keio communication review - 慶應義塾大学メディア ... communication review no. 30, 2008 pb...

Institute for Media and Communications Research

KEIO UNIVERSITY

KeioCommunication

ReviewNo.30

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Keio Communication Review No. 30, 2008

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10.REFERENCES:Referencescited in the textshould read thus: Ikuta (1989:21-

22), Ikuta (1989:67),New York Times (1985:7). (21-22,67 and7 after [:] in-

dicatepagesof citation).The letters a, b, c, etc. shouldbeused todistinguish

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to recognize if youput a commaafter every familyname, especiallywhen the

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putcommasafterthem.

Articles in Journals:

CHANGWon(1981)."Vertical IntegrationofMassMedia in Japan".Gazette,

27(3):181-192.

Articles in Newspapers and Magazines:

New York Times(1985)."RecentFashioninWarsaw".November30:7.

Articles in Edited Books:

LENT JohnA. & GIFFARD C.Anthony (1982). "TheAge ofAwareness in

Global Mass Communications". In DERVIN Brenda &VOIGT Melvin J.(eds.),Progress in Communication Sciences, Vol. III.Norwood,NJ:Ablex.

163-201.

Reports and Monographs:

Ministry of InternationalTrade and Industry (1963). Eiga Sangyo Hakusho[WhitePaperonMotionPictures].Tokyo:Author.

Books:

LEEChin-Chuan(1980).Media Imperialism Reconsidered: The Homogenizing

of Television Culture.BeverlyHills,CA:Sage.

SELLTIZClaire,WRIGHTSMANLawrenceS.,&COOKStuartW. (1976).

Research Methods in Social Relations(3rded.).NewYork:Holt,Rinehart&

Winston.

Reprinted Books:

MinistryofAgriculture andCommerce (1971).Shokkoh Jijoh [Conditionsof

FactoryWorkers].InSeikatsu Koten Sohsho,4.Tokyo:Kohseikan.(Original

workpublished1903).

Edited Books:

FUKUTAKE Sunao, HIDAKA Rokuro &TAKAHASHIAkira (eds.) (l958).

Shakaigaku Jiten[DictionaryofSociology].Tokyo:Yuhikaku.

Non-English Language Literature:

ISHIGENaomichi (1987)"I to Shoku to Juh to [Food,ClothingandShelter]".InSOFUETakao (ed.),Nihonjin wa Doh Kawattanoka.Tokyo:NihonHoso

ShuppanKyokai.33-48.

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A Consideration of Media-Nationalism:A Case Study of Japan

after the Second World War

by Yutaka OISHI*

Introduction: What is Media-Nationalism?

Atpresentmostpeople receivenewsvia themedia,which functionsasa‘window’forlookingoutontotheworld.However,peopledonotsimplybelievethenewsprecisely as themedia reports it.On this point,WalterLippmannwrote‘Forthemostpartwedonotfirstsee,andthendefine,wedefineandthensee’ (Lippmann,1922:81).Audiencesreceivenewsfiltered throughpreexistingdefinitionsor imagesthatalreadyexist in theirminds.Mostof thesepreexistingelementsarehistoricallycultivatedandsharedwithotherpersonsinsociety.Itmustberememberedthatjournalistsalsooperateinthissituation.

Sothen,howarethedefinitionsandimagesformedormade?Thisquestioncanberephrased;whatisthe‘window’foruswhenlookingbackuponhistoricalaffairs?Firstly, theanswer to thequestion lies in theworksofhistorians thatdescribeandexplaineventswhilebuildingon thebasisoforiginaldata anddocuments. Secondly, it can be found in textbooks which offer edited andsummarizedsynthesesofhistoricalworks forbeginnersandstudents.But the‘window’isnotlimitedtotheseformostofpeople.Ratheritwouldbemorevalidtosaythatpeoplealsogenerallylearnandunderstandhistorythroughnovels,films,TVdramas,andotherswhichareinvolvedinpopularculture.

Weneedanewwordorconcepttoframeourinvestigationintotheimpactsofmediaontheaudience’sviewsabouthistory,andfurthermoreontheformationofnationalism.SoI’dliketoproposethekeyword,‘Media-Nationalism’tocapturethismeaning.Inmodernsocietymassmediahavealwaysinfluencedthenationalconsciousnessandnationalismamongpeople indifferentways, independentofwhethermediahasdonesointentionallyornot.

Ofcoursemassmedianotonlydeliversnewsbutalsonovels,films,dramasandotherelements toaudiences.Nationalconsciousnesshasbeenhistoricallycultivatedandaccumulatedinthecontextofeachcountryorsociety.Ithasoftenbeenvisible innewspaper,radioandtelevisionnewsandothermassmedia,and

*Director, InstituteforMediaandCommunicationsResearch,andProfessor,FacultyofPoliticalScience,KeioUniversity.

I’dliketothankMr.GarrettWashington(PurdueUniversity)forusefulsuggestion.

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morerecentlyontheInternetwhichisoftentreatedas‘participatorymedia’.Wecancall thissituationMedia-Nationalism.Iwouldoffer thefollowingdefinitionfortheterm:‘thesituationof‘Media-Nationalism’isoneinwhichthediffusionofmassmediaandnewmediasuchastheInternetincreasenationalconsciousnessandnationalisminanation-state’.Ofcourse,‘Media-Nationalism’appearsinsocietieswheremassmediaandtheInternetarerelativelywelldiffusedamongthegeneralpublic.

In relation to it Ineed todefine theconceptof ‘Nationalism’as follows‘Nationalismisasetof ideasandmovements inwhichpeopleimagineaunitofanationconsistingof region, religion, languageandother factors, their forcesofcohesionincrease,andpeople try toenlarge their interests’.So then‘Media-Nationalism’isaconceptforreconsideringnationalismbyplacingcriticalemphasisonthelinkagebetweenmediaandnationalism.

An Episode of Ryotaro SHIBA in relation to ‘Media-Nationalism’ in Japan

AtPresentRyotaroShibaisoneof themostpopularandfamousauthorsinJapan.HewrotenumerousbooksandfrequentlyparticipatedinseminarswhosesubjectsweremainlyJapanesehistory.Hisworkshaveaconsiderable influenceonJapanesesociety,whichcouldbe termedthe‘Shiba-Boom’. Inhiswritings,heprovidedsubstantialknowledgeandlessonsaswellas imagesaboutJapantotheJapanesepeople.NextIwilldiscusstheauthorinordertoreexamine‘Media-Nationalism’inJapan,especiallyaftertheSecondWorldWar.

Itshouldbeemphasizedthat‘Shiba-boom’hasincreasedsignificantlysincehisdeathin1996.Whyhasthishappened?OneanswertothequestionisthatShibawasgivenanimportantstatusbymassmedia,notonlyasanacclaimedauthorofJapanesehistoricalnovelbutalsoasapersoncapableofdiagnosingthesicknessesofJapaneseSociety.Indeedhecommentedonmanydifferentkindsofpolitical,social,andhistoricalproblems.Massmediafrequentlybroadcasthisopinion.Asaresultofthis,hisfamehasbeenestablishedandtheimageofJapanesehistorymadebyhimhasbeenwidelydiffusedandgainedpopularityamongJapanese.

Referring toShiba’sworks,oneauthorofferedavery interestingopinion,whichissummarizedbelow;‘WhenthereadershavecometobelievemoreandmorethatthecontentsofShiba’snovelsare‘true’,theymistakenlybelievethattheyhaveknowledgeaboutJapanesehistorythroughhisnovels’(Sekikawa,2003:139).Certainlymassmediahasgreatlycontributedtoit.TheviewofJapanesehistorysuggestedbyShibahasgivenanational identitytoJapanesethroughnovelsandTVdramas.MassmediaasawholehasheldShibaandhisworksinhighesteem,andthushisviewofJapanesehistoryhasbothestablishedadominantpositionandbecomepopular.

I’dliketofocusonShiba’sperspectiveontheSecondWorldWar,especially

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policiesbasedonmilitarism.Despite the fact thathe intenselycriticized thepoliciesmadebytheJapanesegovernmentandmilitaryandotherpoliticalelitesagainandagain,hisopinionhasbeenacceptednotonlyby‘liberal’or‘progressive’groupsbutalsoby‘conservative’or‘reactionary’onesaswell.Thereasonisthathisopinionisratherdifferentfromtheso-called‘masochism’thattendstocriticizeorcondemnthewholeofmodernJapanesehistory.Infacthewrote‘ThewholeofJapanesehistoryisbeautifulintermsofphysicalandspirituallevel’(Shiba,1993:36)andinsistedthatthedarkageofJapanesesociety,1905-1945(especiallyduringTheSecondWorldWar),wasexceptional,andheevencalledit‘anothercountry.’SomescholarsandwritershavecriticizedhisviewonJapanesehistory,claimingthatithascontributedtotheformationanddiffusionofaninvalidviewofmodernhistoryamongJapanesethathasconsequentlyallowedmostofthemnottoworryabout the‘DarkAge’andtoavoidfacingitdirectly.I thinkwecanidentifyonedominantstreamof thisviewofJapanesehistorythathasbeenformedbymassmedia.It istypicalofthetrendof‘Media-Nationalism’inJapanaftertheSecondWorldWar.

I’dliketoemphasizethatwhilenationalismismost likelytostrengthenthepeople’snational self-awarenessandencouragenationalcohesion, it canalsomakepeoplecriticaloraggressivetowardtheexterior.Whenthenation-stateistheprimarybasisfornationalism,massmediamayencourageorsupporttheaggressiveattitudesharedamongthepeople.

Itisusuallysaidthatthesurveillanceoftheenvironmentisthemainfunctionofmassmedia.But it isverydifficult formassmedia todrawaclear line thatseparates it fromthe rationaleand interestsdominating thenation-statewherethemedia isheadquartered,even ifmassmediaclaims to seekneutralityandobjectivity.Anditisverydifficultforreporters,especiallythosebelongingtomassmedia, toexecuteneutralandobjective reporting.Forexamplewhen theword‘nationalinterest’isused,massmediareports,comments,andopinionsareeasilyincludedwithintherationaleandinterestsofthenation-state.Throughthischannel,nationalism increasesandMedia-Nationalismshould thereforebeconsideredevenmoreremarkable.Inadditionweshouldnotethattherationaleandinterestsareusuallyembeddedaswellasexpressedinmessagestransmittedthroughmassmediareports.

The mechanism of linkage between media and nationalism

Asdescribed earlier, newspaper, radio, andTV, aswell as Internet areintimatelyconnectedwithnationalconsciousnessandnationalism. Inmodernhistorywecaneasilyfindlotsofinstancesinwhichmassmediahascontributedtotheintegrationofcitizensintotheirrespectivenation-statesandtothedevelopmentofnationalism,because thepeoplecan typicallyobtaincommon information

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throughmassmedia.Thesocialprocessofmasscommunicationhasdevelopedin tandemwithnation-statebuilding.Wecansay thatmasscommunication isanecessaryconditionforthedevelopmentofnation-stateandviceversa.

It should be emphasized that the diffusion and sharing of informationinfluencespeoplenotonlyonasuperficiallevelbutalsoonamoreprofoundone.NextIwillexamineacaseofnewsreportingasitrelatestothispoint.Firstly,weshouldnoticethateventsarenamedbynewsreportsintheformofwords,sounds,orimagesdeliveredviamassmedia.Thenamegiventoaneventmustbeconnectedwiththemeaningandvaluegiventoit.Consequentlymostpeople’svaluesbecomemoreuniform,notmorediverse.Becauseasnotedbefore,mostofpeoplegetinformationaboutsocialaffairsbyexposuretomassmedia,andmassmediaoftentends todeliveruniformednews.Secondly,sharingvaluescan lead to the‘We’feelingamongthepeople.Thefeelingcanformthenationalidentitythroughwhichthepeople(re)discovertheirbelongingnesstothenation-state.Thirdly,newsmediacanbeveryusefulforsharingthenationalimagethatthepeoplehaveandidentifywith.Fourthly,andrelatedto thelastpoint, themassmediacaninventa‘They’which iscontrastedwith the ‘We’. In theviewof ‘We’ thereare twoopinionsinherenttotherelationshipbetween‘We’and‘They’.Oneisnormative,that‘We’peopleshouldcoexistwith ‘They’.Theother is that ’They’shouldbeforciblyincludedinorassimilatedto‘We’,orthat‘They’shouldbeexcludedfrom‘We’.Warreportingrepresentsoneexampleofthissituation.

Whenexamining the interactionbetweenmediaandnationalism,and themechanismofMedia-Nationalismasawhole,weshouldfocusonthecharactersofthefunctionofmassmedia.Massmediamustcutoffsomecomponentsoftheaffairsof‘reality’,andthenreportasnewsselectedelementsthatfit inlinewithstoriessharedamongthepeople,and lastlyconstructa‘social reality’which isdifferentfrom‘reality’.Inotherwordsthereisacirculationprocessthatconsistsofthefollowingthreestages:Thefirstisthatmassmediaconstructs‘socialreality;’thesecondisthat‘reality’ismadebyreflectingthe‘socialreality;’andthethirdisthatmassmediaagainconstructsthe‘socialreality’bycuttingoffthe‘reality’andreporting thechosenelements.Wecanrecognize the interactionprocessamongthethreefactors;‘reality’,massmedia,and‘socialreality’(orpublicopinion).Wecaneasilyseethisprocessatworkinthepoliticalarena.Particularlywehaveseenmanycasesinthefieldofdiplomacyandinternationalpoliticsinwhichthenegativeimage towardforeigncountries increasesamong thepeopleby themechanismof‘Media-Nationalism’andthenthenationalconsciousnessandnationalismarereinforced.

Iwillproposeanotherquestion;howhasthedevelopmentofinformationization,thathasbeenacceleratedbythediffusionofmanydifferentkindsofinformationtechnologyandmedia,andhowhasitinfluencedthetrendof‘Media-Nationalism’?Whenconsidering them theconceptofan informationsociety isveryuseful.

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This idea has a tendency to emphasize the positive aspects of the impactbroughtaboutby informationization. Ithassuggested that thedevelopmentofinformationizationwouldcontribute toprovidingtheuserswithapublicspherewhere theycanexpress theiropinionsaswellas improve theirordinary lives.Taking thisoptimisticview to its logicalconclusion, Icanoutlineasequencemodel,asbelow:

1.Developmentanddiffusionofinformationization.2.Moreincreaseanddifferentiationofmediaanditscontents(especiallyin

thefieldofborderlessinformationflowandonlinepublicopinion).3.Thepeople’svaluesbecomedifferentiated.4.Thenationalconsciousnessandnationalismamong thepeople tends to

decline.

According to thismodel themorevariationofmediaand information, themoreuseful theywillbeforrepressingnationalism. Incontrastwith this, thereisanotherviewwhichholdsthat thedevelopmentofinformationizationdoesnotsolvemanykindsofsocialproblemsbutratherworsensthemorevencreatessomenewones.Thisviewiscalledthecriticalperspectiveofinformationsociety,whichemphasizestheseriousproblems;‘Surveillancesociety’or‘DigitalDivide’.FromthepessimisticandcriticalviewIcanalsosummarizebyoutliningasequencemodelthatshowstherelationshipbetweenmediaandnationalism,asbelow.

1.Thedevelopmentofinformatization.2.Themoremediaanditscontentsareconcentratedandunified, themore

emotionalpublicopinionisexpressed.3.Thepeople’svaluesbecomeunified.4.Thenationalconsciousnessamongthepeopletendstogrow.

ComparingthetwomodelswecaneasilyseecasesofthelatterinJapanandothercountries,wherenationalismgrowsthroughmedia.

Some bases of ‘Media-Nationalism’

‘Media-Nationalism’ isnotcausedonlyby thedevelopmentanddiffusionofdifferentkindsofmediaand theircontents.Whenit isbornandgrowstheremustbeabaseforacceptingitwithinthenation-state.Asiswidelyknown,astateconsistsof land,people,sovereign,andnational identityamongthepeople.The“state”sometimesmeansanapparatusofgovernmentandpower,sometimestheoverallsocialsystemsubjecttothatgovernmentorpower’(Giddens,1985:17).Thestateapparatusisessentialfornationbuildingandnationaldevelopmentorstability.

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Inadditiontheorganizationsandpeoplewhobelongtoandoperateinthenation-stateneedtoregardtheinstitutionaslegitimate.Andthepeopleseethemselvesasmembersofthenation-statebyconstructingandmaintainingnationalidentity.

Next Ineed to refer to theconceptofnationalculture,whichconsistsofnationalidentity,dominantvaluesandwaysoflifeandthinkinginthenationstate.Nationalcultureplaysimportantrolesforconstructingandmaintainingthenationstateandthenationalismofthemodernsociety.Wecandefinenation-state-basednationalismasfollows:‘Nationalismisasetofideasandmovementsinwhichthepeopleimaginethenation-state,theirforcesofcohesionareincreased,andtheytrytoenlargetheirinterests.’

In the lateof twentiethcentury,globalizationhasprogressedrapidly,manypeople,goods, and informationoftenmovebeyondbordersmoreeasily, andinterdependencyamongstateshas further increased.Consequentlynationalismbasedon thenation-statehas transformed. Inadvancedsocieties sub-culturesgroundedonregion,ethnicity, religion, language,generation,genderandothershavegained importanceandbecomepowerful.The identity rooted in thesub-cultures has become distinct.The members of sub-cultures have begun toreproducetheiroriginalorspecificnationalismswhichoftenopposethenation-state-basednationalism.Therearemanycaseswherethesub-culturesconflictwiththenationalculture.Especially theproblemsof immigrantsandforeignworkerswhoarenoteasilyincludedinorassimilatedtothenationalculturehavebecomeseriousaskindsof‘ethnicproblems’.Atthesametimeithasraisedthenationalconsciousnessbasedonthesub-cultures.Namely‘evenintheageofglobalizationpeopletrytoseekculturerelatingtotheir‘roots’,whichcanprovidespatialandhistoricalfoundations insteadofanation-state that isrelativelyartificial for thepeople’(Matsumoto,2002;97).Thetypeofnationalismbasedonthenation-statehaschangedduetothedevelopmentofsub-culturesandglobalization.

How has nationalism in Japan changed since the Second World War?

