Assessment of Bilateral Telecommunications Agreements With Japan

GAO reviewed the implementation of two bilateral telecommunications agreements between the United States and Japan. The U.S.-Japan Agreement on Nippon Telephone and Telegraph Public Corporation (NTT) Procurement covers procurement by NTT, a Japanese Government enterprise that is responsible for developing Japan's domestic telecommunications system, and commits NTT to treat bids from U.S. and Japanese firms equally. The Understanding on Interconnect Market formally gives U.S. firms access to the Japanese market for equipment to be connected into the NTT system.

GAO found that sales generated by the NTT Agreement have not met U.S. Government expectations. Most American business officials interviewed said that these low sales do not necessarily mean that the agreement cannot succeed, pointing out that a firm entering a foreign telecommunications market generally needs at least 3 years before making major sales. The protracted procurement process used by NTT contributes to the delay. In addition, NTT officials noted that they have had difficulty implementing the procurement procedures called for by the agreement. GAO also found that there is an unrealistic expectation on the part of American firms that the pressure associated with the agreement would facilitate sales. Most officials interviewed agreed that it would be premature to judge the agreement a failure. U.S. firms have tried to take advantage of the Interconnect Market Understanding, under which NTT reviews American-made interconnect equipment and approves acceptable equipment for purchase by NTT customers. As of April 1983, NTT had approved all requests to sell or install such equipment in Japan. American suppliers contacted by GAO believed that NTT is acting in good faith with respect to approval of American-made equipment.