JPRS ID: 10694 JAPAN REPORT NIPPON TELEGRAPH, TELEPHONE PUBLIC CORPORATION REORGANIZATION

• Document Type: CREST
• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000500080068-4
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 33
• Document Creation Date: November 1, 2016
• Sequence Number: 68
• Content Type: REPORTS

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JPRS L/ 106g4
28 July 1982
- Ja an Re ~ort
= p ~
Nippon~ Telegraph, Telephone~ Pubii~~ Corporation
Reorganization
(FOUO 45/82)
Fg~$ FOREIGN BF~OADCAS~ INFORMATION SERVIC~
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NbTE
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,7PR5 i~/1Qfi94
28 July 1982
JAPAN REPORT
(FOUO 45/82)
NIP~PON TELEGRAPH, TELEPtiONE PUBLIC CORPORATION
REORGANIZATION
CONTENTS
NTT Family's Uncertain Future
(Kenichi Komahashi; SHUKAN TOYO KEIZAI, 24 Apr 82)......~......... 1
NTT Labor Union's View ,
(Kazuo Oikawa Interview; EKONOMISUTO, 27 Apr 82) 9
View of Ministry of Posts and Teleco~unications ~
(SENTAKU, May 82) 16
Impact of NTT Reform Discussed
(NIHON KEIZAI SHIMBUN, 11-13 May II2) 22
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_ a - [III - ASIA - 111 FOiJO]
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. .
NTT FAMILY'S UNCERTAIN FUTURE ~
Tokyo S~iUKAN TOYO KEIZAI in Japanese 24 Apr 82 pp 82-85
jArticle by reporter Kenichi Komahashi]
[Text] The situation in the Nippon Telegraph and Telephone Public Corporation
, (NTT) has changQd greatly during the past year so, with liberation of mater-
ial procurement as of 1 January and changes made by the new president, Shinto,
who took over his new post on the same day. The effect of the rough waves is
~ surging toward the so-called "NTT family" of approximately 300 firms which
supply equipment to NTT.
The NTT family is also called the "mighty closed society." Communication ~
circles have been upgrading their technological know-how through ~oint rP-
' search with NTT. Specific manufacturers are given orders through private
contracts. Outsiders are ahle to achieve official status in NTT through the
recoffinendation of the business concerned. It is an extremely difficult feat
for a new participant to break into this bastion.
It is a fact that in achieving a quick reconstruction of the Japanese telephone
network, which was devastated by the war, it was more efficient to concentrate
orders with specific firms. In the actual contracts today, the first order
. depends on the degree of contribution in the joint development. The alloca-
tion of next year's orders is decided after the assessments have been made as
to the quality of goods, condition of conservation system, delivery time, price
offer, and management situation, including the previous year's performance.
; In other words, "The principle of competition is working, to a certain degree,
and there is absolutely no allotment of an entire order to one single manufac-
~turer. In addition, members of NTT do not take 'gifts.' In that sense, things
are working well" (according to a party connected with NTT). Nevertheless, a
"coquettish structure continues to thrive in the long closed society. Even
the cost of telephones is set by the "accumulative system" of addin,; the cost
of parts of rigid quality standazds and a fixed profit margin. Homa appliance
manufacturers say that telephones "can be made much cheaper.
Moreover,the "rights" of the four members--consisting of NTT, the Ministry of
Posts and Telecommunications, the postal group, and private enterprises--have
been Lunctioning. Thus, the power to crush the family never developed from
witt~in. In the final analysis, the door was finally opened by "external
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~~~;t)a~a?~z.r~�r~~eat31 r.
Leading NTT Demands, Telecommunications Machinery Tndustrial Association
~y' (5) Civilian demands
(1) In 100 million yen ~6~ ~T
(2) ~ Total orders
(3) Other governnent (7) Note: Broadcasting equipment,
radio equipment not included
(4) External demands
pressure," through ~e rocuremeatinegotiationsnatntheTokyo roundpofgGATT.by
the government-leve p
This changed the whole situation.