MasaoMaruyamawhowasoneofthemostimportantandfamous‘opinion-leaders’aftertheSecondWorldWarwroteaverywellknownphraseinhisbook,whichwas‘I’dliketobetnotonthe‘realexistence’ofamilitaryJapanbeforetheSecondWorldWar,but insteadonthe‘fiction’of theJapanesepoliticalregime’sgoalsafter theSecondWorldWar’(Maruyama,1964;584-585).Hisopinion,asrepresentedbythisquote,hasbeenwidelyacceptedandachievedthepredominantpositionamongthepublic,especiallyintellectuals.Thegoalornormativestandardoftheopinionwas‘civilsociety’anddemocracyinWesternsocieties.Atthattime(almost spanningbetween1945-1990)manyJapanesehadnegative imagesofnationalismbecausetheyassociatednationalismwiththesortofradicalpatriotismthat theJapanesepeoplesharedupuntilWorldWar.Thewordsandconceptsset

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incontrast tonationalismandpatriotismhasbeen‘demilitarization’and‘neutral’amongmostJapanese.Alotof themhavesupportedthemaspreciousideasandhaveinsistedonprotectingJapaneseConstitution,especiallyarticle91.

HowevertherealityofJapanhasbecomeestrangedfromthepeace-orientedconceptsof theglobalcommunity.CertainlyJapanhasadopted thepolicy forlightarmamentbuthassubordinateditselftotheUS.foritsnationalsecurity.TheJapanesehavecertainlyreachedaconsensusonthepoint that thepeace-orientedconceptsareoneofthemostimportant‘nationalgoals’.Butthereis inconstancywithintheconsensusornationalgoal.InfactmanyJapaneseapproveofthelightlyarmedforce (only forself-defense),while theywant tomaintain theJapaneseConstitution(includingarticle9)(NHKHosoYoronChousajoHen,1982;172-175).

Aside frompoliticalandforeign issues, theJapanesegovernmentand theprivatebusinesssectorhavemade tremendousefforts toaccomplisheconomicgrowth.Japanhasachievedexpertstatus in thefieldofeconomics in theworldwhilemaintaining thegoalofapacifiststate.AsJapangainedmoreeconomicpower and international influence there appeared an opinion that has beencalled ‘Japanese revisionism’. Ithas insistedon reassessingandemphasizingcharacteristicsofJapanesesociety includingtraditionalculture.Needless tosaytheviewhashadacloserelationshipwiththeeconomicgrowth.Italsosuggestsanotherviewthat ismuchdifferentfromthemainstreamofpublicopinion.ThemainopinionwasthatcatchingupwithWesternsocietiesinthefieldofeconomicswasnationalgoalinJapanesemodernsociety.Referringto‘Japaneserevisionism’Takeuchiwrotebelow.“Thetraditionalinstitutionsandconsciousnessweregivenanegativeimageasinferiorandpre-modern.Buttheyhavesubsequentlycometobeadmiredwhenit isrecognizedthat theycontributetotherapidmodernizationinJapanasa‘magiccard’”(Takeuchi,2005;265).Theperspectiveof‘Japaneserevisionism’ has provided Japanese with the opportunity for reconsideringnationalism,particularlyinthefieldofpolitics.

Thesocial trendorclimateofopinionhasbecomeremarkableinthe1990swhentheinternationalcommunityhassodramaticallychanged,particularlydueto theendofColdWar.Forexample theconservativefactioninJapanbegantoinsist thatJapancouldnolongermaintainthepolicyof‘one-state-pacifism’.ThepolicyhasmeantthatJapanhasatendencytopreserveitsownpeaceandsecuritywithoutmakinganactivecontributionforresolvingarmedconflictsoverseas.Theyalsobegantoassert that theJapaneseshouldrecognizethenecessityofnationalconsciousnessandnationalism,theirnational(orethnic)identity,andthenationalinterest.

Furthermore theJapanesegovernmentadvocated the threeprinciplesandpolicies thatshouldbegraduallyaccomplished(Nakasoneet.al.1992;258-264).These are ‘statism’ in thepolitical sphere (the state shouldactivelyplay itsproperroles), ‘liberalism’ineconomics(deregulationshouldbepromoted),and

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‘internationalism’in theglobalcommunity(thestateshouldbecomemoreopentotheglobalsociety).ThisstanceiscloselyrelatedwiththerevisionofJapaneseconstitution.Thatdocumentasserts that Japanshouldcontribute to theglobalcommunitynotonlyinthefieldofeconomicsbutalsoofinternationalpoliticsandglobalsecurity,andinsistedthat theJapaneseSelfDefenseForce(JSDF)shouldbedispatchedoverseasinordertoachieveit.Theopinionhascaughtthepeople’sattentionandhasbeengraduallyacceptedamongthem.

The change of consciousness and feeling of nationalism in Japan

In the1990’s, Japanesepeoplewereveryshockedby thecollapseof thebubbleeconomy,andthepublicopiniontransformedrapidly.Ithasencouragedthechangeofnationalconsciousnessandnationalism.Iwillmentionsomeevidenceabout itbelow.Looking to the research resultof thequestion, ‘confidence inJapan’,theaffirmativeanswertoithasdecreased.Forexampletheanswerto‘DoyouthinkJapanbelongstofirstrankstates?’hasgonedownfromthepeakof57%(1993),thento49%(1993),38%(1998)36%(2003)(NHKHosoBunkaKenkyujoHen,2004;115-118).Italsoexplainedthatthechangehasbeenmainlycausedbytheeconomicbreakdown.ThisevidencerevealsthereasonthatconfidenceinJapanhasmostlybeenbasedonandsupportedbytheeconomicsuccess.

InadditionakeyfactorthathasinfluencedJapanesenationalconsciousnessandnationalismwasthePersianGulfWar(1990-91).ItencouragedtheJapanesepeople todiscusshowJapanshouldcontribute toglobalsecurity (in thiscase,ofMiddle-Eastregion),andthentoreconsiderandfurthercriticizetheJapanesepolicyof‘One-State-Pacifism’.Whenthepeoplewereasked‘WhatpolicyshouldJapanadoptafterPersianGulfWar’,61%ofpeopleanswered‘Japanshouldplayanactiveroleforresolvinginternationalconflicts’.Needlesstosay,anactiverolesignified‘dispatchingtheJSDFoverseas’.Belowaresomerelatedopinions(AsahiShinbun,19June,1991).

1.TheJSDFshouldnotbedispatchedoverseas;21%.2.TheJSDFshouldbedispatchedonlyforlimitedoperations,suchasdisaster

reliefandothernon-militaryoperation;46%.3.TheJSDFshouldbedispatchedandpermittedmilitaryoperationonly

underthecommandofUN(ex.ParticipatinginPeaceKeepingOperationofUN);23%.

4.TheJSDFshouldparticipate in the forceoperation(ex.MultiNationalForceinPersianGulfWar);5%.

5.OthersandNA;5%.

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Theopinionpoolalsohadthequestion,‘DoyouthinkthatforeignpeopleseeJapanasreliablecountry?’Theaffirmativeresponse,‘Yes’,haddecreased;from45%(December,1990) to35%(June,1991).But thenegative response, ‘No’,hadgoneup;from44%(December,1990)to55%(June,1991). Inmyviewtheresearchresultsmightsuggest that thepositiveresponse to ‘DispatchingJSDFoverseas’hasbeencorrelatedwiththedeclineofconfidenceinJapanandthedesiretoregainforeignnations’confidenceinJapan.ThemajorityofJapaneseseemedtowanttorecoverthetrustbyforeigncountriesbyplayingactiverolesinresolvinginternationalconflicts(i.e.dispatchingJSDFtooverseas).

The trendofpublicopinionhas in turnencouraged thedisputesover theJapaneseConstitutionwhichforbids thedispatchof theJSDFoverseas.And ithas increased thenumberofopinions favoring the revisionand reformof theConstitution.Theaffirmativeresponsetothequestion,‘WehadbetteramendtheConstitution’,has increasedfrom33%(1991) to50%(1993) (YomiuriSinbunYoronchousabu,2002:49).FurthermoreregardingthereformoftheConstitution,theproportionofpositive images (e.g. ‘futureoriented’ (28%), ‘independent’(14%),‘realistic’(29%))waslarger thanthatofnegativeones(e.g.‘restoration’(8%),‘expansioninarmaments’(10%)(AsahiShinbun,May3,2002).

Butweshouldrecognize thatmanyJapanesehavenotregardedthereformofConstitutionas themost important issuefor thepresent.Forexamplewhenthepeoplewereasked‘What issueshouldpoliticiansdealwith?’,mostof themmentioned‘economicdevelopment’,whichhas risenfrom21%(1993) to48%(1998), lastly to48%(2003)(NHKHosoBunkaKenkyuujo,2004;72-74).Fromthispublicopiniondata,wecanconclude thatmostJapanesewould like tobeproudofeconomicsuperiorityintheworld.InotherwordsnationalisminJapanhasbeencloselyrelatedthetheconsciousnessandfeelingofeconomicpower.Thiseconomicconfidence,however,hasdecreasedbecauseofthecollapseofthebubbleeconomyinJapan,rapiddevelopmentofChineseeconomy,andrestorationofU.S.economy.Asaresultofthisthenationalconsciousnessandnationalismbasedoneconomicprosperityhave‘drifted’.

Another factor thathas caused thedecreaseof confidencehasbeen thefluctuationofself-imageamongJapanese.AlthoughmostJapanesebelievedthattheirownsocietyhasbeenmuchsaferandmorepeacefulthananyothercountries,seriouseventsandcriseshappenedinJapanin1995.Theseconsistedofthe‘GreatHanshin-AwajiEarthquake(January)’and‘SaringasattackonundergroundTokyo(March)’.CertainlymostJapaneseconsider thegreatearthquaketohavebeenanaturaldisasterandthesarinattacktheworkof theradicalnewreligiousgroupcalled‘AumShinriKyo’.

ButmostJapanesewereextremelyshockedbytheseevents,for theyforcedtheJapanesetorealizethat theirsocietyismoredangerousandfragilethantheyhadpreviouslyassumed.ThesetwoeventscausedJapaneseconfidenceintheirown

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societydecrease.Infactthisconclusionissupportedbytheresultsofthefollowingopinionpoolaboutthesarinattack(MainichiShinbun,June11,1995).Peoplewereasked;‘Doyouthinkthatthereisarelationshipbetweenthesetwosituations;oneisthatAumShinriKyohasacquiredmanyadherents,especiallyyounggeneration,andcommittedimmoralactions;theotheristhattherearelotsofsocialproblemstobesolvedinJapan.61%respondedintheaffirmativewhile19%respondedinthenegative.ThusmanyJapanesethoughtthattheirownsocietyproducedthefelonygroup.

Therehasbeenadecreaseof confidence in safetyandpeaceaswell aseconomicsinJapan.Ithasinturnledtothedecreaseoftheprideoftheirsocietyand the fluctuationofnationalism thatwasbasedoneconomicsuccess.Thenthepeoplebegan torecognize the importanceforJapan toestablishapowerfulpositioninglobalcommunitywithstrongorientationtowardanationalismbasedoneconomicpower.

Giventhesedifficulttimes,theopinionadvocatingapolicyofcontributiontotheglobalcommunityhasbecomethenorm.BoththeJapanesegovernmentandthepeoplethoughtthatdispatchingtheJSDFoverseaswasoneofthebestwaystocontributetotheglobalcommunityandtomakeJapanmoreappealingtoforeigncountries.Japanesepublicopiniongraduallyacceptsandsupports thepolicyofdispatchingtheJSDFtoIraqandothercountrieswhereseriousconflictsexist.ItisoneofthemostimportantaspectsofnationalisminJapan.

‘Media-Nationalism’ after ‘September 11 Terror Attacks’ in Japan

The‘September11TerrorAttacks’,followingAfghanistanWarandIraqWarhavethecommoncharacteristicsofa‘TelevisionWar’.Inparticular,thepicturesoftheterrorattacks,whichhappenedSeptember11,2001,haveappearedonTVagainandagain.Theseriousandtragiceventandvariousreportsabout it invokedtheinferiorcollectivememoryamongJapanesethatoriginatedfromtheGulfWar.

Asa resultof it, asdescribedabove, themajorityof the Japanesepubicopinionhasagreedwithmoreactivecontributiontotheworldcommunityinthemilitaryaswellastheeconomicfield.ItshouldbeemphasizedthatthewarreportsbyU.S.mediagenerallyadoptedabinaryscheme,‘terroristsanditssupporters’vs.’U.S.forcesanditssupporters’.Theformerwasportrayedasevilenemies,andthelatteraslawfulallies.MostofthemediaandthemajorityopinioninJapanfollowedthesamescheme.ThenwhenJapandecidedtojointhe‘CoalitionofWilling’forattackingIraqaswellasAfghanistan,mostJapaneserecognizedthemselvesasoneoftheimportantmemberofU.S.supporters.Japanthusreproducedandreinforcedthevalues that formed the‘We’feelingbelonging toU.S.supporters,butmostJapanese regardAfghanistan, Iraq,and Islamiccountries lessasenemies thansimplyasa‘They’.Inadditionaterroristgroup,‘Al-Qaeda’anditsleader‘Osama

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binLaden’havebeenregardedassymbolsof‘Enemy’,‘Evil‘and‘They’bymostofJapaneseaswellasWesternpeople.

SomeJapaneseanditsmediaquestionedthelegitimacyofAfghanistanandIraqWar,andsendingtheJSDFtoIraq,andcriticizedaseriesofpoliciesexecutedbyJapanesegovernmentinaccordancewithU.S.policies.Butasdescribedbefore,the supportersof sending the JSDF to Iraqhas increased in tandemwith theinternationalornationalseriousanxietycausedby‘9.11terrorism’.TheresultsofapublicopinionpoolconductedjustaftersendingtheJSDFtoIraqshowanincreasein thenumberofJapanesewhosupport theJSDF’scontinueddeployment; thequestionwas“DoyousupporttheopinionthatJapanshouldcontinuesendingtheJSDFtoIraq,ornot?”Theanswer“Yes”was50%,“No”was32%.(Asahi-shinbun,April17/18,2004).Asmediareportedtheissueagainandagain,emphasizingthesituationoftheU.S.andherallies,andexpressingthenecessityofjoiningthem,theclimateofopinionhascertainlychangedandhasbeenreinforced.Itcanbeinterpretedasgrowinginto‘activenationalism’.

Anotheraspectof thechange in theclimateofpublicopinion is thatmostJapanesewishtomaintainasecuresociety.Wecancallthis‘negativenationalism’.SomemediareportedthatJapanwastargetedbytheterror(butfortunatelyithasnothappenedyet in Japan).SomeJapanesewerekilledandabducted in Iraq.Inaddition in2004terroristsattackedtrains inMadrid,andyetothersattackedLondon’ssubwaysandbuses in2005.Throughaseriesofmediareports,mostJapanesehaveagaincometorecognizethepositionthatJapanshouldoccupyintheglobalcommunityandunderstandtheimportanceofasecurenation.NowtheJapanesehavebecomemoreawarethatJapanisamemberofadvancedcountriesandU.S.allies,andtheyadvocatenotyieldingtoterror.

Needlesstosaynationalsecurityisapointofnationalinterestandtheclimateofopinionafter the ‘9.11attacks’ in Japanbegan to resonatemorewith thisprioritization.InreferringthisIneedmentionotherseriousproblemsthathavebeencausedbyNorthKorea.SincePrimeMinisterJunichirouKoizumisuddenlyvisitedNorthKorea2002,manydifferentkindsofJapanesemediahaveeagerlyreportedthethreatsofthecountryagainandagain.Indeedthecountryhassomethreateningelements for Japan, includingnuclearweaponsand theabductionof Japanesepeople.AsJapanesemediahasactivelyreportedtheseaspectsJapanesenationalismhasbeenelevated.It isanotherimportantaspectof‘Media-Nationalism’inrecentJapan.

Conclusion

MostJapanesehavecome tobelieve that theirnationneeds to takemoreresponsibilityforglobalsecuritythanbefore.Theyhaverecognizedthat thewayofachievingthisgoalistocontributeinthemilitary,aswellaspolitical,economic

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fields. Inotherwords theyhavecometoappreciate the limitationof‘one-state-pacifism’,mainlybecauseJapanesemediahasrepeatedlyreported thepressingissues.Thenthetrendofpublicopinionhasbeenlinkedtotheformationofnationalconsciousnessandnationalism.Thisisatypicalexampleofthepresentsituationof‘Media-Nationalism’inJapan.

OfcoursesomeAsiancountries,especiallyChinaandSouthKorea,haveexpressed their fearsabout this trend.Because theywereseriouslydamagedbyJapaneseinvasionduringtheSecondWorldWar.AsJapanhashadauniquepositioninAsia,ithasattachedgreaterimportancetoU.S.thanotherAsiancountries.ButJapannowneedstolistentotheopinionsofAsiancountriesmorethaneverbeforebecauseJapanhasbecomedeeplyinvolvedwiththem.HowdoesJapancopewiththisandestablisharelationshipofmutual-respectwithAsiancountriesalthoughitcontinuestomaintainitsorientationtotheU.S.Thisisthemostimportantissueintheconditionsfor theriseof‘Media-Nationalism’inJapan,especiallyfor themedia.

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NOTES

Article9inJapaneseconstitutionstates:1.Aspiringsincerely toan internationalpeacebasedon justiceandorder, the

Japanesepeopleforeverrenouncewarasasovereignrightofthenationandthethreatoruseofforceasmeansofsettlinginternationaldisputes.

2.Inorder toaccomplishtheaimof theprecedingparagraph, land,sea,andairforces,aswellasotherwarpotential,willneverbemaintained.Therightofbelligerencyofthestatewillnotberecognized.

REFERENCES

GIDDEN,Anthony(1985)The Nation-State and Violence,PolityPress.

LIPPMANN,Walter(1922)Public Opinion,Harcourt.

MARUYAMA,Masao(1964) Gendai Seiji no Shisou to Koudou (Thought and Behaviour in Modern Japanese Politics)MiraishaPub.

MATSUMOTO,Kenichi(2002)Minzoku to Kokka (Nation and State);PHPPub.

NAKASONE,Yasuhiroet.al.(1992)Kyodo Kenkyu ‘Reisen Igo’ (Group Research on ‘Post Cold War’)BungeiShunjuPub.

