Section 7 Recommended Measures Which Should Be Effected by the Government Earlier discussions identified the need to quickly and comprehensively promote the advancement of each level of info-communications infrastructure in order to build the intellectually creative society of the 21st century. This section draws together the main policy issues to be tackled up to the year 2000‹the target year for completing the preliminary development of subscriber fiber-optic networks. The Council recommends that the government take the following measures. 1. Establishing Subscriber Network Infrastructure Network infrastructure is a social resource which plays the most fundamental role in all info-communications infrastructures. The government should therefore act to lead in expediting and promoting network-related investment, network usage, and socio-economic reform. 1) Expanding Incentives to Promote Private Investment During the next decade, the United States is expected to spend between US$50 and 100 billion to improve its telecommunications facilities for the NII. Section 6 indicated that Japan needs to spend an annual average of about ¥1 trillion to build a subscriber system before the year 2010. Achieving the targeted 20% of population coverage identified in Section 4 will require an investment of slightly more than ¥3 trillion during the pre-2000 preliminary development stage. This equates to an annual investment of slightly more than ¥500 billion. As it will not be expected to obtain revenues to meet this scale of investment over the next six years, assistance measures will be needed to mitigate the cost burden and promote private sector investment. a. Mitigate burden of interest payment Currently, to improve social infrastructures, interest-free and low-interest loan systems are available by revenue from NTT stock sales. Under the present scheme, however, interest-free loan system is only applicable to the 'third sector', the private and public joint organization. We require a new support system, targeting private businesses, to expedite construction of subscriber fiber-optic networks in which private business is not active. The government should consider introducing new financial support and other measures such as interest-free loans that will reduce the interest burden on private investment. b. Tax incentives Expand the scope and amount of the existing tax incentives, such as those for promotion of the new-generation info-communications networks, including the subscriber fiber-optic networks. 2) Encouraging Underground Installation and Promoting Security, Reliability, and Counter-disaster Measures Although locating cables underground is vital to improving visual amenity and network security, placing excessive burdens on private businesses will hamper infrastructure development. In its 100 years of telephone network construction, Japan had not been guided by a particularly clear vision on its policy to encourage embedment of cables. However, our intellectually creative 21st century society should have a clear vision on the embedment. The government must collaborate with regional governments to implement the following actions. Expanding the current tax incentives designed to encourage the underground installation of cables Promoting the construction of common-use tunnels, cable-boxes, conduit lines, and other facilities Reviewing fee and licensing standards for road use with priority given to underground installation These government initiatives will actively encourage embedding cables underground. Concerning bottleneck facilities such as conduit lines, utility poles, road use and other installations, it is necessary to reduce the operators' burden on installing and maintaining their lines. It will promote fiber-optic network construction and secure fair and effective competition. For example, the road-use licensing standards for CATV operators should be given a flexible reassessment. The role of info-communications in socio-economic activities will continue to increase. Japan experiences many natural disasters such as earthquakes and typhoons. A major commitment must be made to ensure the security and reliability of info-communications infrastructure. The government must also implement full measures so that emergency communications are secured in times of disasters without any occurrence of line congestion. 3) Ensuring Openness of Network Infrastructure Telecommunications and CATV businesses will help advance their networks by constructing broadband subscriber systems. This will lead to attempts to ensure interconnection with subscriber network infrastructure, and the sharing of transmission lines by a variety of businesses. Networks are likely to become more complex. Functionally effective networks will be developed by ensuring openness in identifying basic conditions for future network infrastructure including network control functions. 2. Development and Introduction of New Applications in Public Fields The public sector must play the leading role in developing and introducing applications so that private investment will be stimulated. At the same time, it must provide financial support and other incentives to accelerate development of applications. The government should therefore allocate budget more flexibly focusing on the following fields. In addition, these considerations should be made not only with respect to hardware but also to software development. 1) Developing Basic, Wide-Use Technologies There are certain basic info-communications technologies that are largely adopted by a variety of applications, including network-related and terminal-related applications. Some of these require a long development period before they can be put to practical use. The government should therefore promote long-term R&D efforts focused on enhancing these technologies, making R&D investment more efficient, and encouraging private R&D activities. Research and development should concentrate on the following fields. a. Network systems Optical soliton transmission, optical switching and other ultra-high-speed transmission technologies Structural and functional architecture technologies for ultra-high-speed networks Organically integrated access technologies for connecting high-speed broadband networks such as fiber optics, satellite and CATV Technologies for improving security and reliability such as network control and security technologies (including coding and authentication) b. Terminal systems Developing common terminal application technologies is necessary for user-friendly applications. Despite high risks, in terms of investment and research time, we need to pursue