Recent development of net neutrality conditions in Japan
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Transcript of Recent development of net neutrality conditions in Japan
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Recent Development of Net Neutrality Conditions in JapanImpact of Fiber Wholesale and Long-term Evolution (LTE)
Toshiya JITSUZUMI, D.Sc.,Kyushu University
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015)
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Purpose and agenda Purpose of this study is to
- analyze the net neutrality issue from an
economic perspective,
- summarize the emerging challenges for
Japan’s regulator, MIC, and
- propose a set of policy options.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015)
Agenda
1. Net neutrality from an economic perspective
2. Japan’s approach so far
3. Impact of fiber wholesale introduction and LTE
4. Required approach
Net neutrality from an economic perspective It is nothing but a congestion problem with a little twist.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 3
Three reasons that market dynamism does not work and traditional transportation economics cannot be applied.
1. Internet backbone is a collective commons supported by many individual operators.
2. Prevalence of best-effort quality may inhibit network investment while causing no damage on ISPs if competition is insufficient.
3. There exists a serious information asymmetry concerning network QoS between ISPs and end users.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 4
Twin problems
Low barriers to entry
High barriers to entry
Demand management
Capacity development
Short-term solution
Long-term solution
How to achieve efficient and fair traffic management in the dynamic condition?
How to calculate the optimal capacity and how to finance it?
Congestion control over the Internet backbone facing the exaflood of network demand
Controlled by vertically integrated network providers
Leverage into the neighboring market
How to discipline the behaviors of SMPs in the communication market?
Is it efficient?How to restrain the anti-competitive behaviors?
Control the monopolistic leverage of SMPs
ISPs
Network operators
UsersContent providers
Application providers
Natural monopoly
Unique business practices
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 5
Japan’s approach so far
Interconnection rules
SMP Regulations
NTT Law
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 6
Interconnection rule in the TBA Article 32 (Interconnection with Telecommunications Circuit Facilities)
◦ Any telecommunications carrier shall accept a request from another telecommunications carrier to interconnect the telecommunications facilities of the requesting telecommunications carrier with the telecommunications circuit facilities that the requested telecommunications carrier installs, except in the cases listed below:i. Where the interconnection is likely to hinder telecommunications services from being
smoothly providedii. Where the interconnection is likely to unreasonably harm the interests of the requested
telecommunications carrieriii. In addition to the cases listed in the preceding two items, where there are justifiable grounds
specified by an Ordinance of the Ministry of Internal Affairs and Communications
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 7
SMP regulations on NTT East/West Telecommunications carriers installing Category I designated telecommunications facilities
Other facilitiesCategory I designated telecommunications facilities
Notification of tariff for designated telecommunications services( FTTH, dedicated service)
Prohibited activity regulations Regulations regarding carriers with special relations
Authorization of interconnection tariff
Access lines and related telecommunications facilities
Access lines(More than 50% share)
( Copper cable, optical fiber )
( NGN, PSTN, etc. )
( Wiring inside apartments, etc. )
Development of interconnection accounts
Notification of plan for change or addition of
functionNon-regulation
Regulation of lending facilities to other carriers
Service regulations
Non-regulation
(ADSL, etc.)
Prohibition of abuse of information obtained
through interconnection
Prohibition of unfairly advantageous treatment
for specific carriers
Prohibition of undue interference with
equipment manufacturers, etc.
Firewall with specified carriers
Equal treatment in interconnection and
consignation
Price cap regulation for specified telecommunications service(voiceover copper lines, etc.)
Interconnection regulations
Price regulations
Restrictions for corporate behavior
Source : Created using material provided by the MIC.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 8
NTT LawNTT NTT East/West
Objectives of operation Control NTT East/West to properly secure the telecom service and related R&D
Provide regional telecom services
Scope of business Exhaustively listed in the law.
Expansion of the business domain Must be for the accomplishment of the original scope and needs pre-notification to the minister (until 2011, the approval of the minister was required instead)
Must be for the accomplishment of the original scope, the provision of out-of-bounds service, and the productive use of its resources as long as it does not impair fair competition; it needs pre-notification to the minister (until 2011, the approval of the minister was required instead)
Obligation Universal Service Obligation (USO) and promotion of public welfare
Obligatory shareholding by the government
At least one-third must be owned by the government, and foreign control must be less then one-third.
NTT must own 100%
Appointment of directors and auditors Foreigners cannot be appointed and must be approved by the minister.
Business operating plan Must be pre-approved by the minister, subject to consultation with the Minister of Finance.
