regulation into a policy of industrial sponsorship and proper intervention (Vogel, p.52). Considering these characteristics of political system and regulation in Japan, the rapid transition in its regulatory model of universal service should not come as a surprise. Before 1995, the regulatory model for universal service was, according to the Tyler’s classification, the ‘broad regulatory oversight with no payment of cross-subsidy from new carriers for universal service costs’ while since 1995 it has made a transition into a ‘broad regulatory oversight with explicit but bundled cross-subsidy mechanism.’ As Tyler properly pointed out, there was an arrangement where a mechanism for cross-subsidy existed, but did not come into operation until some pre-set threshold of growth of competitive activity was reached before 1995. Since 1995 an element of

Authors: Park, Namkee.
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Tracking Number: ICA-1-11804 Regulatory Governance and Universal Service 22
bureaucrats, has the leading authority regarding the telecommunications policy implementation
and virtually no obstacle, which in turn, makes policy-making processes much more flexible and
expedite. For example, the Japanese Telecommunications Business Law makes no special
provisions for judicial review of any MPHPT decisions, and requires only a hearing for
enforcement actions against licensees (Noll & Rosenbluth, p.133).
The political structure of Japan makes its regulatory incentives much different from those
of the US. Government authorities easily engage in ‘expansionary regulation’ in order to prevent
the loss of bureaucratic authority, or they simply take advantage of the process to expand their
powers when they create a new regulation such as universal service (Vogel, p.18). Thus, it is
natural that the Japan’s basic orientation in regulation is characterized as managerial (Vogel,
p.51). Because Japanese officials view government intervention as a natural component of
economic policy, they believe that the government should actively shape and restructure markets
as well as regulate industry. The lack of checks and balances that arise from an independent
executive and a small, coequal legislative branch makes the Japanese regulators have relative
autonomy. Japanese ministries, here MPHPT, practice “market-conforming intervention” and
they discourage “excess competition” among the telecommunications players because they are
more concerned with market stability than efficiency or fair competition narrowly defined (pp.51-
52). Also, the legislators do not have many incentives to serve their constituencies compared to
those of the US due to the nature of the electoral system. Furthermore, the concentration of
authority in the national government is inherently less favorable to consumers and other localized
interests (Noll & Rosenbluth, p.124). Therefore, rather than trying to increase competition
among firms, ministry officials in Japan restrict it through an elaborate system of licenses,
permits, and other regulations since they think competition beyond a certain point becomes
unnecessarily disruptive. Thus, the Japanese approach to regulation is strategic in the sense that
Japanese ministries integrated regulation into a policy of industrial sponsorship and proper
intervention (Vogel, p.52).
Considering these characteristics of political system and regulation in Japan, the rapid
transition in its regulatory model of universal service should not come as a surprise. Before 1995,
the regulatory model for universal service was, according to the Tyler’s classification, the ‘broad
regulatory oversight with no payment of cross-subsidy from new carriers for universal service
costs’ while since 1995 it has made a transition into a ‘broad regulatory oversight with explicit
but bundled cross-subsidy mechanism.’ As Tyler properly pointed out, there was an arrangement
where a mechanism for cross-subsidy existed, but did not come into operation until some pre-set
threshold of growth of competitive activity was reached before 1995. Since 1995 an element of


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