aggressively advanced technologies such as the application of cerebral and biological functions to info-communications, info-communications technologies benefiting the elderly and disadvantaged, and human-machine interface technologies including voice and character recognition. c. Multimedia systems We need to develop advanced multimedia application technologies in areas such as large-capacity multimedia databases accumulation and retrieval, efficient compression, ultra-high-definition imaging, and high efficiency screen synthesis. These technologies will be widely used to accumulate, process and retrieve image-based multimedia information in many fields including communications, broadcasting, printing and medical and health care. 2) Promoting Development and Introduction of Public Applications a. Improving facilities and research environments at universities and public research institutes Increasing research budgets and improving facilities at universities and public institutions will serve to promote the development of basic info-communications technologies. b. Developing and introducing applications in public fields The development and introduction of public applications for education, medical and health care and welfare services should be promoted. c. Maximizing information use in public works We must ensure the improvement of administrative data services, such as directory services, and better information access to various national and regional governments administrative procedures. d. Supporting pilot model projects We must continue to assist the work of public utilities and regional governments by supporting their pilot model projects as well as network-related experimental and demonstrative applications projects. e. Measures for rural areas The citizens of rural areas have high expectations about the ability of high-performance info-communications infrastructure to overcome isolation barriers. However, there is some concern that the low-demand density in these regions could delay network infrastructure development. Supporting application development and introduction should therefore emphasize improving the network at public institutions, such as schools and hospitals, which will play leading roles in network expansion through effective utilization, operation and maintenance. 3. Regulatory Reforms to Accommodate the Convergence of Telecommunications and Broadcasting 1) Activating Info-communications Markets The 1985 telecommunications system reforms introduced competition in all fields of the telecommunications industry. Following these reforms, a communications satellite broadcasting system was also established, and the media anti-monopoly principle was deregulated, while CATV systems were permitted to operate in wider areas. Major regulatory reforms have since been implemented in consideration of current technological innovations, leading to the vitalization of the info-communications market. Further promotion of private sector activities will necessitate appropriate and timely regulatory reviews, based on the current Japanese telecommunications market structure and the characteristics of public utilities in the info-communications field. The review should include the interconnection between private leased circuits and public switched network. At the same time, the services without tariff authorization should be expanded. 2) Trends Towards Convergence Recent technological innovations have generated networks such as communications satellites and interactive CATVs, that can be applied to both telecommunications and broadcasting services. Emerging trends include personal computer communications, off-talk communications, and dial-Q2. All of these permit transmission of information from one agency to a large number of recipients. However, the division between telecommunications and broadcasting has not been eroded yet. Until now, differences between telecommunications and broadcasting, as described below, have resulted in separate regulatory frameworks. a. Telecommunications Contact between specified parties (primarily one-to-one information transmission) Securing content confidentiality is particularly crucial. b. Broadcasting One-way transmission to the public (primarily information transmission from one agency to a non-specific public audience) Major social impact, but limited frequencies (radio) Ensuring freedom of speech, public order and political neutrality are particularly important. The installation of fiber-optic networks will advance the development of full-scale broadband and interactive multimedia communications. The conventional demarcation between telecommunications and broadcasting will become blurred. The "Pilot Model Project for New Generation Communications Network" and other similar projects, scheduled to commence this fiscal year, will more clearly define this convergence between telecommunications and broadcasting. 3) Perspective of Regulatory Reforms Accommodating to the convergence of two services, the government should take a comprehensive approach toward an appropriate regulatory framework, while taking into consideration the results of the Pilot Model Project and other experiments on integrated services. It is important to take into account of other nations' approaches to regulatory reform, including the U.S.'s "Administration White Paper on Communications Act Reforms." To serve the consumers' best interests, a wide range of issues should be considered. These include: a. Reorganizing the media industry The convergence of telecommunications and broadcasting will establish a multimedia market. "Packaged media" such as newspapers, publishing, printing and film production, which have traditionally been differentiated from info-communications, will become new participants in the info-communications market. We will need to set "packaged media" access barriers, both social and economic, at the lowest possible level if multimedia is to become the leading industry of the 21st century. b. Reviewing rules for information distribution There will be various ways of distributing information. The new social standard must be set to ensure information confidentiality and freedom of expression. Protecting individual rights and benefits will ensure personal freedom, dignity and social justice. c. Enabling multiple use of fiber-optic networks The shift to broadband communications will enable multiple use of the subscriber system. This will necessitate an examination of various legislation and regulations to promote market competition, reviewing issues such as sharing network infrastructure and separating transmission and switching functions (unbundling). d. Diversifying services The number of businesses providing various services and functions will increase with infrastructure improvement. Innovation and user service provision will be best promoted by establishing a fair rule which governs the relationship between those developing the network and those being provided with services and functions from those network operators. e. Guaranteeing open access to information providers New business opportunities will arise if information providers are able to fully utilize info-communications networks. Appropriate rules should be established such as network operators having to provide information providers with open access to the network. 