Financial report Must be submitted to the minister
Source: Adapted and translated by the author.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 9
Industrial structure of the fixed broadband
Local Loop Unbundling (dark fiber, dry copper, and line-sharing)
Service-based
Operator
ISP
Facility-basedOperator(cableco)
ISP
Local Loop Unbundling (dry copper)
The USJapan
Wholesale or Interconnection
NTT-east/west
AccessWholesaler
Independent ISP
Service-based
Operator
Facility-basedOperator
NTT East/West
ISP
PhysicalFacility
BroadbandAccess
ISPRetail
Service
Facility-based Operator
(telco)
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 10
Share of the fixed broadband market, almost a decade ago
78.6%
49.1%
29.1%
13.5%
5.8%
3.8%
0% 20% 40% 60% 80% 100%
Estimated market share
NTT group Power company Cables
Other telcos Municipalities Others
BB access line wholesale market
BB access market
BB ISP market
NTT Group
Powercos
Other telcos
Cablecos
Others
Municipalities
Estimated market share in Japan
Source: Created on the basis of MIC (2008), FCC (2008a, 2008b), and Noam (2009)Note 1: ISP shares in the US are based on revenues in 2006 (Noam, 2009), which include satellite Internet; the shares
in other markets are based on the FCC’s line count and include fixed lines only.Note 2: RBOCs stand for Regional Bell Operating Companies, telcos for telecommunications companies, powercos for power
companies, and cablecos for cable companies.
43.6%
36.7%
36.3%
53.9%
53.9%
44.2%
0% 20% 40% 60% 80% 100%
Estimated market share
RBOC Cables Others
Estimated market share in the US
RBOCs Cablecos
Others
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 11
Market share as of March 2014
19%
8%
1%
9%
8%1%11%
2%
9%
7%
7%
4%
6%
2%2%
6%NTTcommunicationsNTT pulalaother NTTKDDIJ:comother KDDISoftbankBBother SBBiglobeniftySonetk-opticompowercocablecoTOKAI communicationsother
Source: Created based on MIC data (2014a).
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 12
Japan’s approach so far
Interconnection rules
SMP Regulations
NTT Law
• Guidelines for Consumer Protection Rules for the TBA
• Measurement of mobile QoS
• Anti-DoS/DDoS Guideline
• Packet Shaping Guideline
Co-regulation?
Create Competitive Conditions
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 13
Impact of fiber wholesale introduction and LTE
https://farm4.staticflickr.com/3216/2883679931_c4f46b3ca4_o.jpg
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 14
Fiber range
ADSL range
Technological developments in mobile broadband
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
20161,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1,000,000,000
Maximum download speed (bps)
Mobile PHS WiMax
2G 3G 3.5G
3.9G 4GSource: Created using data from NTT Docomo’s website and Wikipedia.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 15
Users are increasingly relying on mobile broadband.
According to a questionnaire survey conducted by the MIC’s research institute, IICP, not only has the user share of mobile broadband become larger than that of fixed broadband, but its usage time is now longer.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%0
5
10
15
20
25
30
35
40
45
Share of users among respondentsUs
age
time
(min
.) PC
Smartphone
Feature phoneTablet
Internet TV
Source: Created based on MIC data (2014b).
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 16
SMP rules on mobile BB cover wider but are less strict. Telecommunications carriers installing Category I designated telecommunication facilities
Other facilitiesCategory I designated telecommunications facilities
Notification of tariff for designated telecommunications services( FTTH, dedicated service)
Prohibited activity regulations Regulations regarding carriers having special relations
Authorization of interconnection tariff
Access lines and related telecommunications facilities
Access lines(More than 50% share)
( Copper cable, optical fiber )
( NGN, PSTN, etc. )
( Wiring inside apartments, etc. )
Development of interconnection accounts
Notification of plan for change or addition of
functionNon-regulation
Regulation of lending facilities to other carriers
Service regulations
Non-regulation
(ADSL, etc.)
Prohibition of abuse of information obtained
through interconnection
Prohibition of unfairly advantageous treatment
for specific carriers
Prohibition of undue interference with
equipment manufacturers, etc.
Firewall with specified carriers
Equal treatment in interconnection and
consignation
Price cap regulation for specified telecommunications service(voiceover copper lines, etc.)
Interconnection regulations
Price regulations
Restrictions for corporate behavior
NTT East
NTT West
Source : Created using the material provided by the MIC
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 17
SMP rules on mobile BB cover wider but are less strict. Telecommunications carriers installing Category II designated telecommunications facilities
Other facilitiesCategory II designated telecommunications facilities
Prohibited activity regulations
Notification of interconnection tariff
Access lines and related telecommunications facilities
Access lines(More than 10% share)
( Some servers, etc. )
Development of interconnection accountsNon-regulation
Regulation of lending facilities to other carriers
Non-regulation
Prohibition of abuse of information obtained
through interconnection
Prohibition of unfairly advantageous treatment
for specific carriers
Prohibition of undue interference with
equipment manufacturers, etc.
