Japan’s Efforts To Strengthen The Effectiveness Of Enforcement Against Foreign Telecommunications Operators.

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Japan’s Efforts To Strengthen The Effectiveness Of Enforcement Against Foreign Telecommunications Operators.

 

28 May 2021

 

Asia Pacific Legal Updates
 

Introduction
 

In Japan, the Telecommunications Business Act (Act No. 86 of 1984, the “TBA”) provides the regime applicable to the telecommunications businesses.
 

On May 15, 2020, the Act Partially Amending the Telecommunications Business Act and the Act regarding the Nippon Telegraph and Telephone Corporation, etc. (Act No. 30 of 2020; the “Amendment Act”) was enacted. The Amendment Act and the relevant cabinet and ministerial ordinances came into force on April 1, 2021.
 

Further, on February 12, 2021, Japan’s Ministry of Internal Affairs and Communications (the “MIC”) published its “Guidelines Concerning the Application of the Telecommunications Business Act to Foreign Corporations, etc. that Operate Telecommunications Businesses” (the “MIC Guidelines”).[1] Under the MIC Guidelines, the MIC indicated that from the effective date of the Amendment Act (i.e., April 1, 2021), the TBA will also be treated as applying to certain telecommunications businesses operated by foreign operators.[2]
 

While the Amendment Act amended a wide range of matters, in this article, we focus on (i) the expansion of the scope of foreign operators subject to the TBA and the impact of that expansion, and (ii) the changes under the Amendment Act in respect of telecommunications businesses operated by foreign operators.
 

Background
 

In recent years, the use in Japan of telecommunications services provided by foreign operators has expanded rapidly in line with the expansion and globalization of the digital economy. However, the MIC has historically taken the position that even if an operator provided services to users in Japan, the TBA did not apply to any such operator that (i) was based outside Japan, and (ii) did not have telecommunications facilities in Japan. Therefore, concerns were raised, including in respect of whether users in Japan of services provided by foreign operators were protected sufficiently (including regarding data privacy and leakage and service outages), and whether there has been competition inequities among domestic and foreign operators arising from the differing regimes applicable to such operators.
 

Changes in the MIC’s Interpretation of the Scope of the TBA
 

In accordance with the MIC Guidelines, from April 1, 2021, the TBA applies not only to foreign operators that “conduct telecommunications businesses providing telecommunications services in Japan,” but also to foreign operators that “conduct telecommunications businesses providing telecommunications services from a foreign country to persons located in Japan,” even if such foreign operators are based outside Japan and do not have telecommunications facilities in Japan. The specific provisions of the TBA that apply to foreign operators are, in principle, the same as those that apply to domestic operators who conduct a telecommunications business providing the same type of telecommunications services.

 

According to the MIC Guidelines, the phrase “providing telecommunications services from a foreign country to persons located in Japan” refers to “a situation where the operator clearly intends to provide telecommunications services from a foreign country to persons located in Japan (including foreign persons visiting Japan).” The MIC Guidelines provide the following examples as cases where it can be considered clear that the operator has such intention:

 

(i) Where the services are provided in the Japanese language.

(ii) Where settlement currencies for paid services include Japanese yen.

(iii) Where advertising and sales promotion activities are conducted for use of services in Japan.
 

In this regard, public comment was made that it should be clarified as to when it would be considered that an operator has an intention to “provide telecommunications services from a foreign country to persons located in Japan.”[3] Specifically, the comment raised the following cases as examples:

 

(A) In connection with (i) above, it seems likely that a foreign operator who provides telecommunications services to Japanese nationals residing in a foreign country (for work or study) would do so in the Japanese language. In connection with (ii) above, it is also possible that Japanese yen is added as a settlement currency for those who have moved abroad recently and wish to select Japanese yen as the settlement currency. Foreign operators might avoid offering telecommunications services to Japanese nationals residing abroad if they would be considered as clearly having the intention to “provide telecommunications services from a foreign country to persons located in Japan” in such situations.

 

(B) In connection with (iii) above, even in a case where foreign operators are merely advertising their services to be provided in “foreign countries” (i.e., outside of the home country the foreign operators are located in) in English, and the purpose of the advertisement is not primarily to solicit users located in Japan, they might still fall under “(iii) Where advertising and sales promotion activities are conducted for use of services in Japan” simply because Japan is not excluded explicitly from the “foreign countries” where their services are to be provided.

 

(C) Also in connection with (iii) above, it should be stated clearly that it is not a case of “providing telecommunications services from a foreign country to persons located in Japan” when a foreign operator provides roaming services to residents of the home country where the foreign operator is located and the residents happen to visit Japan and use the services of a Japanese roaming operator while in Japan.