NHKHOSOYORONCHOUSAJO(ResearchInstituteofBroadcastingandPublicOpinion)eds.(1982)Zusetu Sengo Yoronshi; Dai 2 Han (History of Japanese Public Opinion After the Second World War, 2nd ed.)NihonHosoShuppanKyokai

NHKHOSOBUNKAKENKYUJO (Research InstituteofBroadcastingandCulture)eds.(2004)Gendai Nihonjin no Ishiki Kozo Dai 6 Han (Consciousness Structure of Contemporary Japanese 6th ed.)NihonHosoShuppanKyokai.

SEKIKAWA,Natsuo(2003)Shiba Ryotarou no Katachi (Japanese Way of Thinking; Shiba Ryotarou),BungeiShunjuPub.

SHIBA,Ryotarou(1993)Kono Kuni no Katachi (1) (Japanese Way of Thinking; From Historical View (1))BungeiShunjuPub.

TAKEUCHI,Yo(2005)Maruyama Masao no Jidai (The Age of Maruyama Masao),ChuoKoronPub.


1�PB

The Relationship between Rental and Salein the Japanese Video Market

by Sumiko ASAI*

Introduction

Themotionpicture industryhasseveraldifferent revenuessources.Aftertheatricalexhibition,homevideosuchasdigitalversatiledisc(DVD)isreleasedandisfollowedbypremiumcableservicesandpay-per-viewservicesviasatellitebroadcasting.Themovie is finallydistributed to thepublic for free throughterrestrial televisionbroadcasting.Furthermore,homevideoisdividedintovideoforrentalandforsale,givingthepublicseveraloptionsforenjoyingamovie.

Themarketingmethod thatdistributesaprogramthroughseveralchannelsatdifferenttimesiscalledthewindowingstrategies.Whileproducingamovieisveryexpensive,whetherthemoviewillbeahitornotremainsuncertainuntilafteritsrelease.Amongallcontentindustries,themotionpictureindustryisespeciallyrisky, judgingfromthepossibilityofhitsandfilms’enormousproductioncosts.Givensuchuncertainty,windowingstrategiesaredesignedtomaximizetheprofitsfromhitmoviesbypricediscrimination.Recently,theInternethasbeenutilizedtodistributemovies,inadditiontotraditionalchannelssuchastelevision.Thisshowsthatwindowingstrategiesarestillinthedevelopmentstage.

Themainfocusofmarketingresearchesintomotionpictureshasbeenonboxofficerevenues.Thisisreasonable,sincemoviesthatprovetobeunpopularatthecinemadonottendtobedistributedthroughotherchannels.However,whileannualboxofficerevenueswere202billionyenin2006,movieDVDssalestoretailersand rental stores reached217billionyen thatyear, surpassing theboxofficerevenuesinJapan,accordingtothedatacollectedbytheMotionPictureProducersAssociationofJapan, Inc. (MPPAJ)and theJapanVideoSoftwareAssociation(JVA).

We do not usually view the same movie repeatedly, so we select onedistributionchannel forviewingaprogram.Since the time intervalsbetweentheatricalexhibitionandvideorelease,andbetweenvideoreleaseandbroadcastingdiffer, thesedistributionchannelsdonotsimultaneouslycompetewitheachother.Ifwemissgoingthetheater,wehaveachancetoviewthemoviethroughvideoorbroadcastafteracertaintimehaspassed.Ontheotherhand,whileJapanesemovie

*SumikoASAI is anAssociateProfessorof InformationEconomics at theSchoolofSocialInformationStudies,OtsumaWomen’sUniversity.

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companiesgenerallyreleaseDVDsaboutsevenmonthsafterfilms’initialreleaseintotheaters,DVDsforrentalandsalearereleasedalmostsimultaneously,andtherelationshipbetweenrentalandsalediffersfromtherelationshipbetweenotherwindows.

Although thevideo rental system ispopularwithconsumers,producersofdigitalcontent suchasmusicCDsandgamesoftwarehavedifferentviewson the rental system. InJapan, it isprohibited to rentmusicalbumsfeaturingJapaneseartists foramaximumperiodof threeweeksafter theirsales release,inconsiderationof the impactof rentalonalbumssales.Foralbumsfeaturingforeignartists,therentalprohibitionperiodisoneyearaftersalerelease.Thegamesoftware industryhasamorenegativeattitude toward therentalsystem.Gamesoftware isexclusivelysold inapackaged format1and rental servicesarenotprovidedexceptinafewcases.Itseemsthatthemotionpictureindustrydoesnotviewtherentalsystemnegativelyintermsoftheprohibitionperiod.

However,consumersdonotgenerally rentavideo that theyhavealreadypurchased.Ifrentalperfectlysubstitutesforpurchase,theintroductionofthevideorentalsystemmaynotcontributetotheexpansionofthetotalvideomarket,whichconsistsofbothsaleandrental.Thepurposeofthispaperistoascertainthroughempiricalstudieswhetherornot thevideorentalsystemdisturbsgrowthof thevideoretailmarket.Ifthesemarketsdonothaveasubstituterelationship,doestherentalsystemprovideconsumerswithaccesstoawidevarietyofcontent?First,thisstudyexaminesthequantitativerelationshipbetweenvideorentalandsale.Second,itanalyzestheimpactoftherentalsystemonthevarietyofmoviesconsumersareabletoview,inotherwords,thequalitativedifferencebetweenrentalandsale.

Therestofthepaperisorganizedasfollows:ThesubsequentsectionsprovideanoverviewoftheJapanesevideomarketandabriefreviewoftherelatedstudies.Followingtheoverview,themodelandtheestimationresultsofempiricalstudiesaredescribed.Thefinalsectionofferssomeconcludingremarks.

Overview of the Japanese Video Market

AlthoughthehomevideocassettemarketexpandedwiththediffusionofVHS-formattedvideocassetterecorders(VCRs)inthe1980s,VCRshavebeenreplacedbyDVDplayerssincethelate1990s.AsofMarch2007, thepenetrationrateofDVDplayers intohouseholdsreached65.1percent,according to theConsumerConfidenceSurveyconductedbytheJapaneseCabinetOffice.InproportiontothepenetrationofDVDplayers, theratioofDVDsales to totalvideosalesreached98.3percentin2006,accordingtothedatacollectedbytheJVA.ThisshowsthatvideotapeshavebeenreplacedbyDVDs.Therefore, thisstudyfocusesonDVDsoftware,sinceDVDisnowthemainformatusedinthehomevideomarket.

InJapan,thevideotaperentalbusinessstartedin1977,andthesamesystem

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alsohasbeenapplied toDVDs.TheJapaneseCopyrightLawgivescopyrightholdersthedistributionrights,whichmeanthatvideosmaynotberentedwithouttheirpermission.Accordingtotheseprovisions,anyonewhointendstoenter thehomevideorentalbusinesshastoobtainpermissionfor lendingDVDsfromthecopyrightholders.However,it isdifficultforrentalstorestonegotiatewitheverycopyrightholdertoobtainsuchpermissionanditisalsocomplicatedforcopyrightholderstogivepermissiontoeachrentalstore.Therefore,copyrightholderstrusttheJVAwithrentalpermissionandtheJVAcomprehensivelypermitstheownersofrentalstorestoproviderentalservicesinordertosimplifythelicensingprocedures.That is tosay,DVDsareclearlydividedinto thoseforsaleandthoseforrentalbasedontheCopyrightLaw.

Table1showsthemarkettrendforDVDs,usingtheJVAdata.TheJVAhascollecteddataasmeasuredbyquantityandsalesfromvideoproductioncompaniesandpublishedthemthroughthewebsiteoftheJVA.RetailinTable1meansDVDsalestoretailersfromvideoproductioncompanies,andRentalinTable1indicatesDVDsales torentalstores.Theretailmarketwas142billionyen in2001,andit reached262billionyen in2005,nearlydoublingover this four-yearperiods.However, theretailmarketshrunkby40billionyenin2006withtheresult thatthetotalmarketdecreasedforthefirsttime.AlthoughtheDVDrentalmarketwasonly6.7billionyenin2001,ithasexpandedsteadilyupuntilthepresenttime.Asaresult,therentalmarketrepresentedonethirdofthetotalDVDmarketin2006.

Table 1: The Trend for DVDs (billion yen)

Retail Rental Total RatioofRetailtoTotal(%)

2001

2002

2003

2004

2005

2006

142.2

178.3

222.0

250.9

262.2

221.4

6.7

15.7

33.3

67.2

83.8

101.9

148.9

194.0

255.3

318.1

346.0

323.3

95.5

91.9

86.9

78.9

75.8

68.5

Source:TheJapanVideoSoftwareAssociation(JVA)

TheJVAhasclassifiedDVDs into19genressuchas foreignmoviesandJapanesemovies.MeasuringthegenreshareofDVDsalestoretailersandrentalstores showed that the top rankedgenrewas foreignmovies.Thesemoviesrepresenteda34.7percentshareofallgenresonaveragefortheperiodfrom2001to2006.SecondplacewenttoanimatedJapanesemovieswithanaverageshareof23.2percent,andthirdwasJapanesemovies.Theshareofthetopthreegenreswas73percentonaverageforthefive-yearperiodinwhichmeasurementsweremade.

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Thatistosay,threequartersofallDVDsretailsalesaremovies.SalesofforeignmovieDVDstoretailersandrentalstoresdecreasedby31

billionyen in2006ascomparedwith thepreviousyear,causing the totalDVDmarket to shrink, asmentionedabove.Thispaper calculated the correlationcoefficientbetweenboxofficerevenuesandmovieDVDssales toconsumers inordertoexaminetherelationshipbetweenthem.Japaneseandforeignmoviesweremeasuredincludinganimatedmovies,whichearnedboxofficerevenuesexceeding1billionyenin2005.DataonboxofficerevenuesareavailablefromthewebsiteoftheMPPAJ.Sincetheaverageintervalbetweenamovie’sreleaseandavideo’sreleaseissevenmonthsinJapan,someDVDswerereleasedin2006.Therefore,DVDsalesin2006arealsocovered.TheDVDsalesdataaremeasuredbyunitandareavailablefromtheOricon Yearbooks 2006 and 2007.ThecorrelationcoefficientbetweentheboxofficerevenuesforJapanesemoviesandtheircorrespondingsalesasDVDswas0.965andthecorrelationcoefficientbetweenboxofficerevenuesforforeignmoviesandtheirDVDssaleswas0.917.Thus,astrongandpositiverelationshipexisted.Boxofficerevenuesofforeignmoviesdecreasedfrom116billionyen in2005 to94.9billionyen in2006.Fromthepositive relationshipbetweenboxofficerevenuesandDVDssales,itappearsthatthedecreaseinDVDssalesofforeignmoviesin2006wascausedbyaslumpinforeignmovies2,andthisisthemainfactorcontributingtothedecreaseintotalDVDssalesin2006.

Averagepricemaybecalculatedbydividingsalesbyquantity.PricesofDVDsforretailerssetbyvideoproductioncompaniesdiffersignificantlyfromthosesetforrentalstores.TheaveragepriceofDVDsshippedtoretailerswas2,884yenin2006,whilethatofDVDsshippedtorentalstoreswas4,511yen.Whenrentalstores lendmusicCDs toconsumers,copyright license fees for the rentalsarepaid tocopyrightholders inproportionto thenumberof timesthat theCDsarerented.Incontrast,forvisualDVDs,inmanycases,thelicensefeesfortherentalsareincludedinthepriceofDVDsshippedtorentalstoresandthesefeesaresetatafixedrate,regardlessof thenumberof timestheDVDisrented.OnefactorcontributingtothedifferenceinDVDspricesbetweenretailersandrentalstoresisthelicensefeeforrental.Furthermore,whiletheaveragepriceofaDVDinthetotalmarketwas3,567yenin2001,theaveragepricein2006was3,253yen.ThepricesofDVDsshippedtobothretailersandrentalstorestendedtodecrease.

Related Literature

While theprimaryfocusofmanystudieson themotionpicture industry isthefactorsinvolvedinthesuccessofamovie3, therentalsystemandwindowingstrategieshavereceivedlittleattention.WhenvideorentalstoresintheU.S.obtainvideosfrommoviedistributors,revenue-sharingcontractshavebeenwidelyusedsince the late1990s,whereas, in Japan,a fixed rate for license feeshasbeen

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popular.Regardingthecontractsintherentalsystem,Mortimer(2007)investigatedtheeffectoftheintroductionofrevenue-sharingcontractsonfirmsandconsumerwelfare. Inrelationto thewindowingstrategies,LehmannandWeinberg(2000)focusedonthetimingofvideoreleaseafter theaterexhibitionandcalculatedtheoptimalrelease timebasedonexponentialsalescurves.Theyalsoreported thatthecorrelationcoefficientbetweendomesticboxofficerevenuesandDVDrentalrevenueswas0.24in2001,andthat thecorrelationbetweenboxofficerevenuesandDVDsaleswas0.81 in2002.Furthermore,Weinberg(2005)conductedanoverviewoftheU.S.videomarketandraisedresearchissuesregardingthemarket.AlthoughEliashberg,Elberse andLeenders (2006) alsopointedout that therelationshipbetweenthetheatricalandnon-theatricalwindowisoneoftheresearchareasinthemotionpictureindustrythatisworthyofexamination,wefoundfewstudiesthatexaminedtherelationshipbetweenwindows.

Theprovisionofvideosaleandrentalservicesstartsatalmostthesametime.Inthissense,therelationshipbetweensaleandrentalofDVDscloselyresemblestherelationshipbetweensaleofmusicCDsandInternetdistributionincludingfilesharingratherthantherelationshipbetweenotherwindowsinthemotionpictureindustry.However,whilefilesharingislargelyillegal, therentalofDVDsinthisstudyiscompletelylawful.

TurningtotheliteratureontheInternetdistributionofmusic,severalempiricalstudieson the relationshipbetweendistributionchannelshavealreadybeenconductedusingafewdifferentapproaches.First,Liebowitz(2006)analyzedthemusicmarketusingaggregated timeseriesdataandconcluded that filesharingreduced thesalesofpackagedmusic.Second,OberholzerandStrumpf (2007)conductedanempiricalanalysisontheeffectoffilesharingonrecordssalesusingdataby title.Theymeasuredrecordpurchasesusing instrumentalvariablesandfoundthattheeffectofdownloadsonCDsaleswasstatisticallyindistinguishablefromzero.Third,Zentner(2006)usedEuropean individual-leveldatacollectedthroughthemailbyaresearchcompanyandmeasuredtheprobabilityofmusicpurchaseby individuals.Fromtheanalysis,Zentner reported thatpeer-to-peerusagereducedtheprobabilityofpurchasingmusicby30percent.

Thispaperestimated twoDVDsalesandrentaldemandfunctions,addingvariables thathavean impactonsalesandrentaldemands inorder toexaminetherelationshipbetweenDVDrentalandDVDsale.ThefirstisananalysisusingaggregateddatafromJanuary2001toDecember2006.Thesecondiscross-sectionanalysisusingdatabytitlein2005.

Analysis using Time Series Data

TheJVAhaspublisheddataonmonthlyshipmentsofDVDstorentalstoresandretailers.Sincethesemonthlydataarenotclassifiedbygenre, thesubjectof

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analysisistheoverallDVDmarket.Thispaperspecifiedthedemandfunctionsofretailersandrentalstoresbyequations(1).

ln(retail sale)=á1 +â1ln(retail price)+ã1ln(rental sale)+ë1ln(DVD player)(1)

ln(rental sale)=á2 +â2ln(rental price)+ã2ln(retail sale)+ë2ln(DVD player)

wherevariableretailsale indicatesDVDsshippedtoretailers,andrentalsale isDVDsshipped torentalstores.Bothretailsaleandrentalsalearemeasured inthousandsofunits.Retailpriceistheaveragepriceandiscalculatedbydividingsalestoretailersbysalesquantity.Similarly,rentalpriceiscalculatedbydividingsalestorentalstoresbyquantity.Retailpriceandrentalpricearemeasuredinyen.Researchershaveoftenpointedout thatapositivefeedbackmechanismoperatesbetweenhardwareandsoftware in the information industry.Gandal,KendeandRob(2000)foundthat indirectnetworkexternalitiesexistedbetweenCDplayersandCDtitles.Karaca-Mandic(2003)elucidatedthepositiverelationshipbetweenDVDplayersandDVDsoftware.Takingintoconsiderationthepositivefeedbackbetweenhardwareandsoftware, thisstudyaddsthevariableDVDplayerwhichindicatesthecumulativeproductionofDVDplayers(unit:thousands).ThestartingpointisJanuary2001.RetailandrentalsalesdataareavailablefromtheJVA,andthedataonDVDplayersareavailablefromthewebsiteoftheJapanElectronicsandInformationTechnologyIndustriesAssociation(JEITA).Table2reports thesamplesummary.

Table 2: Sample Summary Statistics (time trend data)

retailsale retailprice rentalsale rentalprice DVDplayer

average

max

min

standarddeviation

5736.6

14399.0

1909.0

2221.4

3145.1

4489.8

2441.6

410.4

841.9

2571.0

39.0

706.5

5575.6

14048.8

3717.9

1357.8

12234.9

30593.0

81.0

9780.3

â1and â2areexpectedtobenegativevalues.Ifã1isnegative,thedevelopmentofrentalservicesisconsideredtodisturbthegrowthoftheretailmarket.Similarly,whenã2 isnegative, theexpansionof the retailmarket isconsidered tohaveanegativeimpactontherentalmarket.

Thispaperestimatedequations(1)simultaneouslyusingthefull informationmaximumlikelihoodmethod.Table3showstheestimationresults.Thecoefficientsofâ1and â2arenegativeasanticipated.ã1 is -0.0198andnegative,but isnotsignificantat the10percentsignificancelevel.Thesefindingsdonotsupport the

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hypothesisthatthedevelopmentoftherentalsystemdisturbstheretailmarket.Ontheotherhand,ã2 issignificantlypositive indicatingthat theretailmarket leadstotheexpansionoftherentalmarket.Bothë1andë2arepositive.Althoughvideorentalstoreshithertostockedvideocassettes,itcanbeseenthattheyhavereplacedvideocassetteswithDVDswiththepenetrationofDVDplayersintohouseholds.