Interconnection regulations
Price regulations
Restrictions for corporate behavior
Applied as necessary when 25% of shares on a revenue basis is
exceeded
NTT Docomo
KDDI
Softbank
NTT Docomo
Source : Created using the material provided by the MIC
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 18
No business domain control on NTT Docomo KDDI and Softbank are pure private companies.
NTT Docomo is one of the major members of the NTT group and 59.27% of its shares is owned by NTT holding company; however, it is free to expand its business domain.
◦ NTT Docomo provides Internet access services on its own.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 19
Fixed vs. Mobile
Dominant network operator in the fixed market
(NTT East, NTT West)
Dominant network operator in the mobile
market(NTT Docomo, KDDI,
Softbank)
In-houseISP function
Independent ISP
Group ISP
Fixed Broadband Mobile Broadband
Independent ISP
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 20
Fiber wholesale by NTT East/West
Source: http://www.ntt.co.jp/news2014/1405eznv/ndyb140513d_01.html
NTT DOCOMO, INC. announced today that it will begin offering "docomo HikariTM," a superfast optical-fiber broadband service, combined with "docomo Hikari PackTM" bundled discounts with mobile subscribers.
… By integrating ISP, wired and wireless services, DOCOMO's one-stop service will simplify the subscription process and customer support.
Source: Press release by NTT Docomo (Jan. 29, 2015). https://www.nttdocomo.co.jp/english/info/media_center/pr/2015/0129_00.html
Virtual integration of NTT Docomo
and NTT East/West
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 21
Competing Softbank has started similar services.
Source: http://upload.wikimedia.org/wikipedia/commons/c/c1/Masayoshi_Son_(boss_of_Softbank)_and_Nobi_Hayashi_(Digital_Advisor).jpg
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 22
Possible outcome: Domination of BB by mobile carriers
Local Loop Unbundling (dark fiber, dry copper, and line-sharing)
Pre “3G and Fiber Wholesale”
Wholesale or Interconnection
Fixed BB
AccessWholesaler
Independent ISP
NTT East/West
PhysicalFacility
BroadbandAccess
ISPRetail
Service
Now
Fixed BBMobile BB
Mobile Operators
ISPMVNO
Service-based
Operator
Facility-basedOperator
ISP ISP
Service-based
Operator
Facility-basedOperator
NTT East/West
ISP
Near future
Fixed BB
Mobile BB
Mobile Operators
MVNO
Facility-basedOperator
NTT E/W
Service-based
Operator
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 23
Expected share of the Japanese ISP market: fixed BB
As of Mar'14
With fiber wholesale(estimated)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
27.9%
38.0%
17.9%
17.9%
12.6%
12.6%
6.4%
4.8%
26.8%
20.3%
2.1%
1.6%
6.3%
4.8%
NTT group KDDI group Softbank group powerco ISPvender ISP cable ISP other
Assumptions for the estimation:• Following JAIPA’s assumption, 4
million users start using NTT Docomo’s ISPs.
• Before the introduction of fiber wholesale, these users had used ISPs that were not related with mobile operators.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 24
Share of the Japanese mobile BB market
mobile phone, grouped
mobile phone
mobile ISP, grouped
mobile ISP
0% 25% 50% 75% 100%
40.2%
42.5%
28.4%
28.1%
31.4%
29.4%
40.2%
40.4%
25.8%
25.8%
2.6%
2.6%
22.9%
22.6%
2.8%
2.9% NTT group
NTT Docomo
KDDI group
KDDI
UQ
Softbank group
Softbank
eAccess
Willcom
Wireless City Planning
(as of the end of Mar. 14)
Source : Created based on in MIC ( 2014 ) data
The future market share of the overall ISP market may look like this, if Internet usage becomes 100% mobile-based.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 25
Summary of the market changeUntil very recently, owing to the competitiveness in the fixed broadband ISP market that had been maintained by the TBA and the NTT Law, the MIC did not have imminent needs to introduce special rules for network neutrality.
Japanese broadband users have enjoyed the competition in the ISP market thanks to the SMP regulations, including the business domain rules on NTT East/West, as well as interconnection requirements of the TBA.
However, now that the situation has started to change, the MIC must start examining its future policy options.
The evolution of mobile technology, accompanied with the introduction of fiber wholesale by NTT East/West, is changing the dynamism in the broadband ISP market and making the market increasingly oligopolistic.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 26
Japan’s BB ecosystem becomes very similar to that of the US?