 

In response to this comment, the MIC simply responded that items (i) through (iii) above indicated in the MIC Guidelines are examples of cases where it could be considered that the operator clearly intends to provide telecommunications services from a foreign country to persons located in Japan and that the MIC will make specific determinations on a case‑by‑case basis.
 

Of the cases raised as examples in the aforementioned public comment, case (A) would apparently fall under “(i) Where the services are provided in Japanese” and “(ii) Where settlement currencies for paid services include Japanese yen”; however, such a case assumes that the services are provided to Japanese nationals after they have left Japan and while they are residing in foreign countries. As the telecommunications services are not provided from a foreign country to “persons located in Japan,” it appears obvious that these services are outside the scope of TBA.
 

On the other hand, case (B) could fall under “(iii) Where advertising and sales promotion activities are conducted for use of services in Japan” insofar as the availability of the services in foreign countries, including Japan, is advertised, even if acquiring users located in Japan is not the primary purpose of the advertisement. Further, for case (C), if wholesale network access services, which are often used in so-called “international roaming services,” are employed, the foreign operator accesses the domestic operator’s network, and uses this network as an integral part of its network when providing telecommunications services to its users. As such, such a case could arguably constitute a situation where the operator clearly intends to provide telecommunications services to foreign persons visiting Japan. For both cases (B) and (C), in light of the purpose of the TBA (e.g., to maintain the confidentiality of communications of persons located in Japan), it is arguably not unreasonable to make such foreign operators subject to the TBA.
 

In any case, as the MIC has stated that it will decide on a case-by-case basis whether an operator clearly intends to provide telecommunications services from a foreign country to persons located in Japan, it would be prudent to consult with the applicable authorities (such as the MIC or the relevant regional bureaus of telecommunications) in ambiguous cases.
 

Outline of the Amendment Act
 

As stated above, under the MIC Guidelines, the specific provisions of the TBA that apply to foreign operators are, in principle, the same as those that apply to domestic operators who conduct a telecommunications business providing the same type of telecommunications services.
 

On the premise that the TBA applies uniformly to domestic and foreign operators, to strengthen the effectiveness of enforcement against foreign operators, the Amendment Act prescribes new measures for foreign operators engaging in the telecommunications business. In particular:
 

(i) foreign operators must designate a domestic representative / agent at the time of registration / notification; and

 

(ii) violations of the TBA will be published.

 

(i) Requirement for foreign operators to designate a domestic representative / agent at the time of registration / notification 
 

The Amendment Act requires foreign operators to designate a domestic representative or agent (a “Domestic Representative”) and notify the Minister for Internal Affairs and Communications (the “Minister”) of the details of such Domestic Representative at the time of application for the registration or submission of a notification for a telecommunications license[4] (Article 10(1) or Article 16(1) of the TBA).[5] Failure to designate a Domestic Representative constitutes a reason to refuse registration, and a notification that does not specify a Domestic Representative will not be effective for failure to meet the formal requirements.[6] In addition, any change in the Domestic Representative must be notified (Article 13(4) or Article 16(2) of the TBA). The requirement to designate a Domestic Representative also applies to foreign operators who already have a telecommunications license (Article 3(1) of the Supplementary Provisions of the Amendment Act).[7]
 

The above requirement to designate a Domestic Representative has been established to resolve the issue of jurisdiction over a foreign operator to enforce administrative actions such as business improvement orders and to ensure timely and appropriate communications to confirm compliance with the TBA. In this context, the MIC explains the authority that should be granted to, and the qualifications required for, a Domestic Representative as follows:[8]
 

  • The Domestic Representative must be authorized to receive on behalf of the foreign operator notices (a) concerning administrative actions to be taken by the Minister under the TBA and (b) issued in advance of publication of the name, etc. of a person who has committed violations of laws and regulations.
     

  • The Domestic Representative is expected to be the “contact point” between the MIC and the foreign operator on various communications regarding discipline under the TBA.
     

According to the MIC, the term “contact point” is not prescribed under any laws or regulations (unlike “Domestic Representative”), and it refers to a point of contact through which the MIC will conduct various communications with the foreign operator on matters related to discipline under the TBA. The MIC also seems to expect the Domestic Representative to serve as a general contact point between the MIC and the foreign operator. That said, as a contact point should be established in a way that fits the actual situation of each foreign operator, foreign operators may consult with the MIC or the regional bureaus of telecommunications as to how they should set up their contact points.[9] As long as the above‑mentioned authority and qualifications requirements are satisfied, it should be possible to designate a person outside the foreign operator, such as its Japanese subsidiary or outside legal counsel, as the Domestic Representative.
 