Table 3: Estimation Results (time trend data)

retailsale rentalsale

á115.3166(3.3876)*

â1 -1.0134(0.4055)**

ã 1 -0.0198(0.2182)

ë1 0.1751(0.1674)

á2 0.9535(2.8420)

â2 -1.0006(0.1429)*

ã 2 1.0816(0.3744)*

ë2 0.5211(0.0705)*

adjustedR2 0.613 adjustedR2 0.936

Loglikelihood-1064.10

Thenumberofobservations72

Thestandarderrorsareinparentheses.*1percentlevel**5percentlevel

Analysis using Cross Section Data

Thispaperalsospecified thedemandfunctionsusingcross-sectiondatabytitle.Thesubjectofestimationis therental top100ascalculatedbythenumberoftimesthataDVDwasrentedin2005.Theserankingdatahavebeenpublishedon thewebsiteof theCompactDisc&RentalCommerceTradeAssociationofJapan(CDV-Japan)since2005.ThereareafewDVDsoftelevisiondramasintherental top100.WhilemoviesaregenerallyonasingleDVD, televisiondramasseriesrequiremultipleDVDsandaresoldasaDVDset.Ontheotherhand,whentelevisiondramasDVDsarerented,asingleDVDratherthanaDVDsetisrented.Thatistosay,themannerinwhichtelevisiondramasDVDsaresoldandhowtheyarerentedisdifferent.Therefore,televisiondramasDVDswereexcludedfromtheobservationsforestimation.Demandfunctionsforrentalandsalearespecifiedbyequations(2).

ln(sale)=á1 +â1ln(price)+ã1ln(rental times)+ë1box office(2)

ln(rental times)=á2 +ã2ln(sale)+ë2anima

wherethevariablerentaltimesrepresentsthenumberoftimesthattheDVDwasrentedintherentaltop100.Thevariablesaleisunitsbytitlesoldfromretailersto

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consumers.TheexplanatoryvariablepriceisthepriceofDVDswhichconsumerspurchaseandismeasuredinyen.Thisisnotthesameasretailpriceinequations(1),asthevariableretailpriceinequation(1)istheaveragepriceofDVDs.DVDsaleandthepricedataareavailablefromtheOricon Yearbook 2006.Explanatoryvariableboxofficerepresents theboxofficerevenuesof themovieontheDVD.SinceamorepopularmovieisexpectedtogeneratealargenumberofDVDsalesasshownbythecorrelationcoefficients, thevariableboxofficemeasuredinbillionsofyenisadded.TheMPPAJpublishesonlythetitlesandrevenuesofmovieswhichhaveannualboxofficerevenuesexceedingonebillionyen.Boxofficerevenuesof46titlesintherentalmovietop100didnotreachonebillionyenandthesedataarethereforenotavailable.Whenboxofficerevenuesarelessthanonebillionyen,thevariableboxofficeissetto0.Therefore,thevariableisnottransformedintoalogarithm.Whileordinarymoviesareviewedbyadults,mostanimatedmoviesareproducedforchildrenandviewersofordinarymoviesandanimatedmoviesdiffer.Therefore,thispaperaddsabinaryvariableanimatoidentifygenre.Animaissetto1iftheDVDisananimatedmovieandis0otherwise.Table4describesthesamplesummary.

Table 4: Sample Summary Statistics (cross-section data)

sale price rentaltimes boxoffice anima

average

max

min

standarddeviation

120853.7

1514370

15718

204404.2

3958.6

8400.0

999

1098.3

54942.3

210132

18687

36173.3

22.6

396

0.0

47.3

0.14

1.0

0.0

0.35

Equations (2) are also estimated using the full information maximumlikelihoodmethod andTable5 shows the estimation results.The estimatedcoefficientofã1 indicating the impactof therentalsystemon theretailmarketis0.2568andpositive,but isnotsignificantat the10percentsignificancelevel.ã2 issignificantlypositive.Thepositive impactof retailon therentalmarket iscommontotheresultsattainedfromtheanalysisusingthetimeseriesdata.ë1 issignificantlypositive,asanticipated.ë2issignificantlynegativeindicatingthatthereisconsumers’preferenceforpurchasingratherthanrentinganimatedvideos

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Table 5: Estimation results (cross-section data)

retailsale rentaltimes

á110.4632(8.2197)

â1 -0.2914(0.3766)

ã 1 0.2568(0.6257)

ë1 0.0109(0.0022)*

á2 7.3854(1.0522)*

ã 2 0.3101(0.0945)*

ë2 -0.5489(0.2412)**

adjustedR2 0.400 adjustedR2 0.429

Loglikelihood-2361.63

Thenumberofobservations100

Thestandarderrorsareinparentheses.*1percentlevel**5percentlevel

Qualitative Difference

Thissectionexamines thequalitativedifferencebetweenrentalandsaleofDVDs,while theabove twoestimationsarequantitativeanalyses.Thesubjectofanalysis is the rental rankingof the top30movieDVDs in2005,and thecorrespondencebetweenrentalrankingsandsalerankingsisexamined.Ifthetop30rentalDVDsoverlapwiththetopselling30, it implies that therentalsystemiscompetingwith the retailmarket. If there isnooverlapbetween them,wemaysay that the introductionof therentalsystemcontributes toenhancing thevarietyofmoviesthatconsumerscanenjoy.Rentalandsalesrankingsdatafrom2005areavailablefromtheCDV-Japan’swebsiteandtheOricon Yearbook 2006,respectively.

Fifteenofthetop30DVDrentalstitlesenteredthetopselling30.Another5rentalDVDtitlesappearedonthesaleschartsrankingfrom31to100.However,therestofthe30rentals,10titlesdidnotappearonthesaleschartstop100.Thatistosay,therentalrankingsdonotalwayscorrespondwiththesalesrankings.Weinberg(2005)alsoreportedthattherewasvirtuallynooverlapbetweenthetop10rentalsandthe top10sellingvideos in2002in theU.S.It issupposedthatconsumerschoosewhether to rentorpurchasedependingon the title,provided thatweexaminethecorrespondenceamongthetop30DVDs.However,theobservationsinthisstudyarelimitedtodatain2005duetotheavailabilityofdata.Ifstudiesusingabundantandfuturedatawillreachthesameconclusion,wemayassert that therentalsystemprovidesconsumerswiththeopportunitytochoosefromavarietyofcontent.

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Conclusions

ThispaperconductedempiricalstudiestoexaminetherelationshipbetweenrentalandsaleofDVDsandfound that the rental systemdoesnotdisturb thedevelopmentof theretailmarket.Theresults imply that rentalstoresare large-scaleandregularcustomersforvideodistributorsandthat therentalsystemmayberegardedasanotherchannelthatenablesdistributorstoincreasetheirrevenues.Furthermore, it seems thatconsumersdistinguishbetweenpurchaseandrentalbyDVDtitle,andthat therentalsystemprovidesthemwithopportunitytohavecontactwithawidevarietyofcontent.

However,sincethenumberofobservationsandindependentvariablesusedfor theestimationsare limited in thispaperdue to theavailabilityofdata, it isdesirabletore-estimatethedemandfunctionusingnumerousobservationsinordertostrengthentheresultsreportedinthisstudy.Atpresent,availabledataarelimitedtotherankingofrentalDVDssince2005andtomovieswhoseboxofficerevenuesexceed1billionyen.Thus,thestorageofdatainthefieldofvideocontentisnotcomplete.Theestablishmentofadatabase isessentialforfurtherstudiesontheJapanesemotionpictureindustry.

Furthermore,thispaperdealtwiththeimpactoftherentalsystemontheretailDVDmarket.Recently,severaldistributorshaveintroducedtheInternetdistributionofmovies.Althoughthevideodistributionmarket throughtheInternet isstill initsinfancy,itmayhaveanimpactonthesalesofpackagedcontentsuchasDVDs.TheimpactofInternetdistributiononthepackagedcontentmarketneeds tobeconsidered.

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NOTES

1.Recently,ithasbecomecommonforgamesoftwaretobedistributedthroughtheInternet.

2.MostforeignmoviesreleasedinJapanareHollywoodmovies.AlthoughboxofficerevenuesofforeignmoviesreleasedinJapandecreasedfrom116billionyenin2005to95billionyenin2006,boxofficerevenuesintheU.S.increasedby5.5percentin2006.

3.Forexample,PragandCasavant(1994),VanyandWalls(1999),Vany(2006)andAsai(2006).

REFERENCES

ASAI,S.(2006)“FactorsInvolvedintheSuccessofaMovie,”Otsuma Journal of Social Information Studies,15,1-13(inJapanese).

ELIASBERG,J.,A.ELBERSEandM.A.A.M.LEENDERS(2006)“TheMotionPicture Industry:Critical Issues inPractice,CurrentResearch, andNewResearchDirections,”Marketing Science,25(6),638-661.

GANDAL,N.,M.KENDEandR.ROB(2000)“TheDynamicsofTechnologicalAdoptioninHardware/SoftwareSystems:TheCaseofCompactDiscPlayers,”RAND Journal of Economics,31(1),43-61.

JAPANVIDEOSOFTWAREASSOCIATION,Statistical Reports 2001-2006.TheJapanSoftwareAssociation(inJapanese).

KARACA-MABDIC,P. (2003)“NetworkEffects inTechnologyAdoption:TheCase of DVD Players,” http://repositories.cdlib.org/berkeley_econ221/fall2004/4.

LEHNMANN,D. andC.B.WEINBERG (2000) “Sales throughSequentialDistributionChannels:AnApplication toMoviesandVideos,”Journal of Marketing,64(3),18-33.

LIEBOWITZ, S. (2006) “File Sharing Creative Destruction or just PlainDestruction?,”Journal of Law and Economics,45(1),1-28.

MORTIMER,J.H.(2008)“VerticalContractsintheVideoRentalIndustry”The Review of Economic Studies,forthcoming

OBERHOLZER-GEE,F.andSTRUMP,K.(2007)“TheEffectofFileSharingonRecordSales:AnEmpiricalAnalysis,”Journal of Political Economy,115(1),1-42.

ORICONENTERTAINMENT,Oricon Yearbooks 2006, 2007,OriconEntertainment(inJapanese).

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OWEN,B.M.andS.S.WILDMAN(1992)Video Economics,HarvardUniversityPress.

PRAG,J.andJ.CASAVANT(1994)“AnEmpiricalStudyof theDeterminantsofRevenuesandMarketingExpenditures in theMotionPicture Industry,”Marketing Science,15(2),113-131.

RAVID,A.S.A.andS.BASUROY(2004)“ManagerialObjectives,theR-RatingPuzzle,andtheProductionofViolentFilms,”The Journal of Business,77(2),155-192.

VANY,A.D.andW.D.WALLS(1999)“Uncertainty in theMovie Industry:DoesStarPowerReducestheTerroroftheBoxoffice?,”Journal of Cultural Economics,23(4),285-318.

VANY,A. D. (2006) “The Movies,” Ginsburgh,V.A. and D.Throsby eds.Handbook of the Economics of Art and Culture,Chapter19,North-Holland.

VOGEL,H.L.(2004)Entertainment Industry Economics,CambridgeUniversityPress.

WEINBERG,C.B.(2005)“ProfitsoutofthePicture:ResearchIssuesandRevenueSourcesbeyondtheNorthAmericaBoxOffice,”Moul,C.C.ed.A Concise Handbook of Movie Industry Economics,Chapter6,CambridgeUniversityPress.

ZENTNER,A.(2006)“MeasuringtheEffectofFileSharingonMusicPurchases,”Journal of Law and Economics,45(1),63-90.


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A Study of Current Telecommunications Policy-making in the U.S. :

The Case of Universal Service, in comparison with the Japanese case

by Shoko KIYOHARA*

Introduction

Universal Service Policy in the U.S. and Japan

UniversalServicehasbeenconsideredoneof themost important issues inthetelecommunicationsfield,allovertheworld. Today,thedebateonreforminguniversalservice in telecommunicationspolicy ismoreandmorecontroversialnotonly in theU.S.butalso inJapan. Whatservicesshouldbeconsideredasuniversalinthebroadbandage?Whatnewtechnologiesshouldbesubsidizedbytheuniversalservicefund? Theseare thecommonquestions inbothcountries.However, thesubstanceofthedebateinJapanissignificantlydifferentfromthatintheU.S. Thisresearchexamineswhatcausesthedifferencesinpolicydebatebetweentwocountries.

IntheU.S.,asmandatedbytheTelecommunicationsActof1996,thegoalsofuniversalserviceare“topromote theavailabilityofqualityservicesat just,reasonable,andaffordablerates;increaseaccesstoadvancedtelecommunicationsservices throughout theNation;advance theavailabilityofsuchservices toallconsumers, including those in low income, rural, insular, andhighcostareasat rates thatare reasonablycomparable to thosecharged inurbanareas (FCCwebsite).”“Advancedtelecommunicationsservices”meanshigh-speedbroadbandthatcantransfervoice,data,andvideoservices. AlthoughnotallcitizensintheU.S.receivethedirectbenefitofbroadbandaccessfromtheuniversalservicefund,anumberofschoolsandlibrariesinpoorareasaswellasruralhealthcareprovidersgetbroadbandaccessservicesatdiscountedrates. Therefore,manypeoplecan

*ShokoKIYOHARAisavisitingassistantprofessor,InterfacultyInitiativeinInformationStudies,UniversityofTokyo(Theauthortakespersonalresponsibilityforallviewsdiscussedinthispaper.)ThisresearchwaspartiallyfinancedbytheGrants-in-AidforScientificResearch.IwouldliketothankProfessorClydeWilcoxofGeorgetownUniversityandAssistantProfessorMelekOrtabasiofHamiltonCollegeforsupportingthisresearchandcorrectingmyEnglish. Theoriginalversionof thispaperwaspresentedat theNortheasternPoliticalScienceAssociationAnnualMeetinginPhiladelphia,PA.(USA)inNovember2007.IamgratefulforthecommentsfromProfessorOrinKirshnerofSokaUniversityofAmerica,andProfessorRobertSorensenofFairleighDickinsonUniversity.

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receivetheindirectbenefitthroughthesepublicinstitutions,anditisobviousthattheuniversalservicesupportmechanismsin theU.S.areregardednotonlyasatelecommunicationspolicybutalsoasasocialwelfarepolicy.

ThesearesignificantdifferencesfromtheJapanesecase. Thebeneficiariesof theuniversalservice fund inJapanarequite limitedand there isnospecialdiscountedprogramforlowincomeordisabledconsumers;neitheristheresupportforeducationnortelemedicinepurposes.TheonlygoalunderthecurrentsystemistocompensateforanddeficitsincurredbyNTT(NipponTelegraphandTelephone)EastandWest (dominant incumbents for regional telephoneservices),whichprovideequaltelephoneservicestosubscribersinbothurbanandruralareas(MIC,website).Inotherwords,thesystemsupportsonlyeffortstoclosethegeographicaldivide. Voicecommunicationsdividescausedbyother factorssuchas incomelevelarebeyondthescopeofuniversalservicebecauseitwouldthenbeconsidereda socialwelfarepolicy(MIC,2007.10.2). AlthoughJapanesepolicymakersare taking themarketsituationforbroadbandservices intoconsiderationwhenrevisingprovideequal telecommunicationsaccess inbothurbanandruralareas,theJapanesepolicydebatestilldoesnotexpand tohelpdistance learningandtelemedicineorotheraccessproblemscausedbysocioeconomicfactors.Itmightseemodd that theuniversal service fundwidelysupports telecommunicationsservicesintheU.S.,butasaresultthefundundoubtedlytargetsmanymorepeople,andhascreatedmoreconstituenciesincomparisonwiththeJapanesesystem.

What Does This Paper Examine?

Wheredo thedifferences in the contemporaryuniversal servicepolicydebatebetween the twocountriescomefrom?Differentmarketcharacteristicsandpolitical institutionsmaybethecause. However,are theseaspectsdecisiveenoughwhencomparingAmerican telecommunicationspolicywith Japanesepolicies? Myquestion iswhatelseweshouldconsiderwhenweexamineU.S.telecommunicationspolicy. Thispaperwilldemonstratehowexpandeduniversalservicehasbeenrealizedsince themiddleof the1990’s in theU.S. throughapolicyofnetworkconvergence,andthenarguethattheincreasingnumberofactorsparticipatinginthetelecommunicationspolicyprocessmoststronglydistinguishesAmericanuniversalservicefromtheJapanesecase.

Thepaperisorganizedasfollows.Thefirstsectionintroducesthetheoreticalbackgroundsuchasinterestgrouppoliticsandissuenetworks.Thesecondsectionprovidesmyargumentsas towhyuniversalservicepolicyhasbeenexpanded,seeminglyareverseofthepoliticalmood.SomesayitwasPresidentBillClintonwhoshowedstrongleadershipinfulfillingthepolicygoalofexpandeduniversalservice,orwhatismorecommonlycalledthe“Informationsuperhighway.”WhileIcannotdenysuchanargument,since1990’sithasbeenverydifficulttoimplement

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anysocialwelfareprogramsandredistributivepolicyintheU.S.Aroundthattime,socialwelfareprogramssuchasAidtoFamilieswithDependentChildren(AFDC)were revised. It iswellknown that theClintonAdministrationhad tomodifythetraditionalliberalwelfareprograms,andthat itwasadifficult timetorealizeredistributivepolicyandsocialwelfareprogramsbecause theRepublicans tookcontroloftheCongressafterMidtermElectionin1994;additionally,publicopinionleanedtotheconservativeside(Sunada,2000,47-51). Accordingly,weneedtotakeafreshlookatthereasonswhyanexpandeduniversalservicepolicy,whichisalsoconsideredsocialwelfare,wasrealized. Thethirdsectionprovidesevidenceformyargument. Thepaperwillconclude thatmoreandmorediverse interestgroupsandcivicparticipationaswellasgrassrootsmovementswereveryimportantinexpandinguniversal servicepolicy in theU.S., and that thecontemporarytelecommunicationspolicynetworkhasbecomemoredynamicanddecentralizedasaresult.IntheJapanesecase,however,therearestillcomparativelyfewcitizengroupsandnoeducationgroupsormedicalgroupsinvolvedintheuniversalservicepolicydebate.

This research makes use of public documents such as the FederalCommunicationsCommission (FCC)websiteandothergovernmentwebsites;technicalmagazines includingTelecommunicationsReports;andanumberofinterviewswiththosewhoarecloselyrelatedtotheuniversalservicepolicymakingprocess. Thispaper is alsobasedon the research resultsofmydissertation,“Gendai America ni okeru Telecom Seisaku to Seisaku Network no Henyo〔TelecommunicationsPolicyintheCurrentAmericaandtheTransformationofthe

PolicyNetwork〕(2007).