PhysicalFacility
BroadbandAccess
ISPRetail
Service
Service-based
Operator
ISP
Facility-basedOperator(cableco)
ISP
The US
Mobile
Facility-basedOperator
(telco)
Japan, Now
Fixed BBMobile BB
Mobile Operators
ISPMVNO ISP
Service-based
Operator
Facility-basedOperator
NTT East/West
ISP
Fixed BBMobile
BB
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 27
Options for Japanese telecom policymakersStructural remedy: Increasing competitiveness
1. Introduce more competitorsA) Mobile network operators
B) Mobile virtual network operators
2. Lower switching costsA) Mobile number portability
B) Unlock SIMs
C) E-mail address portability
D) Personal data portability
3. Regulate marketing hypeA) Put a cap on excessive cash rebates
B) Set a minimum transparency
Behavioral remedy: Restricting SMP players
1. Self-regulationA) Guideline for packet shaping
B) Guidelines for QoS measurement
2. Re-regulationA) Tightening of regulations on category II facilities
B) Introduce tariff regulations
3. New network neutrality rulesA) Set the minimum QoS
B) Introduce higher transparency
C) Set the bright-line rules while leaving much room for case-by-case discretion
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 28
Track record of some structural remedies is poor. MVNOs may not contribute to competition in the mobile market
◦ As of the end of 2014, the MVNO subscription was 25.52 million, 16.5% of the total mobile market.
◦ 65% of them came mainly from sharing spectrum resources among the group operators; thus does not contribute to increasing competition among MNOs.
◦ SIM-based MVNOs are for the second-tiers.
MNP did not significantly change the competitive structure.
◦ Since the MNP introduction in Oct. 2006, Softbank has become a big winner, and NTT Docomo is a constant loser. However, the ranges of market share changes have remained almost the same.
Unlocking SIMs and regulating marketing hype have not yet worked very well.Source : Created based on the data in
http://www.soumu.go.jp/menu_news/s-news/01kiban04_02000088.html; http://www.soumu.go.jp/menu_news/s-news/01kiban02_02000151.html
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 29
Guidelines for Consumer Protection Rules for the TBA Article 26 (Accountability of Terms and Conditions for the Service Provision)
When any telecommunications carrier or any person who engages in acting as an intermediary, agency or agent for concluding a contract for the provision of telecommunications services of a telecommunications carrier (hereinafter referred to as "telecommunications carrier, etc.") intends to conclude a contract, or to act as an intermediary, agency or agent for concluding a contract, with a person …, they shall, …, explain to the person an outline of the charges and other terms and conditions for the provision of the telecommunications services.
In 2009, the MIC revised the Guidelines and started to require ISPs to notify subscribers of the details of their packet shaping practices.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 30
The Japanese fixed broadband is not as great as it looks.
0 5 10 15 20 25 30 35 40 45 500%
25%
50%
75%
Average Actual Download Speed ( Mbps )
Actual Speed/Advertised Speed
USA (2009)
UK (May 2010)
Australia (2008 Q4 )
Ireland (2008)
Note: Due to the inconsistency between individual nation’s estimates, this graph is for reference only.Source: Created on the basis of Akamai, Epitiro, FCC, and the author.
Japan (Mar. 2014)
Japan (Mar. 2013)
Japan (Mar.-Apr. 2012)
Japan (Jan. 2011)
Japan (Nov. 2009)
Japan (Apr. 2015)
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 31
Behavioral remedies seem more promising. Since increasing competitive pressure through cultivating competing operators takes time, the MIC should rely more on disciplining the behaviors of the existing mobile operators.
1. Self-regulation◦ Easy to implement but lack of formal authority, thus lack of legal certainty.
2. Re-regulationRegulation on broadband tariff◦ Strengthen SMP rules on the Category II designated telecommunications facilities
3. New network neutrality rules◦ Set the minimum QoS◦ Set the bright-line rules while leaving much room for case-by-case discretion
EU-like approach
FCC-like approach• Introduce higher transparency• Terms and conditions, network management• Actual QoS
Considering their intrusive nature, behavioral remedies may harm overall efficiency.
T. JITSUZUMI@The 26th European Regional ITS (San Lorenzo de El Escorial, Spain, June 24-27, 2015) 32
Summary◦ Till the recent past, the MIC could let the market dynamism deal with the net neutrality issue
without introducing any special rules, because the Japanese broadband market was very competitive.
◦ However, technological developments in mobile broadband have made the broadband access market far more oligopolistic than it used to be. The recently introduced fiber wholesale by NTT East/West may accelerate this trend.
◦ Since the mobile network operators are much less disciplined in the current Japanese telecom framework, the MIC cannot sit back and do nothing.
◦ In order to deal with this situation, the MIC must increase competitive pressure in the market, complemented by behavioral remedies on dominant players.