The Relationship Between SaaS Services with Chat and Newsletter Features and the Japanese Telecommunications Business Act

In the past, software was primarily sold in packages such as CD-ROMs, but recently, there has been a rapid proliferation of SaaS (Software as a Service), which provides software as a cloud service.

With SaaS, clients can easily use the software they need, when they need it, and to the extent they need it.

Furthermore, since there is no need to install software on a computer, it is easy to access data on the cloud from another device in a location other than the office, as long as an internet environment is available.

For this reason, cloud sales support tools, which are often used from outside the office, are notably provided as SaaS. However, if communication tools such as chat functions and newsletter functions are incorporated into SaaS, they may be subject to the Japanese Telecommunications Business Act.

Therefore, we will explain when registration or notification under the Japanese Telecommunications Business Act is required for businesses that develop and sell cloud sales support tools.

Overview of the Japanese Telecommunications Business Act

The Japanese Telecommunications Business Act was enacted in April 1985 (Showa 60). This law was established to regulate the telecommunications industry following the introduction of competition principles due to the privatization of the former Nippon Telegraph and Telephone Public Corporation (the establishment of NTT). The law aims to protect the secrecy of communications and ensure the security of important communications.

Under the Japanese Telecommunications Business Act, anyone intending to engage in a “telecommunications business” (Article 2, Paragraph 4) must register (Article 9) or notify (Article 16, Paragraph 1) and become a “telecommunications carrier”.

Therefore, to determine whether the provision of cloud support tools offered as SaaS is subject to the Japanese Telecommunications Business Act, it is necessary to consider whether it falls under the “telecommunications business”.

What is a “Telecommunications Business”

A “telecommunications business” refers to a business that provides “telecommunications services” in response to the needs of others (excluding businesses related to broadcasting station facilities supply services defined in Article 118, Paragraph 1 of the Broadcasting Act (Law No. 132 of 1950 (Showa 25)) (Article 2, Paragraph 4).

Therefore, to determine whether the Japanese Telecommunications Business Act applies, it is necessary to consider whether the following two requirements are met:

• Whether telecommunications services are provided in response to the needs of others (Requirement 1)
• Whether it is a business (Requirement 2)

What is “Telecommunications Service” (Requirement 1)

“Telecommunications service”, which is included in the definition of “telecommunications business”, refers to “mediating the communications of others using telecommunications equipment, and providing telecommunications equipment for the communications of others” (Article 2, Paragraph 3).

Here, “others” refers to those who are considered to have an independent personality in social common sense other than oneself. For example, even if Corporation A and Corporation B are in a parent-subsidiary relationship, if they are separate legal entities, Corporation A and Corporation B are considered “others”.

Also, “communications of others” refers to communications other than one’s own, including communications between oneself and others. For example, if A communicates with B using telecommunications equipment installed by A, it is considered that A is providing the equipment for the communications of B, who is “another person”.

Whether Telecommunications Services are Provided in Response to the “Needs of Others” (Requirement 1)

If telecommunications services are provided for “one’s own needs”, it does not meet Requirement 1. On the other hand, if services are provided to “others”, it is considered that telecommunications services are provided in response to the “needs of others”.

Whether it can be considered “others” is determined by whether the legal personality is different, as explained above.

Whether it is a “Business” (Requirement 2)

A “business” refers to the proactive and continuous execution of the same type of action with a subjective and positive intention. Therefore, it is considered that the following cases do not fall under the “business”.

• Actions taken in an emergency or temporarily in an extraordinary situation
• Actions taken temporarily
• Actions taken in response to the legal rights of the user by the provider

Also, providing telecommunications services in conjunction with services other than telecommunications services is not included in the “business”. However, whether it can be considered as an accompanying service is judged substantially based on whether the provision of telecommunications services can be recognized as an independent business.

Exclusion from the Application of the Japanese Telecommunications Business Act

Even if Requirements 1 and 2 are met and it falls under the “telecommunications business”, if it falls under any of the items in Article 164, Paragraph 1, Items 1 to 3, the Japanese Telecommunications Business Act does not apply, and registration or notification is not required. Specifically, it is as follows.

Article 164

This Act shall not apply to the telecommunications businesses listed below.

1. Telecommunications business that provides telecommunications services exclusively to one person (excluding telecommunications services for the use of the telecommunications business of the said one person when the said one person is a telecommunications carrier).

2. Telecommunications business that provides telecommunications services by telecommunications equipment, part of which is installed in the same premises (including areas equivalent thereto) or the same building as the other part, or telecommunications equipment of a scale that does not meet the standards prescribed by the Ministry of Internal Affairs and Communications.

3. Telecommunications business that provides telecommunications services other than telecommunications services that mediate the communications of others using telecommunications equipment (excluding domain name telecommunications services) without installing telecommunications line facilities.

Japanese Telecommunications Business Act

Among these, “mediating the communications of others” in Article 164, Item 3, refers to accepting the request of others, transmitting and exchanging information without changing its content, and completing it by intermediating or brokering communications between remote parties.

Consideration of Each Function of Cloud Sales Support Tools

Based on the interpretation of the Japanese Telecommunications Business Law, we will examine specific cases. Here, we would like to consider whether the comment and newsletter functions, which are often used as features of cloud sales support tools, are subject to the Japanese Telecommunications Business Law.

Does the Comment Function Fall Under the Japanese Telecommunications Business Law?

If the provider of the cloud sales support tool is different from the actual user of the service, the client company introducing the service is considered a ‘third party’. Therefore, in such cases, providing a cloud sales support tool equipped with a comment function can be said to be ‘providing for the use of third-party communication’, and it falls under ‘telecommunication services’.

Furthermore, as long as you are providing SaaS to others as part of your regular business and receiving compensation, there should be little dispute that it falls under ‘business’.

Therefore, if a comment function is included in the cloud sales support tool by SaaS, it is basically considered a ‘telecommunications business’.

However, in the comment function, if the ‘user’ who can comment is limited to those inside the company that introduced the service (no interaction with external parties such as sales representatives), it cannot be said to ‘mediate third-party communication’, and it may fall under the exclusion (item 3).

Does the Newsletter Function Fall Under the Japanese Telecommunications Business Law?

Generally, if the newsletter function is merely provided as an optional feature of a service where the newsletter function is the main feature, and it only provides telecommunication services in conjunction with the main service, it may not be considered a ‘business’, and there may be room to say that registration or notification is not necessary.

Examples of not falling under ‘business’ include telephone and internet services provided as part of hotel accommodation services, although these are not examples of newsletters. The reason these do not fall under ‘business’ is that the hotel business itself is not a ‘telecommunications business’, but a service associated with it.

Therefore, if the service excluding the newsletter function does not fall under ‘telecommunication services’ in the first place, and the newsletter function can be said to be associated with the service, it may not fall under ‘business’, and notification or registration may not be necessary.

However, in cases where the service excluding the newsletter function itself may fall under ‘telecommunications business that does not require registration or notification’, it may not be possible to position the newsletter function as an associated service, and it may fall under ‘business’. In this case, it will be subject to the Japanese Telecommunications Business Law.

Summary

Originally, the IT sector was an industry with less stringent regulations compared to the financial and real estate sectors. Perhaps due to this background, there are surprisingly many businesses that are not aware that they may need to notify or register under the Japanese Telecommunications Business Law when providing SaaS services.

However, while this might be the case for traditional offline software, it is often necessary to consider the Japanese Telecommunications Business Law when providing cloud services.

Violations of the Japanese Telecommunications Business Law can result in criminal penalties, so it is crucial for companies considering offering cloud services to thoroughly verify the application of the law in advance.