One might think the telecommunications market an obvious place for the state to be swept away by the swift tides of transactions and information washing across borders. Telecommunications firms have become very active internationally and telecommunications services themselves provide instantaneous and rich intercourse among nations. Markets that were until recently dominated by stodgy telecommunications monopolies are now convulsed in international mergers, hostile takeovers, and falling prices. Behind the dizzyingly rapid business changes, however, lies an enormous stock of wires and switches. Since duplicating this infrastructure is extraordinarily expensive, competition takes place in large part because governments have decided to use regulation to force incumbent telecommunications providers to rent their networks to new entrants. Because making rules to decide how and at what prices these networks should be shared is complicated and must change constantly as technologies and costs change, there is great scope for policy differences among states.

The US and the European Union have moved towards converging on strongly pro-competitive telecommunications policies in very recent years, though the process by which they arrived at these policies was quite different (see Levi-Faur, this volume). But Japan has maintained policies that are considerably less pro-competition, and this chapter will consider the reasons why the difference has persisted.

Certainly, both the US and Japan have experienced great change in their telecommunications policies.