Theoretical Background

Interest Group Politics

Since thebeginningof the20thcentury,politicalsciencescholarssuchasArthurBentleyandDavidB.Trumanhavepropounded the theory that interestgroupsorpressuregroupsareatthecoreofpoliticsandpolicymakinginacomplex,large,andincreasinglyspecializedgovernmentalsystem(Cigler,Loomis,2002,4).Therefore,theinterestgroupbecomesanimportantelementforanalyzingcomplexpoliticalprocesses; interestgrouppolitics itselfcontinues tochangeforseveralreasons. Interestgrouppoliticsscholarshavepaidmuchattentiontohowinterestgroupsdevelop. DavidTrumanhassuggested that rapid technologicalchangesand increasingsocialcomplexitiesgreatly influence theproliferationofgroups(Truman,1971,57). Truman’s theoryofgroupproliferationremindsus that theinterestgroupuniverseischangeableandunstable.

For example, since the 1960s, the mobilization of business interests

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has resulted from the rise of counterparts such as consumer groups andenvironmentalists. Therefore,onecansay thatgrouppoliticsarecomprisedofsuccessivewavesofmobilizationandcountermobilization(Cigler,Loomis,2002,8).Sinceabout1960,thenumberofgroupshasincreasedandmostofnowdirectlyengageinlobbyinginWashingtonD.C.Thegrowthofgovernmentandincreasingfederalprogramsaccelerated thedevelopmentofnewpoliticalgroups thatwereparticularly interested ineducation,welfare,healthcare,civil rights,andsoon(Cigler,Loomis,2002,12). Also, think tankssuchas theAmericanEnterpriseInstitute,theBrookingsInstitution,theHeritageFoundation,theUrbanInstitution,and theCato Institutehavecome toplay important roles inpolicymaking inWashingtonD.C.(Salisbury,1992,341-342). Moreover, the increasingnumberofseniorcitizenssincethe1970shasalsostimulatedthesegroups.TheAmericanAssociationofRetiredPersons(AARP)boastsanimpressivemembership. TheAARPiswellover twice thesizeof theAFL-CIOand in1998, itcounted33millionmembers,whichmeans10millionmoremembersthantwentyyearsago(Cigler,Loomis,2002,13). Inotherwords,socialmovementssince the1960s,the increasingpopulationofseniorcitizens,andthegrowthofgovernmenthavestimulatedmoreandmorenewgroupstoparticipateinpolicymakinginWashingtonD.C.Theinterestgroupuniversehasdramaticallychangedinthelast40years.

Anotherquestion ishowinterestgrouppolitics in the telecommunicationsareahasbeenchangedbyrapidtechnologicalinnovation.AT&T,whichwasoncetheworld’slargestcorporationanddefactomonopolizedthetelecommunicationsindustry,wasadominantactorinthetelecommunicationspolicyprocessbeforetheAT&Tdivestiturein1984.BecauseoftheAT&Tbreakupandcompetitionforthelongdistancetelephonemarket,newcompaniesfreelyenteredsomemarketsandanumberoffractiousissuenetworksdeveloped(Berry,1997,308). Similarly,newbusinessgroupssuchasCompetitiveTelecommunicationsAssociation(Comptel)wereformed. Within thiscompetitiveenvironment,AT&Talsoreorganized itslobbyingteaminWashingtonD.C.(Berry,1997,308).

However, there have been few studies on interest groups in thetelecommunicationsarea since the1990’s. Since then, theemergenceof theInternetand thebroadbandenvironmenthasbeenhavingagreat influenceoninterestgrouppoliticsinthefield.Thispaperwouldliketofocusmorecloselyonhowinterestgroupsin the telecommunicationsareahavechangedinreactiontorapidtechnologicalinnovation.

From Subgovernments to Issue Networks

RobertSalisburyhas suggested thatmore interestgroupsand lobbyistsmaywieldlessinfluenceoverpolicyresults;however,healsopointsoutthat thegrowthinthenumberof interestgroupsinWashingtonD.C.hashelpedtobring

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abouta transformationin thewaymuchpublicpolicyismade(Salisbury,1992,340). TheAmericanpoliticalprocessused tobeexplainedassubgovernmentsor“irontriangles,”whichmeantthatalimitednumberofgroups,legislators,andadministratorswere involvedinpolicymakingforaparticular issuearea(Berry,1997,187).Inthe1950s,afeworganizationshadhegemonyincertainissueareas.For instance,asSalisburymentions, theAmericanMedicalAssociation(AMA)dominatedhealthpolicy,andtheAmericanFarmBureauFederation(AFBF)wasthemostinfluentialgrouponagriculturalissues(Salisbury,1992,343).However,in the1970s, thepoliticalprocessbecamemorecomplexandthe interestgroupuniverse ineachissueareabecamemorefragmented. TheAMAusedtobethesinglemostpowerfulorganizationinhealthpolicy,but“isnolongerthedominantvoiceofevenorganizedmedicine(Salisbury,1992,344).”

Hugh Heclo has suggested the concept of “issue networks” that arecomposedof “a largenumberofparticipantswithquitevariabledegreesofmutualcommitmentorofdependenceonothers in theirenvironment (Heclo,1978,102)”. Healsoexplainsanissuenetworkconsistsof“ashared-knowledgegrouphavingtodowithsomeaspectofpublicpolicy”(Heclo,1978,103). Heargues thatweshouldpaymoreattention to thefairlyopennetworksofpeoplethatincreasinglyhaveaninfluenceongovernment,achangefromtheclosedirontrianglesorsubgovernmentsweusedtosee(Heclo,1978,88).SinceHeclo’sbook,morepoliticalscientistshavecometoanalyzethepolicymakingprocessfromtheperspectiveof issuenetworks. Forexample,FumiakiKubo(1997)hasanalyzedissuenetworksintheenvironmentalpolicyarea.JefferyM.Berry(1997)hasdonethesamewithtelecommunicationsaswell.

The Telecommunications Issue Networks

UsingJefferyM.Berry’sdefinitionofthetelecommunicationsissuenetwork,Iargue that the telecommunicationspolicynetworkhasbeen transformedfromthedecentralizedmodeltotheconvergencemodel. Hecomparedissuenetworksin1984and1994, indicatingthat theformerwas“characterizedbywell-definedindustrynichesandinterestgroupcoalitions[that]werebuiltlargelyaroundtheseindustryclusters(Berry,1997,213)”. Atthattime,thetelecommunicationsissuenetworkwas formedprimarily focusingon telephoneequipmentandservices(Berry,1997,209). Thereweresomeconsumergroupsintheissuenetwork,butneitherthinktanksnorpublicinterestgroupswereactivethere.

Ontheotherhand,1994wascharacterizedasafullyintegratedmarketmodel.Berryindicatesthat“thelarge-scaleintegrationofdifferentcompaniesintobusinessalliances”wastheprominentcharacteristicbythatyear(Berry,1997,211).CableTVcompaniessuchasTimeWarnerandTCI(thenation’slargestowneroflocalcableTVcompaniesatthetime)wantedtoenterthetelephoneservicemarket,and

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telephonecompaniessoughtnewbusinessalliances inadifferentmarket. Whatcausedthisbusinessmoodin1994?AlldifferentmarketscouldnowprovidethesameservicesontheInternet,the“informationsuperhighway”ofthefuture(Berry,1997,211).

AlthoughBerry’sstudyusefullyillustrateshowthetelecommunicationsissuenetworkwastransformed,hedoesnotanalyzethefunctionofeachactorintheissuenetworks.BuildingonBerry’swork,inmydissertationIanalyzehowactorsaffecteachotherandhow,tounderstandthetransformationsinthetelecommunicationsissuenetwork,onemustexaminetheentireuniversalservicepolicyprocesssincethe1990’s.

Arguments and Hypothesis

From Decentralized Policy Networks to Policy Network Convergence

Thispaperconsidersthepolicynetworkratherthantheissuenetwork.IthinkitismoreappropriatetousetheconceptofthepolicynetworkbecauseIwouldliketofocusontheentiretelecommunicationspolicyareainsteadofonasingleissue.Iwillprovideanewanalyticalframeworkarguingthattelecommunicationspolicynetworkhasbeentransformedfromadecentralizedpolicynetworkmodel intoapolicynetworkconvergencemodelastheInternethasdiffusedamongthepublicintheU.S.sincetheearly1990’s(Kiyohara,2007).

Adecentralizedpolicynetworkischaracterizedasseveralpolicynetworksseparatedbypolicyareas;politicalactorsineachpolicynetworkdonotfrequentlyenteranotherpolicynetwork. Figure1showsadecentralizedpolicynetwork.In thismodel,even in the telecommunicationsarea,eachbusinessmarketandregulationsfortelephony,broadcasting,cableTVandsatelliteareclearlyseparated(byso-calledpipes). It issimilar toBerry’s telecommunications issuenetworkin1984.Ontheotherhand,Figure2showspolicynetworkconvergence.Inthismodel, theboundariesbetweenpolicynetworksaremorepermeable than inadecentralizedpolicynetwork. CableTVoperatorsdevelopedinterest inenteringthetelephonebusiness,andtelephonecompaniesinenteringthecableTVmarket,sincetheyseeall telecommunicationsservicesconvergingontheInternet. Also,educationgroupssuchasteachers’unionsandPTAsaswellasthinktanks,libraries,andruralcommunitiesnowpaymoreattentiontotelecommunicationspolicythanbefore. Mostofthemusedtohavealmostnointerest inthetelecommunicationsareabecausethisareawasthoughttobehighlytechnicalandnotterriblyrelevantwhenonlytheschoolprincipalhadatelephoneinhisorheroffice.Previously,theAmericanLibrariesAssociation(ALA)lobbiedonlyfor libraryfundingandwasinterestedmostlyincopyrightissues.However,sincethe1990’swiththeriseoftheInternetandnewissuesrelatedtotheInternet,telecommunicationspolicysuddenly

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seemsrelevant toeducational institutionsofallkinds,especially libraries. Inotherwords,inthepolicynetworkconvergencemodel,manyactorsthathavebeenpoliticizedindifferentpolicynetworksnowparticipateinthetelecommunicationspolicynetworkwithoutregardtoboundariesbetweenpolicies.Somegroupsformacoalitiontofulfilltheirgoals,andothersenterascountermovementsinthepolicynetwork. Somebusinessgroups lobbytheCongressandtheFCCveryactivelywithplentifulpoliticalresourcessuchasanumberoflawyers. Somethinktanksjusteducatethepolicymakersandthepeople.Theconvergedpolicynetworkisnotonlycomposedofdiversecoalitions. Theimportantpoint is thatmanypoliticalactorswhichplayimportantrolesinotherpolicyareassuchasteachersunionsandtheALAenterintothetelecommunicationspolicynetworkasactiveactors.Thus,thepolicyprocessbecomescomposedofmanymorepoliticalactors,whichwillmaketheprocessmorecomplicatedanddecentralized.

Figure 1: The Decentralized Policy Network Model (Before the Emergence of the Internet Society)

eraflewlaicosnoitacude

commercebroadcasting

satelliteradio

computercisumseivom

bold circle :telecommunications area

telephony medical servicecable TV

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Figure 2: The Policy Network Convergence Model (In the Development of the Internet Society)

Myhypothesis is that the transformationof the telecommunicationspolicynetwork (fromdecentralized toconverged)affects the substanceofuniversalservicepolicyintheU.S.Inthenextpart,Iwouldfirstliketodemonstratehowthetelecommunicationspolicynetworkwastransformed,andnext,analyzehowthistransformationaffectsuniversalservicepolicy.

Analysis

More New Groups Enter the Telecommunications Policy Network

A number of non profi t o rganiza t ions have newly en tered thetelecommunicationspolicynetworksinceearly1990’s. Accordingto the Public Interest Profiles in2001-2002, therewereelevenorganizationspayingcloseattentiontomediaissues. Previously, in1992, thenumberoforganizationswasfive;in1996,thenumberwaseight;in1998,thenumberwasten.ItisobviousthatthenumberofmediaadvocacygroupssuchasAccuracyinMediaandCenterforMediaandPublicAffairsisgraduallyincreasing.

Moreover,KevinW.Hulaindicates that traditionalcivil libertygroupssuchasPeoplefortheAmericanWayandtheAmericanCivilLibertiesUnionformedacoalitionwithnewercomputingorganizationssuchas theElectronicFrontierFoundationandVoterTelecommunicationsWatchinordertopromotethecampaign“tostoptheU.S.communicationsdecencyact”in1995(Hula,1999,89).Thesame

eraflewlaicosnoitacude

Internetenicidemeletecremmoc-E

telephone cable TV broadcastingradio satellite

music

computermovies

bold circle: telecommunications area

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year,theALA,whichisthelargestlibrarygroupintheU.S.,starteduptheOfficeforInformationTechnologyPolicy(OITP)inWashingtonD.C.Thisofficeplaysanimportantroleinsupportingtheeffortsoflibrariestoensureaccesstoelectronicinformation resourcesbyconducting researchandeducating librarians. Theircurrentmajorconcernsarebroadband; theE-rateanduniversalservicereform;networkneutrality;andcopyrightandfederalfunding(ALAWebsite).

LynneE.Bradley indicates thatAlliance forPublicTechnology,BentonFoundation,ALA,NationalEducationAssociation(NEA),EdLiNC(EducationandLibraryNetworkCoalition)formedbyschoolsand libraries, theDepartmentofEducationaswellashigh-techindustrywerenewplayerstotelecommunicationsdebatein1990’s.(InterviewwithBradley,2006.3.1).Shealsonotedthatthereasonwhynewgroupsentered thepolicynetworkwasbecause theuniversalserviceopeneduptheE-rate(Ibid.).

Figure3 indicates that thereareevenmorenew interestgroups thathaveentered the telecommunicationspolicynetwork. Theyarecategorizedas thinktanksandcitizengroups. Figure3 shows thatnewgroupswereestablishedin1990’s; there isalso theBentonFoundation,which transformed itsactivityasa think tank inorder toaddress the telecommunicationsarea. Traditionalconservative think tanksalsohave interest in telecommunicationspolicynow.Theywerenot interestedinthetelecommunicationsissuesin1992,accordingtothe Public Interest Profiles,butcametobeawareoftheirimportancelaterinthatdecade. JamesL.Gattusomentioned thatoneconservativegroup,CitizensforSoundEconomics (CSE),wasalreadyworkingon telecommunicationsaroundthetimeof theAT&Tbreak-up(InterviewwithGattuso,2005.11.8). Accordingtohim,subsequently, in1994and1995whileCongresswas trying topass thetelecommunicationsbill,anumberofconservative/freemarket-orientedgroupsgotinvolvedinthetelecommunicationsdebate. Healsonotedthat thesegroupshadstartedaninformalworkinggrouponceamonthforluncharound1994,andthatithadgrowntoabout20groupsin2005(Ibid.).

Therefore, a wide range of diverse groups have participated in thetelecommunicationspolicynetwork since the1990’s as Internet issueshaveincreased.Also,itcanbesaidthatthetelecommunicationspolicynetworkstartedtoconvergewithothernetworkssuchashigh-tech,computers,andeducationareas.

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Figure 3

Name Current Issues

CenterforDemocracyand

Technology(1994)・AccesstotheInternet

・Electronicsurveillanceandcryptography

・FreeexpressionontheInternet

・Onlinedemocracy,etc.

ElectronicPrivacyInformation

Center(1994)・FreespeechontheInternet

・Consumerprotection

・Internationalcyberrights,etc.

Progress&FreedomFoundation

(1993)

・Communications

・Computertechnology

・Deregulationofelectricutilities,

・Internet

・Telecommunications,etc.

CenterforMediaEducation

(1991)

・AdvertisingpracticesontheWebforyouthandteens

・�UseoftheInternetforcivicpurposesforyouthandteens,etc.

ElectronicFrontierFoundation

(1990)

・Censorshipandfreeexpression

・Contentfiltering

・Onlinecopyrightandfairuse,etc.

BentonFoundation(1981)

*In1992,

newlystarted

itscommunications

policyproject

・DigitalTV

・Mediareform,

・Internetservicesatlibraries

・Digitaldivide,etc.

*Thisfigureshowssomegroupsthatstartedtobeinvolvedinthetelecommunicationspolicyin1990’s.Notallgroupsthataredealingwithtelecommunicationspolicyareshown.

What Does the Transformation of the Telecommunications Policy Network Mean?

Who affects the Expanded Universal Service System?

So,whoaffectstheexpandeduniversalservicesystemthemost?Andhowdotheyaffectthesubstanceofthepolicy?First,letusexamineFigure4.

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Figure 4: New Political Actors In the Telecommunications Policy Network :Universal Service Policymaking Process

Figure 4 shows what kinds of groups are the most active regardinguniversalservicepolicy. Thenumberofpoliticalactorshasbeen increasing inthe telecommunicationsarea. Forexample,UniversalServiceAdministrationCompany(USAC)wasestablishedin1997asanot-profitsubsidiaryoftheNationalExchangeCarrierAssociation,Inc.(NECA).SinceDecember31,1998,USAChasbecomeresponsibleforadministeringalloftheuniversalservicesupportprograms,includingtheE-rateandRuralHealthCareProvidersProgram,asdirectedbytheFCC(USACwebsite).OnlylongdistancetelephonecompaniescontributedtotheuniversalservicefundbeforetheTelecommunicationsActof1996wasestablished.Thereafter,all interstate telecommunicationsserviceproviderswererequired tocontributetothefund.Asaresult,localtelephoneserviceprovidersandwirelesstelephonecompanieshavebecomeactiveactorsregardingthis issue. Moreover,becauseoftheTelecommunicationsActof1996,thenumberoflawsuitshasbeenincreasingwithregard toseveral issues, including theE-rate. Forexample, in1998,GTE,BellSouthandSBCCommunicationsbroughtacaseagainsttheE-rate.Plaintiffsargued that theFCCforced telephonecompanies tocontribute to theuniversalservicefundbutthattheydidnotmandateallInternetserviceproviderstocontributetothefund(Puma,Chaplin,Pape,2001,20).Lawyerstoonowplayamoreimportantroleinthetelecommunicationsarea.