4. New Universal Service and Tariff System Everyone should be able to enjoy the benefits of high-performance info-communications services. It will be extremely important to establish an appropriate tariff system and charging levels. It is necessary to create an opportunity to determine the new universal service for the multimedia era and an appropriate tariff system. The government should conduct a public hearing attended by a wide range of people, including users in rural areas, to ensure systems facilitate private business innovations in providing services and achieving consumer usability. 1) New Universal Service a. Establishing Universal Service Details As stated in section 2, the broadband, interactive info-communications service will have a major impact on the lifestyle of Japanese people. The government should clarify the definition and scope of the new universal service which must ensure that every citizen has access at affordable cost, anywhere and at any time. The government should also take into consideration social equity to minimize regional differences and maintain burden sharing equality among users. b. Securing Universal Service Current status Article 2 of the NTT Law requires NTT to provide telephone service as a universal service. The Broadcasting Law also stipulates that NHK (Nippon Hoso Kyokai) must ensure that all parts of the country can receive its domestic broadcasts. Environmental Changes Development of the broadband, interactive network will result in significant environmental changes, including convergence of telecommunications and broadcasting, diversification of services, and increased competition in subscriber network service provision. Necessary measures The new universal service should be ensured on a nationwide basis in the multimedia age. This will necessitate examination of required measures including adjusting burdens among businesses and establishing government support schemes. 2) New Tariff System in the Multimedia Era The use of fiber-optic network will depend heavily on the tariff system. The development of fiber-optic networks will enable a drastic increase in transmission capacity, with a very small rise in transmission costs, as costs will not appreciate in proportion to transmission capacity. Per unit cost will therefore decline as the fiber-optic networks expand. We should therefore strive to augment use. If transmission capacity can be increased 1000-fold, then we should make the best use of this expanded capacity to create a more comfortable society. The most appropriate tariff system from this perspective must be studied and determined. This should not entail significantly increasing the burden on households, and should consider the following points. a. Current status The current charging arrangements for the telecommunications and broadcasting systems have the following differences: Transmission and information charges The broadcasting system (subscription service) does not have separate information and transmission charges as in the telecommunications system. Charging mechanism While broadcasting (subscription service) usually charges fixed amounts, telecommunications systems combine a basic charge with use metering (distance and time). Revenue sources Private broadcasting businesses draw their revenues mainly from charges to commercial sponsors while telecommunications services charge users directly. b. Anticipated environmental changes Increase in video, broadband and interactive communication Although narrowband voice transmission comprises the bulk of the current telecommunications system, broadband, interactive and video transmission will become the mainstay. The shift to multimedia Voice, data and video services will be integrated. € Convergence of telecommunications and broadcasting The convergence of telecommunications and broadcasting will progress with a shift to increasing visual, broadband and interactive info-communications. Network utilization by various industries Various types of businesses, including electronic newspapers, electronic publishing and home shopping will begin to utilize the info-communications networks. International expansion of info-communications networks The ease of using info-communications systems in many countries will result in changing international information flow. c. Examination points for the new tariff system Diversification of revenue sources In addition to charges borne directly by the user, revenue sources should be diversified, including commercial program sponsorship and fees from retailers of home shopping services. Responsiveness to increased video services Time, distance and information quantity will be assessed to achieve a balance between a metered system and a fixed charge system. Changes in the cost structure should be considered to ensure user benefit. Expanding opportunities for user selection A diverse range of tariffs will respond to the user choices and style of service provision ( standardized information service or information processing in response to individual orders). The most user-friendly system should be established. International perspective The new tariff system should adopt an international perspective to ensure that Japan fulfills its role as a hub of global info-communications. 