(ii) Publication of violations of the TBA
 

The Amendment Act established a system to publish the name, etc. of a person who has committed an act in violation of a law or regulation, etc. Specifically, the Minister may publish not only “the name of the person who has committed the violations of laws and regulations” pertaining to the TBA, but also “other particulars necessary for preventing the occurrence or expansion of damage caused by an act in violation of a law or regulation, etc., or for making operation of the telecommunications business appropriate and rational,” if the Minister “finds it to be necessary and appropriate to protect the interests of users of telecommunications services or to ensure smooth provision of telecommunications services” (Article 167-2 of the TBA).
 

Such publication will be made on the internet or by any other appropriate means (Article 61-2 of the Enforcement Regulation). In addition, as a measure to prevent unreasonable harm to the interests of the persons whose name, etc. are being published, such persons will be given prior notice of the publication and an opportunity to express opinions (except in cases where an urgent publication is necessary to protect the interests of users, etc., the location of the person who has committed an act in violation is unknown, or such person cannot be contacted due to other unavoidable circumstances) (Article 61-3 of the Enforcement Regulation).
 

The publication system applies to both foreign and domestic operators. Further, because an act in violation of a law or regulation may be committed by a person who is not a licensed telecommunications carrier, those who are subject to publication are not limited to operators with a telecommunications license.[10] Foreign operators “who conduct telecommunications businesses providing telecommunications services from a foreign country to persons located in Japan” can be subject to publication even if they do not hold a telecommunications license.
 

Summary
 

The MIC has historically taken the position that even if an operator provided services to users in Japan, the TBA did not apply to any such operator that (i) was based outside Japan, and (ii) did not have telecommunications facilities in Japan. However, in accordance with the MIC Guidelines, from April 1, 2021, the TBA applies not only to foreign operators that “conduct telecommunications businesses providing telecommunications services in Japan,” but also to foreign operators that “conduct telecommunications businesses providing telecommunications services from a foreign country to persons located in Japan.” Any person that falls within the scope of the TBA must submit an application for the registration or a notification for a telecommunications license (unless any such person already has a telecommunications license). We recommend that any foreign operators who do not have, or have not yet registered or made a notification for, a telecommunications license, or who are unsure as to whether they fall within the scope of the TBA, make inquiries to the applicable authorities (such as the MIC or the regional bureaus of telecommunications) as soon as possible.
 

Further, even foreign operators who already have a telecommunications license still need to designate a Domestic Representative (and in some cases perhaps a separate contact point) and submit a notification of change without delay.
 

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For further information, please contact:

 

Daisuke Niwa, Partner, Morrison & Foerster

dni[email protected]

 

[1] Ministry of Internal Affairs and Communications, “Guidelines Concerning the Application of the Telecommunications Business Act to Foreign Corporations, etc. that Operate Telecommunications Businesses,” MIC website, February 12, 2021 (last visited: April 13, 2021): https://www.soumu.go.jp/main_content/000733072.pdf (Japanese); 

https://www.soumu.go.jp/main_content/000733074.pdf (English).

[2] In this article, “foreign operators” refers to foreign corporations and associations, as well as individuals domiciled in foreign countries, who operate telecommunications businesses.

[3] Comments on the “Development of Relevant Ministerial Ordinances Following the Enforcement of the Act Partially Amending the Telecommunications Business Act and the Act regarding the Nippon Telegraph and Telephone Corporation, etc. (Act No. 30 of 2020)” and the approach thereto (pertaining to matters other than those for necessary consultation with the council), MIC website, February 12, 2021 (last visited: April 13, 2021): https://www.soumu.go.jp/main_content/000733071.pdf, p. 6 (Opinion 3-3).

[4] Under the TBA, there are two types of telecommunications business licenses: a “registration license” and a “notification license.” The license required to conduct a telecommunication business differs depending on factors such as whether telecommunications circuit facilities are employed and the size of such facilities.

[5] At the time of the registration or notification, a foreign operator will now be required to provide the telephone number and email address of the Domestic Representative and submit (a) a certificate of registered matters (if a corporation is designated) or a copy of a residence certificate (if an individual is designated) of the Domestic Representative and (b) a certificate of authority (a document certifying that the Domestic Representative has been granted the authority by the operator to receive notices issued by the Minister).

<[6] Takahiro Tanaka, Assistant Manager of Business Policy Section, Telecommunications Business Department, Regional Bureau of Telecommunications Infrastructure, MIC (総務省総合通信基盤局電気通信事業部事業政策課課長補佐) and others, The Act Partially Amending the Telecommunications Business Act and the Act regarding the Nippon Telegraph and Telephone Corporation, etc. (MIC, Scientific Journal, Research on Information and Communications Policies, Vol. 4, No. 1), para. IV-22.

[7] The telephone number and email address of the Domestic Representative of a foreign operator who already has a telecommunications license are deemed to have changed as of April 1, 2021, and each such foreign operator must submit a notification of change without delay.

[8] Footnote 1.

[9] Footnote 3, p. 8 (Opinions 3–7).

[10] Footnote 6, para. IV-23.