Themostconspicuousnewgroupsinthetelecommunicationspolicynetworkareeducationgroups,librariesandsocialwelfaregroups.AtthebeginningofthepolicydebateinCongress,around1993,theTelecommunicationsRoundtablewasformedbymanyliberalgroupsincludingtheCenterforMediaEducation,People

erafleWlaicoSnoitacudETeachers union, National ＰＴA, schools, Liberal Groups, Community Based Organizations,D of Education, Catholic education groups Benton Foundation, ALA, Rural Health Clinics, RAC,AHA

TelecommunicationsLocal telephone companies, Long distance companies, ＵＳＴＡ, COMPTEL,ＮＣＴA, FCC, USAC, NTIA, White House, Commerce Committees,CBO, CRS, Court,D of Justice, FTC, Cellphone companies, VoIP providers, Lawyers, Lobbying firms

Conservative Groups High-tech IndustryHeritage Foundation,ＰＦＦ,ＣＥＳ, Wireless Infrastructure Association(ＰＣＩＡ), Apple,Cato Institute, National Taxpayers Union ＳＩＩＡ

Gates Foundation),IBM, Software Information Industry Association(

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for theAmericanWayandtheAmericanCivilLibertiesUnion. Inresponse, theBentonFoundationstartedtoeducatepoliticiansaswellasnonprofitorganizationssoas toencouragethemtoparticipate in theexpandeduniversalservicedebate.TheBentonFoundationwascooperatingwithNationalTelecommunicationsandInformationAdministration(NTIA)in1994and1995inthepolicydebate.In1995,theALAalsomobilizedtheirmemberstolobbyCongressionalrepresentativestosupportthebillincludingtheuniversalserviceamendment,whichwasintroducedbySenatorOlympiaSnowe(ME,R)andSenatorJohnRockefeller(WV,D).

Once theTelecommunicationsActof1996wasestablished,EdLiNCwasformedbyeducationgroupsandlibrariesincludingtheNEA,NationalPTA,andtheALA,andhadan important role in theFCCrulemakingprocess regardingtheE-rate. TheymobilizedhundredsoftheirmemberstolobbyfortheFCCandFederal-StateJointBoardmemberstocreateadiscountedsupportprogrambasedon theTelecommunicationsActof1996. Theyworkedwith theDepartmentofEducationandSenatorsSnoweandRockefeller. Despite thestrongoppositionfromtelecommunicationsserviceproviders, theFCCCommissionersdecidedtocreatetheE-rateprogrambyaunanimousvoteinMay,1997.TheE-rateprogramprovideseligibleschoolsandlibrarieswithtelecommunicationsservice,Internetaccessandinternalconnectionsatdiscountedrates(20to90%).

SincetheE-rateprogramaswellastheRuralHealthCareProvidersProgramwascreatedbytheFCC,schools,libraries,andruralhealthcareprovidershavesenttheirrepresentativestotheSchoolsandLibrariesCommitteeandRuralHealthCareCommitteeoftheUSAC.ThesecommitteeshavepowerandauthoritytomanagethesupportprogramsonbehalfofUSAC.Notonlypartofthecommittee,schoolsandlibrariesworkhardonmonitoringtheimplementationoftheE-rateprogram.Thereare61stateE-rateprogramcoordinators,andmostofthemarestaffworkingatthestatedepartmentsofeducation. MaryKuslerrelatedthateducationgroupshavebeeninvolvedintelecommunicationsissuessincetheE-rateprogramstarted,andthat thenumberofnegotiationswiththeFCChasincreased(InterviewwithKusler,2003September2).EducationgroupsoftencontacttheUSACtomonitortheE-rateprogram. GeorgeMcDonaldofUSACmentioned that educationgroupswereveryactiveparticipantsintheimplementationoftheE-rateandthattheycontactedwithhimveryquickly ifUSACmadeamistake(InterviewwithMcDonald,2004,November15).

Similarly, in1998and1999,as longdistance telephonecompanies suchasAT&T,MCIandSprint started tocharge theircustomersuniversal servicefees,a largecountermovementagainst theE-rateoccurred, ledby theNationalTaxpayers Union and consumer groups. The countermovement got behindRepublicanCongressionalrepresentatives tosubmitbills to terminateorreformtheE-rate. Against thiscountermovement, theNEA,AmericanAssociationofSchoolAdministrators,NationalAssociationof IndependentSchools,National

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SchoolBoardsAssociation,U.S.CatholicConference’sDepartmentofEducation,and theNationalCatholicEducationAssociation formedanationalgrassrootsmovementcalled“SavetheE-rateCampaign.”Withthismovement,andsincetheE-ratebecamemuchmorepopularafter itstartedtoreimburse,noneof thebillstoterminatetheE-ratewerepassedinCongress.Also,in1999,theFCCdecidedtoraisethefundingcapfrom1.9billionU.S.dollarstotheamountof2.25billionU.S.dollars.

TheactivemovementbyschoolsandlibrarieswasnotjustundertheClintonAdministration,althoughVicePresidentAlGorewasastrongsupporterof theE-rate. AftertheBushAdministrationstarted,PresidentGeorgeW.Bushwantedtoconsolidate theE-ratewithothereducationsubsidyprogramsbecausehewaspushinghisowneducationpolicy (“NoChildLeftBehind”)anddidnotwanttocontinueClintonandGore’spetprogram, theE-rate. However,schoolsandlibraries insisted that theuniversalservicefundworkedbetter thangeneral taxrevenuetosupport them. SchoolsandlibrariesstillplayveryimportantrolesinextendingtheE-rateprogram. OnApril23,2003, theFCCadoptedtheSecondReportandOrderandFurtherNoticeofProposedRulemakingregardingtheE-rate.AccordingtotheReportandOrder,about44%ofthe125groupsthatfiledpubliccommentsatthattimewereschoolsandlibraries.Theyaskedtoaddnewservicessuchasvoicemailandwirelessphones to theservicessupportedbytheE-rate.TheFCCallowedtheirrequestsbytheReportandOrder(FCCSecondReportandorderandFurtherNoticeofProposedRulemaking,CCDocketNo.02-6,Adopted:23April,2003).

Inotherwords,alargenumberofconstituenciesmonitortheimplementationof theuniversalserviceprogram,especially theE-rate, in theU.S. Educationgroupsandsocialwelfaregroupshaveworkedtoextendtheuniversalservicefundprogramstoschoolsandlibrariesaswellasruralhealthcareprovidersduringadifficult timeforrealizingsocialwelfareorredistributivepolicy. Thesegroupshave come into the telecommunicationspolicynetwork fromother areasofuniversalservicesincethemiddle1990’s.

Itmaybemucheasier tounderstandwhyhigh-techindustriesarealsonewpoliticalactorsinthetelecommunicationspolicynetwork. Forexample, theBill&MelindaGatesFoundationsupportstheALAtoincreaselibraries’participationin theE-rateprogram. In2006, theGatesFoundationawardedtheOITPof theALA$375,000; thegrantwillhelp theOITPdevelopand test a trainingandsupportprogramforstate libraryE-ratecoordinators(BillandGatesFoundationwebsite). However,high-tech industrieswerestill lessactivesupporters in theFCCrulemakingprocessin1996andearly1997,althoughtheydidnotopposetheprogram(InterviewwithBradley,2006.3.1,Hundt,2000,195).

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Conclusion

WhatarethedifferencesbetweentheAmericancaseandtheJapaneseone?InJapan,theMinistryofInternalAffairsandCommunications(MIC)hasformedaStudyGroupfortheFutureVisionoftheUniversalServiceSystem.Onlythreegroupsoutof sixteen that filedpubliccommentsonMarch2,2007 regardingthisstudygroupwerenot telecommunicationsserviceproviders(MIC,website).Disabilitiesgroupssuchas theJapaneseFederationof theDeafandaconsumergroupcalledShufurenfiledpubliccommentsontheuniversalservicedebate.Theformerwantedadebateon theuniversalaccessibilityof relayservicesand thelatterwanted toreformtheuniversalservicesystembecause thecurrentsystemcollectsauniversalservicefeefromallend-users.TheMICalsocollectedpubliccommentsfortheReportontheFutureUniversalServiceVisionfromOctober5toNovember5,2007(MIC,website). Atotalof14publiccommentswerefiled,butnoneof themwere filedbycitizengroups,educationgroups,orconsumergroups.MostofthemwerefiledbytelecommunicationscompaniessuchasNTTDocomoandKDDI. TheexceptionwasonefiledbyNipponKeidanren(JapanBusinessFederation;acomprehensiveeconomicorganization). Ofcourse, thereisadifferencebetweenpoliticalinstitutionsintheU.S.andJapan.However,fromthesestatistics, itappears that thevoicefromnon-telecommunicationsgroupsinJapanregardinguniversalserviceismuchweakerthanintheU.S.

Asexplainedabove,intheU.S.,therearediverseconstituenciesonuniversalservicepolicy. Moreover,mostarenewparticipants in the telecommunicationspolicynetworkalthoughtheyhavebeenveryactivepoliticalactorsinotherpolicyareas.Especially,educationgroupsandtheALAhavemobilizedalargegrassrootsmovement,cooperatingwithcommunitybasedorganizationsaswellasruralhealthcareproviders. Wecansee thispoliticalactivitynotonlyon the federal levelbutalsoinsomestates. InCalifornia, theCaliforniaPublicUtilityCommission(CPUC)establishedtheCaliforniaTeleconnectFund(CTF)byDecision96-10-066onOctober25,1996.TheCPUCdecisionwasmandatedbytheFCCperspectiveon expanded universal service under theTelecommunicationsAct of 1996(CPUCwebsite). Sincethen,schoolsandlibrariesaswellascommunitybasedorganizationsandruralhealthcareprovidershavehadfrequentcontactwith theCPUC. Theyattendadvisorycommitteemeetingsof theCTFasrepresentativesfrom theirorganizationsanddebatewhatkindofnew technology shouldbeincorporatedintoCTFprograms.

Ofcourse,notallAmericansknowthattheyarechargedforuniversalservicefeesandtheissuemaynotbeaspopularasenvironmentalpolicy(suchaswaterpollution)or theIraqWar. Nevertheless, thenumberofgroupsthatfiledpubliccommentsputintoreliefthepaucityofparticipantsintheuniversalservicepolicydebateinJapan.Inconclusion,itisveryimportantthatadiverserangeofinterestgroupsaffectthesubstanceofuniversalservicepolicyintheU.S. InJapan,it is

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easytosaythatweshouldavoidexpandingtheuniversalservicefundlikeintheU.S. However,before that,wemayneed to thinkabout thereasons thatcausenationaldifferencesinthedebate. ConsideringthemarketsituationandpoliticalinfrastructureisnotsufficienttocomparetheJapanesepolicy-makingprocesswiththeAmericanone.Weshouldpaymoreattentiontothefactthatthereisadiverseconstituencyandthat thevoicesfromnon-telecommunicationsserviceprovidersarequiteimportantinthepolicydebateintheU.S. Thenewgroupscausemorecomplicated interest antagonism,but they arevital to the current expandeduniversalservicesystemintheU.S.

Lastly, itshouldbenotedthatthisstudyhasexaminedmostlytheAmericanuniversal servicepolicyprocess. The lackofanalysison theJapanesepolicyprocessoracomparativestudyofpolitical institutionsmeans that Iamnotyetcertainthat thetelecommunicationspolicynetworktransformationintheU.S. isthemostimportantfactorforthedifferencesinthepolicydebatewiththeJapanesecase. Nevertheless, this studydoessuggest the importanceofpolicynetworkconvergencewithintheuniversalservicepolicydebateintheU.S.

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REFERENCES

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BERRY,JefferyM.&WILCOX,Clyde(2007).The Interest Group Society, (4thed.),NewYork:PearsonLongman.

BERRY, JefferyM.(1997).The Interest Group Society (3rd ed.).NewYork:Longman.

BILL & MELINDA GATES FOUNDATION, (Released on November 20,2006).〔http://www.gatesfoundation.org/UnitedStates/USLibraryProgram/Announcements/Announce-061120.html〕

CIGLER,AllanJ.&LOOMIS,BurdettA.(2002).Interest Group Politics(6thed.).Washington,D.C.:CQPress.

CALIFORNIATELECONNECTFUND,(lastaccessedonOctober20,2007).〔http://www.cpuc.ca.gov/static/telco/public+programs/ctflist.htm〕

DRAKE,WilliamJ.(1995).The New Information Infrastructure Strategies for U.S. Policy,Washington,D.C.:BrookingsInstitutePress.

FEDERALCOMMUNICATIONSCOMMISSION(FCC),“UniversalService,”(last accessed on October 20, 2007).〔http://www.fcc.gov/wcb/tapd/universal_service/〕

HECLO,Hugh(1978).“IssueNetworksand theExecutiveEstablishment”, inKING,Anthony(ed.),The New American Political System,Washington,D.C.:AmericanEnterpriseInstitute..

HULA, KevinW. (1999).Lobbying Together: Interest Group Coalitions in Legislative Politics,Washington,D.C.:GeorgetownUniversityPress.

HUNDT,ReedE.(2000).You Say You Want a Revolution,NewHavenandLondon:YaleUniversityPress.

INTERVIEW with BRADLEY, Lynne E., Director, Office of GovernmentRelations,AmericanLibraryAssociation,onMarch1,2006.

INTERVIEWwithGATTUSO,JamesL.,SeniorResearchFellowonRegulatoryPolicy,TheHeritageFoundation,onNovember8,2005.

INTERVIEWwithKUSLERMary,LegislativeSpecialist,AmericanAssociationofSchoolAdministrators,onSeptember2,2003.

INTERVIEWwithMCDONALD,George,VicePresidentofSchoolsandLibraries,UniversalServiceAdministrativeCompany,onNovember15,2004.

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KIYOHARAShoko(2007).“GendaiAmericaniokeruTelecomSeisakutoSeisakuNetworknoHenyo”〔TelecommunicationsPolicy in theCurrentAmericaandtheTransformationofthePolicyNetwork〕DissertationatKeioGraduateSchoolofLaw.

KUBOFumiaki(1997).“GendaiAmerikaSeiji toKokyoriekiKankyohogowomeguruSeijikatei〔CurrentAmericanPoliticsandPublicInterest:PoliticalProcessonEnvironmentalProtection〕”,Tokyo:UniversityofTokyoPress.

MINISTRY OF INTERNALAFFAIRSAND COMMUNICATIONS (MIC),JapaneseUniversalService,(lastaccessedonOctober20,2007).〔http://www.soumu.go.jp/joho_tsusin/universalservice/index.html〕.

MIC,aReportof theJapaneseGovernmentStudyGrouponUniversalServicefor theFuture (ReleasedonOctober2,2007),〔http://www.soumu.go.jp/joho_tsusin/policyreports/chousa/universal_service/pdf/071002_2_si1.pdf〕

MIC,NewsRelease for the JapaneseGovernmentStudyGrouponUniversalServicefortheFuture(ReleasedonMarch6,2007,andNovember8,2007),〔http://www.soumu.go.jp/s-news/2007/070306_1.html〕〔http://www.soumu.go.jp/s-news/2007/071108_2.html〕

Public Interest Profiles,1992-1993,1996-1997,2001-2002,CQPress.

SALISBURY,RobertH.(1992).Interests and Institutions: Substance and Structure in American Politics,Pittsburgh:UniversityofPittsburghPress.

SUNADA Ichiro (2000). “Dai 3 Sho Renposei Chihojichi Rippoukatei —Shakaihosho Fukushi wo meguru SotenTairitsu no Henka〔Chapter 3Federalism,LocalGovernance,LegislativeProcess—TransformationofIssueConflictonSocialSecurityWelfare〕”,Tokyo:UniversityofTokyoPress.

TRUMAN,DavidB.(1971).The Governmental Process: Political Interests and Public Opinion second edition,NewYork:AlfredaKnopf.

UNIVERSALSERVICEADDMINISTRSTIVCOMPANY(USAC),(lastaccessedonOctober18,2007).〔http://www.usac.org/about/usac/usac-corporate-history.aspx〕


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Challenges Facing the Cable Television (CATV) Industry in an Effort to Create Survival Business Models:

Region-based and Region-expansion Business Strategies

and Government Assistance Policies

by Sayaka SHIOTANI*

Introduction

Thispaper exploreswhether theCATVbusinesseswhichhave enjoyedgovernmentalprotection todatewillplaya roleaspartof the informationandcommunicationinfrastructureintheageofmultimedia.Thispaperalsoexamineswhethertheexpansionmodelandregion-basedservicesaretherightstrategiesfortheCATVindustryfor itssurvival,andwhethergovernmentalassistancewouldlead toaviabledevelopmentof the industry. These issueswillbeexaminedindetailbelow.

Therearefewprecedingempirical researchpaperson thissubject,besidesJitsuzumi&Nakamura(1999&2003).Otherresearchpapershavetoucheduponthemergingofthebroadcastingandtelecommunications,thefiercelycompetitiveentryfromtelecommunicationbusinesses,orsupportsystems,butnot indetail.Theauthorand thegroup involved isnowconductingquantitativeempiricalanalysisonthemanagementpolicy,andwilldiscussthemanagementpolicyandthegovernmentsupport systemfurther.Asa first step, thispaperwill recountthe recent trendsaboutdigitalizationand themergingof thebroadcastingandtelecommunications,andconductqualitativeanalysisontheneedforanexpansionstrategyand thedirection inwhich thegovernmentalsupportsystemshouldbeheaded.

Overview of the CATV Industry

Japan’sCATVindustryhasdevelopedbasedonsuchabusinessmodelasretransmissionof traditionalTVcompanies’ terrestrialwaves toeachhouseholdthroughcables.Due to its role retransmitting terrestrialwaves toareaswhere

*SayakaSHIOTANIisanassistantprofessorintheCollegeofBusinessManagement,J.F.OberlinUniversity.

Author’sNote:Thispaper isapartofstudyunder the“21COEJointProgramofEconomics-Business&Commerce,KeioUniversity”.TheauthorisparticularlygratefulforcooperationbythemembersofthePublicPolicyGroupoftheprogram.

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peoplehavedifficulty inreceivingairwavesdirectly,CATVhasenjoyedpublicassistanceincludingtheestablishmentofaretransmissionnetworkwhichrequiredmassiveinitialinvestment,assistanceforthemeasuresforaddressingthedifficultyof receivingairwavesandbroadcastingservices,andpreferential tax treatmentfromcentralandlocalgovernments.Inaddition,threequartersofCATVoperatorsaremixedpublic-privateentities.Thisshowsthat theCATVindustrydependsongovernmentalsupportsubstantially.ThisalsoindicatesthatCATVbusinessestendtotaketheformofmixedpublic-privateentityinordertoreceivepublicassistance.