5. Preparing the Environment for the Intellectually Creative Society 1) Reforming Systems and Practices, and Developing Human Resources To promote the new applications in such fields as education, medical and health care, government services, and business activities, all of the relevant ministries and agencies must cooperate with each other to reform the various systems involved to make the best use of innovative technologies. Systems and practices do not exist independently; they are closely connected to the people who build and operate them. We will need to change our individual values and capabilities to transform systems and practices into those appropriate for the information age. Human resource training will be the key to socio-economic reforms. a. Improve information literacy Importantly info-communications knowledge must be disseminated to the public via personal computer education at schools through a "virtual university" via computer networks, through life-long study, and by promoting events involving information utilization. b. Foster human resources in this specialized field The info-communications network must be fully utilized by securing appropriate human resources including people who can design and manage optimal systems for each field and staff who have extensive knowledge, skills and expertise in the multimedia arena. Needs must be responded to by expanding projects which foster human resources. Development and implementation of measures must be promoted to train human resources. 2) Addressing the Issues of Intellectual Property Rights In response to the age of digitization, the U.S. Advisory Council on the NII intends to review the system protecting intellectual property rights. The government must also respond to intellectual property rights issues arising from a variety of forms of multimedia info-communications. a. Copyright in the multimedia Multimedia enables the combination and processing of several media such as voice, print and images. Information is readily duplicated, modified and distributed through the network. The ease of replicating and altering information would lead to more innovative industries and more creative activities. However, the following points present particular problems: Processing rights The current Copyright Law requires permission from the copyright holder before copies are modified, used or distributed. Works could be modified as it is distributed on-line through broadband interactive networks. This presents difficulties in maintaining the protection of copyrights and neighboring rights. Moral rights (such as integrity maintenance right) Copyright law guarantees an author's moral right to ensure original works are maintained in a state free of modification or omission. We will need to balance this right and the capabilities of multimedia technologies which can freely process and modify such information. b. Response Multimedia software is characteristically different from traditional written communication. The copyright system and its application require a multi-dimensional review. The Copyright Committee is currently reviewing multimedia copyright issues. If we are to create an environment which promotes the maximum use of info-communications, we will need to cooperate with relevant parties and reflect the results in the copyright system. The following matters should be examined. Balance copyright holder and user rights While the free use of works would assist multimedia promotion, protection of rights provides an incentive for creation. We must maintain a balance between these contrasting needs. Ensure international harmony All efforts should be directed toward achieving and maintaining coordinated international multimedia intellectual property right regulations to support the internationalization of information distribution. Network system software Examinations will need to consider networked multimedia software rather than packaged products such as CD-ROM. 3) Standardization a. Importance of standardization Info-communications only become significant when there are interconnections with other parties. In comparison to other products, standardization has more significant role in the info-communications technologies. Especially standardization of technologically advanced information terminals is crucial to multimedia. The active involvement of standardization organizations will be vital if user benefits are to be maximized. b. Improve standardization guidelines The Telecommunications Technology Council's 1991 Standardization Guideline Report indicated important areas of standardization, the degree of importance of each standardization item, and the timetable for standardization. These standardization guidelines must be refined and expanded as a result of telecommunications and broadcasting convergence, the shift to multimedia, and progress with corporate network developments caused by the downsizing of computers. c. Examine the standardization system Promoting multimedia standardization will require a system which fully reflects the needs of users as well as the intent of network operators and terminal manufacturers. Apart from ITU-centered standardization activities, there is an active move toward de facto standards mainly in applications. We will need to improve the system to further contribute effectively to international standardization efforts, clarifying the roles of recognized standardization organizations and the activities of de facto standards. The government must also enhance user benefits by developing public applications which contribute to multimedia standardization. 4) International Cooperation Building international networks is vital in improving info-communications infrastructure. U.S. Vice President Al Gore has proposed the concept of a Global Information Infrastructure (GII). Japan should strive to upgrade the international info-communications network. As an Asian nation, Japan should contribute to building an "Asian Information Infrastructure (AII)" in the Asian region. Japan must also become involved in comprehensive promotion of the international distribution of info-communication software. a. Implementing policy exchange Policy interchange with the United States, Europe and Asian countries, that is, round table conferences such as the Japan-U.S. Policy Talks on Telecommunications, the Japan-EU Forum and the Japan-South Korea Info-Communications Infrastructure Policy Dialogue, will address global issues central to improving info-communications infrastructure. International info-communications infrastructure will be improved by exchanging opinions on economic impacts, systems, technologies and info-communications policies. This can occur through discussions at international institutions such as the International Telecommunication Union (ITU). b. Promote international cooperation We should actively pursue links with overseas through implementing measures such as promoting the participation of foreign-affiliated companies in pilot projects and broadband ISDN experiments. High-performance info-communications infrastructure will become vital to economic development. We should therefore endeavor to provide active cooperation to developing nations and former communist bloc countries to improve their infrastructure and foster their human resources in this field.