Time-Consumin8 Overseas Procurement �
Through an agreeme}n~tdedtinto three stagese ofiTracksaleS Iltand Illrial procure-
ment method was di
Track I includes those [items] which are mt directly connectea the tele-
communication network, but bids ~an be placed for readily usable goods on the
market which can be worked into the network. Bidding and purchase.of about
one-half of the annual procurement, rdinb~to GATTbilAn~ annualapurchase~ofg
paper and peacils, can be made acco g
over 44 million yen will be announced in the official gazette.
Track II refers to those products on the market that require slight changes.
These will be announcedact with afmanufacturereselectedrframeapplicantsdfor
through a pri.vate contr
joint developmeat (with IviT)�
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These new methods are well received by the U.S. Embassy and USTR, but procure-
ment from foreign enterprises has not progressed substantially.
- Specification study of 56 products and 258 companies under Track I was com-
pleted at the end of March. Among these were 15 foreign products and 27
foreign companies. Bids for 45 products by 54 companies totaling 19.5 billion
- yen were re~eived, but [bids for] only 9.3 billion yen for 9 products by 11
! companies were f rom foreign firms, and many were for magnetic tapes and exper-
imental LSI manufacturing equipment.
On the other hand, the only product announced in the official gazette under
Track II was the digital echo suppressor. A Japane~e firm was selected. As
for Track III, 10 products were announced. A bid for automobile telephones by
MotoLola and a bid for satellite-use echo eliminators by the U.S. ATT aere
received. An examination for selection is being made in each case, but the
fact ls that the number is much smaller than anticipated. (Motorola was
approached for the sale of pocket bslls prior to the liberation of procure-
ment, and [Japan] will purEhase 2 billion yen worzh during this year.)
_ 10 Best Procurement Firms for JFY 1980 (in 100 million yen)
Nippon Electric Company Ltd 1,274
Fuj i�:��u Ltd 844
Oki Electric Industry Co Ltd 483
Hitachi Ltd 415
Sumitomo Electric Industries Ltd 174
Furukawa Electric Co Ltd 156
Fujikura Cable Works,Ltd 156
Iwatsu Electri~ Co Ltd 146
Dainichi-Nippon Cables Ltd 140
Tamura Electric Machinery 113
However, all the products cannot be announced i~rmediately, and it req.uires
time to rewrite the 5pecifications. Among the 101 products for Track II,
slightly over 60 percent of those expected for announcement have been com-
pleted. The plan is to announce all the products by December. The situation
with Tracks II and III is: "Norma.lly, the time required f rom research to
testing and test manufacture is 1 to 2 years for short-term items and about
5 years for long-term items. Procurement takes time." (Shiro Matsuo, chief
of Materials Bureau)
An orientation for U.S. firms, held in Tokyo last Ju~ne, drew 56 participating
firms. Applicationforms were simplified, andthrough the instruction of
President Shinto, bidding instructions and specifications were translated in-
to English and distributed free of charge. Those conveniences by NTT were
rather unusual. Since then, over 100 firms have arrived to make inquiries
or a sales pitch through the Japanese firms or by other means.
However, there is no denial that "foreign manufacturers do not fully un~er-
stand the procedures." (Ichio Kada, chief of the international procurement
room, Materials Bureau) There is a plan to send mail directly to communica-
tion equipment manuf acturers for double PR work.
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On one hand, under the instruction of President Shinto to "take positive steps
to buy good products cheaply," a study group was dispatched to the United
States in the middle of March. The group visited ITT, GTE, Bell System (ATT),
and others tu find ways to participate more readily in the Track II and Track
_ III levels.
"Exemplary manufacturers have made a thorough study of NTT's procedures,
but they do not understand fully the patent rights know-how in Track III"
(Kada); therefore, explanations were made about this. As a result, ATT
placed applications for Track III, showing some progress.
On the other hand, problems also exist within thP foreign manuf3cturers them-
selves. Especially, smaller U.S. communication equipment manufacturers tend
- to submit applications without changing specifications or configurations, as
they have been doing with local telephone companies which do not possess their
own technology. There is also a difference in the way they make their sales
pitch to NTT.