ThebackgroundhasbroughtaboutthesituationwheremorethansixtypercentofCATVoperators registeraccumulated losses,whichhighlightsCATV’shighdependencyonpublicassistance,while80percentofCATVoperators registerannualprofitsinrecentyears(SeeTable1).AmongCATVoperators,thereremainsagreatgapintheirsize,andtheirdependencyratioongovernmentalmeasures.

Table 1: Financial Situation of CATV Operators

FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005

Numberofoperators 311 317 314 314 312 310 311

Numberofoperators

registeringprofitina

fiscalyear

196

(63.0%)

201

(63.4%)

216

(68.8%)

242

(77.1%)

250

(80.1%)

251

(81.0%)

245

(78.8%)

Numberofoperators

registering

accumulateddeficits

236

(75.9%)

233

(73.5%)

225

(71.7%)

214

(68.2%)

200

(64.1%)

183

(59.0%)n.a

Source:Preparedbasedondatafrom“TheReportby theDiv.ofRegionalBroadcastingServices,BureauofInformationandCommunicationPolicy,theMinistryofInternalAffairsandCommunications”(2004-2007).

CATV subscribers have increased in number in recent years. At theendof the fiscalyear2006, thenumberofCATVsubscribers reached20.63million:an increaseof7.7percentover theprevious fiscalyear1.Against thatbackground,optimistsarguethat“CATVwillplayaroleasan informationandtelecommunicationinfrastructureinthemultimediaage”2,atransformationfromitscurrentroleasinfrastructurewhichprovidesatwo-way,high-speed,large-volumeaccessnetworktoeachhouseholdatalowcost.Iwillexaminebelowwhethersuchaviewshouldholdinreality.

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Figure 1: Number of CATV Operators According to Capital Size (Among 201 Operators)

Source:preparedbasedon“TheReportbytheStudyGrouponCATV”(2004).

Rapid Change in the Environment Surrounding the CATV Industry

Changes in the Market Environment

Increased Competition for CATVTheCATV industry isundergoinga rapidchange in its environment. In

the areaofbroadcasting, satellitedigitalbroadcastingand terrestrialdigitalbroadcastingasmulti-channelbroadcastingmediaareexpanding.Inaddition,gas,electricalorrailroadoperatorswhichhavetheirowntracknetworksareplanningtoentertheCATVindustry3. LawConcerningBroadcastonTelecommunicationsService,whichhasbeenineffectsince2002,providesanopportunityforoperatorswhichdonotowntransmissioninfrastructuretoengageinbroadcasting,makinguseoftheexistinginfrastructureoftelecommunicationsoperators.Italsoprovidesanopportunityfortelecommunicationsoperatorstoengageinbroadcastingservices.Sincethen,telecommunicationsoperatorshavestartedthetransmissionofimages,makinguseof IP technology throughFTTHorADSL(broadbandbroadcastingservices)4.

It is increasingly important for themanagementof theCATVindustry toexpandthetransmissioninfrastructureasmuchaspossibleinanefforttoadaptitselftothecompetitiveenvironment.Thechoiceiswhethertousehybridfiber-copper(HFC),asanextensionoftheirownexistingtransmissionnetworks,orwhethertorentFTTHwhichelectronic,railroad,gas,ortelecommunicationcompaniessuchasNTThavealreadyinstalled.WhiletheirownindividualinvestmentinHFCcouldbeburdensomeforsmall-sizeoperators,theexistingcharacteristicsofCATV,suchasclosednetworkingandtwo-waycommunicationswouldbemaintained.Ontheotherhand,while theuseofFTTHwouldleadtolessexpensefor infrastructure

30

81

32 35

0102030405060708090

Less than \100million

No Less than\100 million to

\1 billlion

No Less than \1billion to \2

billlion

No Less than \2billion

Number of Operators

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investmentandmaintenancefeesforCATVoperators,itwouldbedifficulttoholdontotheexistingCATVbusinessmodel,i.e.retransmissionofbroadcastingtothelimitedareathroughtheirowntransmissionnetwork..

CATV’s Entry into the Communications FieldWhenbroadbandservicesinitiallystartedinJapan, theprospectsforCATV

wereconsideredbrightdue to itspotentialasan Internetprovider through theexisting transmission network, and as a multi-purpose player that bundledtelephone,dataandvideoservices.However,thenumberofInternetusersthroughCATVhasstagnatedinrecentyears.Attheendofthefiscalyear2006,thenumberofCATVInternetuserswas385million.ThenumberofADSLnetworksubscriberssurpassed thatofCATVin2001.The increaseratioofsubscribers ishigher inFTTHthanCATV;manyareswitchingawayfromtheCATVInternettoFTTH5.

Somereasonscanbecitedhere.First,CATVoperatorshaveadisadvantageintheirnetworkingcapabilitiesduetotherelativelysmallbusinesssizeascomparedwith thatof the Internetproviders.Second,majorproviders are conductingenergeticsalespromotionsinanefforttoexpandADSLsubscribers.Third,CATVoperatorshavenotchosenapolicyofallowingusers tohaveanoptiononlyfortheInternet.Fourth,CATVoperatorshavenotbeenabletoofferthesamelevelofsoftwareprograms,ascomparedwiththeInternetproviders.Fifth,thespeedoftheexistingCATVnetworkis30Mbps,whichisslowerthanthatofFTTH’s100Mbps.

Inaddition,CATVoperatorshaveadisadvantage inIP telephoneservices,as longasCATVuses theclosedexistingregionalHFCnetwork,since its freetelephonearea is limited inscope.TheprospectofCATV’sIP telephone isnotbright,since its limitedscopeoffreeservicesarenotattractiveforsubscribers.Ontheotherhand,IP telephoneservices thoroughADSLandFTTHhavegreatadvantagesover those throughCATV,since theycanofferawiderareaforfreetelephoneservicesduetothenation-widenetwork.

Alltheabovesuggestthat,inorderforregion-basedCATVoperatorstogainaddedvalue,itwouldbeessentialforthemtohaveanation-widenetworkthroughbusinesspartnerships.

Digitalization of Analog Terrestrial TV ServicesThereappearstobesomeadverseeffectsthatthedigitalizationofterrestrial

TVservicesmaycausetoCATVoperators.Whiletheeffectswillnotbeclearuntilitsactualdevelopment, it isoftensaidthatterrestrialdigitalbroadcastingservicesmayhaveadvantagesinaddressingthedifficultyofairwavetransmission.Ifthatisthecase,therewouldbemorelikelihoodthattheareasnowhavingdifficultyinclearreceptionof terrestrialanalogTVairwavescouldreceiveclearairwavesdirectly.ThecostsofaddressingthedifficultyinreceptionofTVairwaves,which,inturn,haveaccountedfortheCATVoperators’revenuesinlargepart,mightbeaffected

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ifamajorityofCATVviewersintheregionswheretheyfacedifficultyinreceivingterrestrialairwavewouldswitch todirectdigitalizedbroadcastingservices. Inaddition,sincethedigitalizationmakesmoremulti-channeledbroadcastingservicespossiblethannowavailable,therewouldbenoincentiveforconsumerstocontinueto subscribea set salesof20channeledbroadcasting serviceswhichCATVoperatorssupplytoday.Insum,thedigitalizationofterrestrialTVservicescouldresultinfundamentallyunravelingthebasisforCATVoperators’businessmodeltodate,i.e.,theretransmissionofterrestrialbroadcastingservices.

Second, thedigitalizationof terrestrialTVmay trigger thequestionas towhether thesameruleof theanaloguebroadcastingshouldapply toCATVinsuchareasasretransmission6. Infact,aquestionarisesas towhether terrestrialTVstationswhichprovideCATVwithTVcontents shouldallowdigitalizedtransmission tobe transformed intoanalogue transmission in theareaof theiraffiliatedregionalbroadcastingservices.Whileanalogueretransmissionwouldneedadditionalinvestment,itwouldnotbeabletooffersubscribersdigitalTV’saddedservices,andthereforerunscountertoapolicyofpromotedigitalization.Thus,inrecentyears, the terrestrialTVstationshavedemandedapass-through7system,whichdoesnotallowanychangeindigitalizedretransmissionbyCATVoperators.Ontheotherhand,underapass-throughsystem,thepossibilityarisesastowhetherCATVoperatorswouldnotbeable tocollect feesfromsubscribers throughtheexistingset-topboxes,andthesubscriberswouldbemoreawareofthecostaccruedfromretransmissionofterrestrialbroadcasting8.

Need to Alleviate a Gap in Reception of TVWhileCATVhassofarplayedaroleofalleviatingthedifficultyfacedbya

regionintermsofclearreceptionofTVairwaves, thisroleiscomingtoanend.TheCATVindustry,whichhasenjoyedaprovisionofgovernmentalsubsidiesandassistanceinthenameofalleviatingagapinreceivingTVbroadcasting,needstoaddressitsdependentproclivityintheincreasinglycompetitivemarket.

Advantage of CATV in Doubt

Asthemarketenvironmentchanges, therearisesaquestionas towhethertheexistingadvantageofCATVwill remain intact. In thefollowing, the issuessurroundingthatquestionwillbeconsidered.

CATV’s Function of Two-way Information TransmissionThe major characteristic of CATV networks is to establish two way

informationnetworkswithbroadbandwhichcanbeutilizedforcommunicationandbroadcastingservices, throughstablecopper transmissionnetworks.Whileterrestrial broadcasting, broadcasting satellite and communications satellite

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serviceshavedifficultyinprovidingtwo-waycommunicationservices,CATVcanprovidevideo-on-demandservices9,on-lineshopping,on-the-householdwelfareservicesandtheeffectivedisseminationandfeedbackaboutregionalgovernmentalinformation in times of natural disaster, with its two-way communicationcapabilities.However,CATVoperatorswhichprovide individualbroadcastingserviceshavenotofferedcontentswhichutilize its two-waycommunicationcapabilities.Further,broadbandbroadcastingserviceswhichutilizeFTTHasatransmissionnetworkwhichpossessesstabletwo-waycommunicationcapabilitiescanbecomeaformidablecompetitorforCATV.

Existing Well-Established Transmission NetworksItisoftensaidthatCATVhasanadvantageinthatitemploysanexistingwell-

establishedtransmissionnetworksystem.Tobesure,theoretically,thebroadbandserviceswhichutilizeADSL,whichhas thesamecharacteristicsofemployingtheexistingnetwork,canprovide two-waycommunicationservices.However,unlikeFTTHnetwork, itcanhardlyprovidehighqualityTVimageofterrestrialbroadcasting,sinceitsnetworks, i.e., telephonelines,havea limitedwavelengthavailable, and are frequently interruptedbyotherpacketdata, due to its IPspecifications.

Ontheotherhand,sinceFTTHhasatwo-way,stableimagequality,CATVoperatorswhichdonotowntheexistingnetworkscouldjointhemarket,rentingtheFTTHnetworks. TheseCATVoperatorswhichdonotpossess theexistingnetworks,couldbeexempt fromcosts involving the infrastructureandhumanresourceinvestmenttoestablishandmaintaintheirowntransmissionnetworkanddeveloptheirowntechnicians.TheCATVoperators’advantageofowningtheirownexisting transmissionnetworkcouldbediminished,as theFTTHnetworksexpand.

Treatment of Network Security and CopyrightsInviewof thenetworksecurity, it isadvantageousforCATVoperators to

providesecurenetworks,employingclosedtransmissionnetworksthroughcoppercable.Therefore, thecontentownerswithcopyright can safelyprovide theircontents.Operatorsusing theirownfixednetworkssuchasCATVareallowedtodealwith copyright issues in a comprehensivemanner,while broadbandbroadcastingserviceoperatorsemployingtheIPmulti-castsystemneedtoacquirepermissionfromcopyrightholders individuallyprior to the transmission,sincesuchbroadbandservicesarecategorizedastelecommunicationservicesundertheCopyrightLaw.Thisisaverycumbersomeprocessforthesebroadbandproviders.Accordingly,unlikeeoT.V.,andOPCAS,whichprovidebroadcastingservicesbasedon theQAMsystemandobtainretransmissionagreementsbyseparatingimagetransmissionfromIPcommunication,broadcastingoperatorsusingtheIP

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multi-castsystemsuchasBBTVandFiber-PlusTV,cannotobtainretransmissionagreements from the terrestrialbroadcastingservicecompanies,and thereforeprovidea limitednumberofchannels,ascomparedwithCATVusingtheirownnetwork.Theabovepoint symbolizes that the issueof system remainsasanobstacle,evenif thegapbetweencommunicationandbroadcastingservicesarenarrowedtechnologically.

Ontheotherhand,aquestionarisesforCATVoperatorsastohowtheycanaddress the issueofdiluting theclosedenvironmentasoneof themajorCATVfeatures,astheyexpandtheirnetworks,inanefforttoengageintheInternetandIPtelephoneservices.Further,CATVoperatorsusingFTTHasaretransmissionnetworkcannotofferaclosedenvironment.Inotherwords,whileitisessentialforregion-basedCATVoperatorstomaintainclosednetworks,theymayfaceachoicewhetherornottheyshouldmaintainthenetworksoftheclosedenvironment,astheneedtoexpandthenetworksincreases.

Region-based TransmissionWhileCATV’s region-based characteristicswill bediscussed in detail

below, itcansafelybesaid thatCATVismostly transmittinggovernmentalandregional informationinaone-waydirection, thereforedoesnotutilizeitsuniquecharacteristicsoftwo-waytransmission.Theestablishmentofane-governmentore-regionalmunicipalityisunderprocesscenteringuponitscommunicationsbase.Itcanalsobepointedout that, inanemergencysuchasanearthquake,CATV’stransmissionnetworkcouldbefragile.Inaddition,asthemergeroflocalauthoritiesproceedsfurther, theremaybediscrepanciesbetweenthescopeofnewlymergedlocalauthoritiesandthatoftheexistingCATVbusinessarea.

Insum, inachangingenvironmentCATV’sadvantagessuchasowningitsowntransmissionnetworkareincreasinglyputinquestion,asthecommunicationsindustryexpands itspresence in theareaofbroadcastingunder the trendofmergersbetween thebroadcastingandcommunicationsbusinesses. Inaddition,intheforeseeablefuturedigitalizationmightfundamentallyunravelCATV’scorebusinessmodel,i.e.,retransmissionofterrestrialTVservices.Itmaybeundeniablethat,overtime,theenvironmentsurroundingCATVindustrywouldbeincreasinglyfierce.

On theotherhand,whileCATVstillhasanadvantageoverbroadcastingservicesunderthecopyrightsystem,otheradvantagessuchastwo-waytransmissionorpossessionofitsowntransmissionnetworkscouldbedilutedwithanexpansionofFTTHnetworks.Furthermore, theadvantageofestablishingasecurenetworkdue to itsclosednetworksystemcouldbecontradictory toanexpansionof itsnetworks.Also,theregion-basedtransmissionisnotsatisfactory.Overall,CATV’sadvantagesarenowindoubt.

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Evaluation of the Expansion Strategy and Region-based Strategy

Aswasdiscussedintheprevioussection,inafast-changingenvironmenttheCATVindustryis losingitsexistingadvantagesor isnot inapositiontoexploititspotential to the fullest.Presently, theCATVindustry is facingup to thesechallenges throughexpandingitsscopeof targetedareasandpromotingregion-basedcharacteristics further. In this section, the seeminglycontradictory twodirectionsofstrategies,i.e.,theexpansionofareasandthepromotionofitsregion-basedcharacteristicswillbeassessedinaqualitativemanner.It ishopedthatthisqualitativeapproachwillserveasabasisforfuturequantitativeapproach.

Assessment of Expansion Strategy

Inadequate Size of CATV BusinessIn order for the CATV industry to address today’s urgent issues, it is

imperative to expand itsbusiness size, in that itsmanagement resourcesareexceedinglyinadequateintermsofhuman,financial,andtechnologicalresources.These issues include thosesuchashowtopromote infrastructure investment topromotedigitalizationofterrestrialbroadcasting,howtocompetewithbroadbandbroadcastingservices,howtointroduceadvancedsecuritytechnology,andhowtoestablishatechnologydevelopmentsysteminordertoprovideadvancedservicessuchasPPV,VOD,disseminationof regionalgovernmental information,orelectroniccommercialtransactions.ItmayalsobebeneficialfortheCATVindustrytoexpanditsbusinesssizeinaneffort toconsolidateitscustomerbase, increasecommercialrevenues,andstrengthenitscontentprocurementcapabilitiesthroughincreasingitsbargainingpowerwithcontentproviders.

AccordingtoJitsuzumi&Nakamura(1999&2003)whichassessedCATV’sbusiness sizeand itsmanagementeffectiveness, it is estimated that themosteffective size for theCATV industry is thatof40,000 to200,000householdsubscribers10.Presently, theratioofCATVoperatorswhosesubscribersareover50,000outofall themembersof theJapanCATVAssociationismerely20%11.Accordingly,amajorityofoperatorsdonotreachtheoptimumbusinesssize.ThepromotionofexpandingbusinesssizeisstillconsideredtobeaneffectivebusinessstrategyinCATVindustry.

Various Forms of Expansion: Strengthening of Capital Relations (Merger) or that of Business Partnership

Inorder toachievenetworkexpansion,besides thebusinesssizeexpansionthroughstrengtheningcapitalrelations, thereisanapproachtopromotebusinesspartnershipthroughsuchmethodsasjointuseofheadendamongCATVoperators,mergerof receptiondevice infrastructureandanestablishmentofplatformformanagement,administration,surchargeandcertificationsystemsofCATV.While

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theremaybecaseswhere,inviewofmanagementstrategy,thepromotionofcapitalrelationsisconsideredtobeharmfultoCATV’sregion-basedcharacteristics,theremaybeotherswhere thesystematicaspectssuchaspublicsubsidies toCATVoperatorshavebeeninfluential.TheCATVindustry,whereitspermitisoriginallyissuedtoasingleoperatorinasingleadministrativearea,mayhavecaseswherethepublic-ownedCATVsystem,interventionbylocalauthorities,andpublicsupportsystemsadverselyaffecttheexpansionstrategy,eventhoughderegulationenablesCATVoperators toexpandtheir targetareaunderapermitsystem.While thereissuchanoperatorasZTVwhichmaterializeditsexpansionstrategyat thetimeofderegulation,amajorityofCATVoperatorsremainrelativelysmall-sized,andstayinasingleadministrativearea.This isreflectiveof thebackgroundaspectsdescribedabove.

Assessing CATV’s Role as a Region-based Media

Coordinating CATV’s Region-based Characteristics and its Expansion StrategyVariouseffortshavebeenunderway tocoordinateCATV’s twoseemingly

contradictoryfuturedirections:theregion-basedmarketsegmentationapproachandcomprehensiveexpansionapproach.Insomecases,CATV’sexpandednetworkhasbeenutilizedinorder topromoteregion-basedtransmissionfor locally initiatedcontents.Forexample,inOitaPrefecture,theideaof“networkingCATVoperators”hasbeenlaunchedinanefforttoshareimagedataamongCATVoperatorsandgiveastimulustotheregionthroughtransmittinglocallyproducedprogramstootherregionswithnetworking12. InTottoriPrefecture,ChukaiTV,withgovernmentalassistance,promotesitslocallyproducedprogramstoanationalaudiencethroughacommunicationsatellite13.InHokkaido,ObihiroCATVisformingapartnershipwithalocalnewspaper,itsparentcompany14.

Improving CATV’s Region-based Characteristics As a marketing strategy to improve relations with the region, CATV

operatorsneedtoenhancetheirroleasmedia tohelppromotetogethernessasaregionalcommunity throughregional informationtransmission.Besides the livebroadcastingoflocalJ-Leagueteamgamesandthatoflocaltournamentsofhighschoolbaseball,thereemergesuchprogramsaslocallifestyleinformationprogramsandlocalweatherforecastingservices.Insomecases, locallyinitiatedvoluntaryprogramsarebeingbroadcasted15.Further,CATVcanplayaninformationhubroleasaclearinghouseof local information, ifCATV’scharacteristicsasa two-waytransmissionmediaareutilized.Inparticular,CATVasa two-waytransmissionmediahasgreatpotential insuchwaysas: theestablishmentof in-househealthmanagement systems throughCATV in sanitary,welfare,medical fields; thepromotionof informationexchangesand life-longeducationby linkingvarious

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advancededucationalinstitutionsandresearchinstitutes;theexpeditedinformationdisseminationsystemincasesofnaturaldisasters;andthe industrialpromotionthroughpromotinggovernmental information.While it cannotbe safely saidthat theCATVhasmanaged toexploit its two-waytransmissioncapabilities inprovidingitscontents,itisindispensableforCATVtoofferregion-basedcontentsthrough fullyutilizing its two-way transmission capabilities, in an effort todistinguishitselffromothermediaorproviders.

Insummary,sinceCATVoperatorshavenotreachedtheiroptimumbusinesssize, thebusinessexpansion is still aneffectivemanagement strategy.CATVoperatorsneedtofaceuptochallengesofpromotingregion-basedcharacteristicsandexpandtheirnetworkandbusinessatthesametime.

Public Assistance to the CATV Industry

Governmentassistancehasplayedanimportantrole in theCATVindustry.In fact, inviewof thepublic interest that information andcommunicationsinfrastructure should be established, and that regional disparities shouldbe addressed includingareasofdifficult transmission, the central and localgovernmentshaveprovidedvariousformsofassistancetotheCATVindustry.

However,as theCATVindustry transforms itself towardsmoreexpansionandpromotionof itsregionalcharacter, theassistancepolicyshouldbechangedaswell.Subsidiestoprojectswherethereisnoparticularjustificationshouldnotbecontinued.Evenifthereisreasonablegroundforgovernmentalassistance,suchassistanceshouldnotberenderedtoCATVoperatorsinareaswherethenatureandscopeofsuchassistanceaddressthedifficultieswhichtheirmanagersthemselvesshouldberesponsiblefor.Suchassistancemayresult in inefficientmanagementandmisplacedmanagementstrategies.

Thischapterwillconsiderthemeritsanddemeritsofgovernmentalassistancepoliciesasafirststepindiscussionoftheassistancepolicies.Itishopedthatthisdeliberationwillpavethewayfortheforthcoming,specificrecommendations.

The State of Play

First, inregardto thepublicnatureofCATV,SpecificRateSupportGrantsareprovidedby theMinistryof InternalAffairsandCommunications to localauthorities inorder tomakeup for theexpensesofgovernmental informationprograms, basedon a judgment that programs such as livebroadcastingofparliamentarydeliberationsareintrinsicallypublicinnature.Inviewofalleviatingregionaldisparitiesinthebroadcastinginfrastructure,preferentialfinancialandtaxtreatmentareprovidedtoCATVoperatorsincludingmixedpublic-privateentities,by theMinistryof InternalAffairsandCommunications. Incaseswhere local

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authoritiesengageintheCATVbusinessthroughgeneralaccountbudgets,ratherthantheestablishmentofthemixedpublic-privateentities, theyaredesignatedas“aprojectforenhancingregionalinformationandcommunication”,andbondsforstimulatingtheregionaleconomyandforbudgetappropriationsareprovided.Inaddition,subsidiesaregranted to localauthoritiesandagriculturalcooperativesby thecentralgovernment(theMinistryofAgriculture,ForestryandFisheries)forthoseprojectsdesignatedas“aprojectforenhancingregionalinformationandcommunication”.

Figure 2: The Ratio of Government Support in the Capital of CATV Operators

Source:preparedbasedon“TheReportbytheStudyGrouponCATV”(2004).

Issues of Governmental Assistance System and the Directions for Reform

Thegovernmentalassistancesystemisoneofthemeasuresthatareavailabletothegovernmenttointerveneinthemarkettomakesurethatgoodsandservicesareprovidedbelowmarketprices.Thus,thereshouldbejustifiablereasonsforthegovernmenttointerveneinthemarketwithsubsidies.Duetothelimitedscopeofthispaper,detaileddeliberationsabouttheadequacyofthegovernmentalassistancewillbediscussedinotherpublications.Forthesedeliberations,twoaspectsoftheexternaleffectsandincomeredistributioneffectsshouldbementioned.

Asfortheexternaleffects,theremayberegionaldevelopmenteffects,whichmaybeconsideredascommonelementsinregionalinfrastructureindustriessuchascommunicationsandbroadcastingservices.Theseeffects,however,arecommonlyseeninbroadcastingandcommunicationsservices,andarenotuniquetoCATV,since, thereexistother services suchasCS,BSandbroadbandbroadcastingservices,today.

As to redistributioneffectsderiving from theuniversalnatureandscopeof services, since the measures for universal services in broadcasting and

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Less than 1%

1% to 10%

No less than

10% to 50%

No less than

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Number of Operators

No less than

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communicationsservicesareseennotonlyinCATVbutalsoinCS,BS,broadbandandothervariousbroadcastingservices,itwouldbedifficulttojustifysuchindirectincometransferswhichareonlyavailableforCATV,notequallyapplicabletootherservices.

Second, thecurrentgovernmentalassistancesystemhasaproblemthat theassistanceisbasicallylimitedtolocalauthoritiesandmixedpublic-privateentities.ThiswouldcreateabiasthattheCATVbusinessispronetotakeamanagerialformofpublicsector,andleadtoadecreasedmanagerialeffectivenessthroughthefixedformofCATVbusinessentities,andcreateadisincentiveagainstmergersandacquisitionstowardtheexpansionofCATVbusinesssize.ThereisnoparticularneedtolimitCATV-relatedsubsidiestothepublicsectors.Inotherfieldssuchasbusandrailroads,privateoperatorsarealsograntedsubsidies.

Third, there isaquestionwhether the individualCATV-relatedsubsidiessystemaccording togovernmental jurisdictionsuchas thatof theMinistryofInternalAffairsandCommunicationsand thatof theMinistryofAgriculture,Forestry andFisherieswould adversely affect comprehensive and effectiveassistance.

Fourth,underthecurrentgovernmentalassistancesystem,subsidiesandlow-interestloansmostlytaketheformofcapitalsubsidiesthatcanbeonlyapplicableto infrastructure investment.The subsidiesonly available for infrastructurecouldcreateabiastowardunnecessarilyredundantinfrastructureinvestmentandadverselyaffectoptimumresourceallocation.

Inviewof the above, there emerges aprospectivedirection for reform:achange toa systemwhere, insteadofministry-basedsubsidies,governmentsubsidiesshallbeincorporatedintotheRateSupportGrant,andlocalauthoritiescanselectthemostefficientoperatorsorservices.Inotherwords,itisimportanttoleavelocalauthoritieswithoptionstochoosehigh-speedcommunicationsservicesthat theyprefer includingCATV,andprovide thesortofassistance (includingpubicsubsidiesor taxpreferences) that isnecessary. Ina reformedsystem,anoptionutilizingsubsidiestopromotevillagerelocationsmaybeavailableforlocalauthoritiesintheireffortstotakestepstolowercosts.

Sucha reform,byenabling localauthorities toselectwhichmanagementformoroperatorstowhichtheyshouldprovideassistance,wouldeliminatebiaseddistributionsofsubsidiesaccordingtodifferentformsofmanagementofCATVoperatorsandinducemorecompetitionamongmediaandoperators.Ascompetitiongrowswithothercommunicationsoperators,itisabouttimeforCATVoperatorstostartitsownsoul-searchinginanefforttosurvivethroughself-helpeffort,insteadofstickingtothestatusquoanddependingongovernmentalassistance.

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Conclusion

ThequalitativeanalysisabovewasofferedregardingCATV’sstrategicagendaandtheassistancepolicytotheCATVindustry.Theauthorandtheauthor’sgroupintendtoshedmorelightontheseissuesthroughtheongoingresearch.SomeofthemostimportantissuesabouttheCATV’sforthcomingbusinessmodelinclude:furthersubstantiationontheexpansion-modelhypothesis throughhearingswithindividualCATVoperators andquantitative analysis on theirmanagement;proposalsformanagementstrategieswhichsynthesizetheseeminglycontradictorydirections, i.e., theexpansion-model strategyand region-basedapproach;andproposalsforspecificpublicassistancepoliciestowardstheCATVindustry.

Firstofall,asdigitalizationexpands, there isaneed toproceedwith thequantitativeanalysisontheeffectivenessoftheapproachtowardtheeconomyofscalethroughmergersandacquisitionsamongCATVoperators,takingintoaccountadevelopmentssinceJitsuzumi&Nakamura(2003)whichutilizeddatafrom1997.WhileacleardirectionisyettobeseenonquestionssuchashowfartheCATV’sexpansionshouldbepromoted,andwhethersuchanexpansionstrategyshouldbeconductedthroughthestrengtheningofcapital-to-capitalrelationssuchasmergersandacquisitions,orthealliancepartnershipshouldbepromotedbywayoffurtherrationalizationofoperations,thesequestionsaretobefurtherconsideredbasedonhearingswithindividualoperatorsandcorporations.

In addition, while the region-based approach is not a clearly definedconcept, it isdesirable that thisconceptbeclearlydelineated, ifpossible,basedon thequantitativeapproach.MSO’smanagementstrategyshouldbediscusseddistinctively,while, in thispaper, this strategy is referred toasapartof theexpansionstrategy.

Furthermore,thepublicassistancepolicyshouldbegivenfurtherconsiderationinanefforttoreviewthejustificationsofsuchanassistancepolicy,andthewaystoidentifypoliciesthatgiveincentivestomoreeffectivemanagementandtopreventthemisuseofpublic subsidies,basedon the realmanagementdata shouldbeexplored.

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NOTES

1.RegionalBroadcastingDivision, InformationandCommunicationsPolicyBureau(2007).Thenumberwouldbeincreasedto28.75millionhouseholds(a4.8%increaseoverthepreviousfiscalyear),withanadditionofhouseholdswhichsubscribeonlytoretransmissionofairwaves.

2.RegionalBroadcastingDivision, InformationandCommunicationsPolicyBureau(2002)

3.Forexample,TepcoCableTVbyTokyoGasCo.. 4.LawConcerningBroadcastonTelecommunicationsServiceenablesBBTV

basedonIPmulti-cast throughADSL,OpticplusTVbasedonIPmulticastwithFTTH,eoT.V.ofKansaiElectronicsCo.affiliatesbasedonQAMandOPCASofSkyPerfectTVaffiliatesbasedonQAM.Among thesemediaservices,eoT.V.andOPCASprovidesimilarservices toCATVin that theyretransmitterrestrialandsatellitebroadcasting.

5.AsofNovember,2003,24%ofCATVsubscribersswitchedfromCATVtoFTTH(MinistryofInternalAffairsandCommunications(2004)).

6.CableTelevision Broadcast Law (1972) introduced the retransmissionagreement system inaneffort to createanorder inwhich terrestrialTVservicesandCATVcoexist.Witharetransmissionagreementrequired,thelawaimedatpreventinganunauthorizedchangeinthecontentsofterrestrialTVservices.Ontheotherhand, incaseswhereCATVoperatorsarenotable toobtainaretransmissionagreementof terrestrialTVcompanies,accordingtoArticle13oftheCableTelevisionBroadcastLaw,thecompulsorysystemofarbitrationbytheMinisterofPostandCommunications(InternalAffairsandCommunications)wasintroducedinMay,1986.

7.“Passthrough”isasystemwherebroadcastsignalsreceivedbyairwavescantransmit to theCATVsystemthesamebroadcastsignals,with thesameorchangedwavelengths.

8.Mori(2004). 9.Atthesametime,Satellite & CATV,March2005,pointsout that thereisno

successfulbusinessmodelforVOD,initsspecialeditiontitled“StartingVODServices”.

10.Jitsuzumi&Nakamura(1999&2003).11.StudyGrouponCATV(2004).12.Handa(2004).13.“Satellite andCommunicationsCo.” is amixedpublic-private company

establishedbyChukaiTV.Itwasestablishedwithinitialcapitalof￥31millionin1998,with thehelpofgovernment funding. It received￥30million inloansasaresultofitsdesignationunderthePromotionofCreativeActivitiesofTottoriPrefecture,and￥390millioninloansforsubsidiesunderaschemeofthePromotionofEstablishingInfrastructureofAdvancedApplication. In

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addition,itscapitalwasincreasedto￥230million,sinceitreceivedadditionalfundingfromtheTelecommunicationsVentureInvestmentAssociation,andasaresultitwasdesignatedasanapplicablenewenterpriseunderthe“PromotionofDevelopingSpecificCommunicationandBroadcastingServicesLaw”bytheMinistryofInternalAffairsandCommunications.Withthehelpofthissupport,thecompanyaimsatnation-widebroadcastingandnetworking(“Satellite and CATV ”,January,2005,pp.40-41).

14.“Satellite and CATV ”,August,2004,pp.53-57.15.ChukaiTVcaseisagoodexample(Takahashi(2004)).

REFERENCES

CHUJO,Ushio (2005), “DenkiTsushinWaMohayaKoeki JigyoDewaNai(TelecommunicationIndustryisNoLongerPublicUtilities)”,The Economist,No.83-5.

HOUSOUJOURNAL(2004),Nihon No CATV 2004 (CATV in Japan2004),HousouJounnalCo..

INFOCOMRESEARCHINSTITUTE(2004),Information and Communications Outlook 2005,NTTPublishingCo..

IZAWA, Hideyuki (2001) CATV Wa Nekko Work Business (CATV is BasicBusiness),CreativeBusinessAgency.

JAPANCATVASSOCIATION(2004),Gyokai Vision To Senryaku Ni Tsuite(CATVIndustryVisionanditsStrategy).

JITSUZUMI,TandA.Nakamura(2003),”MeasuringDEAEfficiency inCableTelevisionNetworkFacilities”,Socio-Economic Planning Sciences,Vol37(1).

JITSUZUMI,TandA.Nakamura (1999), “Analysison theManagement andFinancialSituationofCATVOperators”,Paperdistributedat theeleventhmeetingoftheStudyGroupofthePostalResearchInstitute.

MINISTRYOFINTERNALAFFAIRSANDCOMMUNICATION(2004-2005),White Paper on Information and Communication, FY 2005 and FY2004.

MINISTRYOFINTERNALAFFAIRSANDCOMMUNICATION,InformationandCommunicationPolicyBureau (2002),Report of the Study Group on CATV in the Broadband Age.

MINISTRYOFINTERNALAFFAIRSANDCOMMUNICATION,Informationand Communication Policy Bureau, Regional Broadcasting Division(2004-2007),Outlook for CATV (FY 2004-2007).

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MORI,Tadashi(2004),”CATVNoBusinessModelGaKawaru(ChangingCATVBusinessModel)”,B-maga.

OITACABLETELECOMCO.MANAGEMENTBOARD(2004),OCT Marketing Senryaku Ni Tsuite(OCTMarketingStrategy).

SPACECABLENETADVISORYCOUNCIL,MinistryofPostandCommunications(1988),CATV Shin Jidai Sengen(DeclarationofCATVNewAge),Gyosei.

STUDYGROUPONCATV(2004),Report on Study Group on CATV.

SUGAYA,Minoru(2007)“DigitalContentsJidaiNoMediaSeisaku(MediaPolicyintheAgeofDigitalContents)”,ShukunamiandSugayaed.,Transnational Jidai No Digital Contents (DigitalContentsintheTransnationalAge),KeioUniv.Press.

SUGAYA,Minoru(2001)“CATVToTsushin(CATVandTelecommunication)”,Joho Network No Horitsu Jitsumu,No.16.

TAKAHASHI,Takayuki (2004),“CATVWaShiminNoMedia–ChiikiMediaContentsNoShimei(CATVisCitizen’sMedia–MissionforRegionalMediaContents)”,Chuo Hyoron,No.248.

Institute for Media and Communications Research

KEIO UNIVERSITY

Keio Communication ReviewNo.30　March 2008

www.mediacom.keio.ac.jp/english/publication.html

Contents

AConsiderationofMedia-Nationalism:

ACaseStudyofJapanaftertheSecondWorldWar

YutakaOISHI..................................................................................................... 5

TheRelationshipbetweenRentalandSale

intheJapaneseVideoMarket

SumikoASAI................................................................................................... 19

AStudyofCurrentTelecommunicationsPolicy-makingintheU.S.:

TheCaseofUniversalService,

incomparisonwiththeJapanesecase

ShokoKIYOHARA.......................................................................................... 31

ChallengesFacingtheCableTelevision(CATV)Industry

inanEfforttoCreateSurvivalBusinessModels:

Region-basedandRegion-expansionBusinessStrategies

andGovernmentAssistancePolicies

SayakaSHIOTANI........................................................................................... 49

keio communication review - 慶應義塾大学メディア ... communication review no. 30, 2008 pb...

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