Talks with various companies are moving along, however, and there is a gradual
understanding. A good example is the approval of private switchboards after
a year of negotiation with the Rohn Company.
In any case, an improvement in getting good results through PR takes time.
"Full-scale participation of foreign manufacturers will exist from here on."
(Kada)
Stringent Environmental Changes for Smaller Manufacturers
Whether there are gains in procurement from foreign manuf actuers or not,
small and medium-size manufacturers will be affected the most from the
liberation. This was visible even before the liberation.
The bidding for facsimile equipment last fall is a typical case. Up to then,
Nippon Electric Company and Matsushita Denso had made deliveries r~-.rough pri-
vate contracts, but the bids last fall were based on Track I. Over 10
companies responded, and Toshiba won orders for 570 electrostatic high-speed
equipment and 5,520 thermal-sensitive medium-speed equipment items, while NEC
received orders for ],900 thermal-sensitive high-speed equipment items.
However, the problem was in the prices of the successful bids, which were con-
. siderably lower than the market price. ~A certain source said, "Toshiba set
the price at one-fourth to one-fifth of the market price in order to make in-
roads into the NTT market, and NEC emulated them." There is a rumor that
"NTT's responsible persons have made inquiries regarding the excessively low
price." (NTT has denied this)
Toshiba disregarded this, saying, "Delivery to TNT does not require distribu-
tion costs or inventory charges. Since a fixed quantity was assured, mass-
production efficiencies can be utilized to lower the cost."
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; Regarding the above, executives of inediimm-size manufacturers could not conceal
their bewilderment, saying, "We believe competition is the flow of time, but
~ large companies which can produce in volume have the advantage in making bids.
~ If they keep this up to become the price settexs, smaller companies can only
throw up their hands in despair."
In actuality, the trend in achievements of inedium-size communication equipment
manufacturers shows a.con:picuous difference between the top-level and lower
level companies. NTT's investment was reduced to cut down on telephone inven-
tories which in turn cut down on orders for telephones.
The top-level companies, which were able to read this situation early, made
gains by exporting pushbutton telephones or by succeeding in diversification
into other fields so as to decrease their dependence on NTT. In contrast, the
medium-level companies, which were unable or were too late in getting into the
right 'track away f rom the NTT's projects, show a trend toward stagnant sales
and profits due to depressed NTT investment.
Moreover, the all-out review of material procurement and construction invest-
, ment under the instruction of President Shinto has added to their apprehensions.
In a normal year, a primary contract for 60-70 percent of the next fiscal
year's budget is drawn in January and a contract for th~ year is concluded in
August after the budget is completed. However, through the recent reconsidera-
tion, contracts were not concluded even in February, when the budgets should
have been fixed by the manufacturers, and it is already April.
The result is the suppression of equipment, for example, by reducing the
installat:on of new public phones, according to the slowdown in real income
growth rate, instead of adding new phones.
In contrast, new equipment such as autophones and pocket bells has increased.
Orders were switched from the old family enterprises to new manufacturers.
Moreover, the main object of the review is on INS (high-level informa~ion com-
munication system). What can be accomplished now is to change to a digital
system and promote a more eff icient investment. However, many small and
mediLUn firms cannot keep up with the new digital technology, and a maldistri-
bution of orders to majors is unavoidable.
In like manner, the structural changes of using LSI in equipinent or moving
into a nontelephone line have pushed the smaller firms into a rather austere
environment. A certain trend in the introduction of new technology corres-
ponding to the technological development of middle and lower-level firms has
been seen, but such a luxury is no longer admissible.
Moreover, as seen in the facsimile case, NTT must compete for price in the
event of a sales competition between NTT and private firms. Procurements are
to be made by the lower market-oriented price, rather than by the purchase
price set hy the system of adding-on, as was the case previously. Soon,
"cheaper products can be sold by competitive bidding even tt~ough private
contracting continues." (Matsuo)
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