Understanding the Japanese Broadband Miracle · 2020. 1. 3. · Digital mobile TV z “One Segment...

Understanding Understanding the Japanese Broadband the Japanese Broadband

MiracleMiracle

April 4, 2007Taka Ebihara

Office of the Japan ChairCenter for Strategic and International Studies (CSIS)

2Copyright (C) CSIS 2007 All Rights Reserved.

Agenda

Broadband Market in JapanMarket Statistics

Broadband Services

Competitive Landscape

Broadband PoliciesPolicies Accelerated BB Deployment

Policy Implications

Broadband Market in JapanBroadband Market in Japan

Market StatisticsBroadband ServicesCompetitive Landscape


Snapshot: Japanese Broadband Market

1,000 miles

Tokyo

Osaka

Japan (US)Population: 127 mil, (290 mil)Households: 50 mil, (110 mil)Geography: 380,000 km2

BB Subs: 25 mil*, (53 mil**)BB Penetration: 17.6%*** (16.8%***)

11th (12th)

*As of Sep 2006 (MIC: Ministry of Internal affairs and Communications, Dec 2006 )

** As of Jun 2006, “Mobile Wireless” excluded (FCC, Jan 2007) *** As of Dec 2005 (OECD 2006)


BB Penetration Rate & Population Density

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Icel

and

S. K

orea

Neth

erla

nds

Denm

ark

Switz

erla

ndFi

nlan

dNo

rway

Cana

daSw

eden

Belg

ium

Japa

nU.

S.U.

K.

0.0

100.0

200.0

300.0

400.0

500.0

600.0Broadband penetration (subscribers per 100 inhabitants, 2005)Population density (inhab/km2, 2004)

Broadband Penetration

Population Density

Source: OECD 2006


Price for 1Mbps Bandwidth

Source: ITU Internet Reports 2005

13.50

12.20

10.50

8.30

7.30

7.30

4.90

2.50

2.00

1.80

0.80

0.70

U.K.

Belgium

Canada

Hong Kong

Netherlands

FinlandU.S.

Sweden

Iceland

Taiwan

S. KoreaJapan

US Dollar / month


Growing Broadband Market in Japan

Source: Ministry of Internal affairs and Communications (MIC), Dec 2006

1999

5

10

20

2001 2002 2003 2004 2005

FTTHFTTHFTTH

DSLDSLDSL

CABLECCABLEABLE

In Million

3.5M (14%)

7.2M (29%)

14.4M (58%)Total: 25 million

20063Q


Broadband Net Increase

0

1

2

3

2002 3Q 4Q

2003 1Q 2Q

2003 3Q 4Q

2004 1Q 2Q

2004 3Q 4Q

2005 1Q 2Q

2005 3Q 4Q

(In Million)

DSLFTTH

Source: MIC, Mar 2006

9Copyright (C) CSIS 2007 All Rights Reserved.Source: NTT EAST and NTT WEST (Apr 2007)

DSLFTTH

DSL increase/monthFTTH increase/month

Broadband Subscribers of NTT

•FTTH: 6.1 M•DSL: 5.3 M(As of Mar 07)

0

1

2

3

4

5

6

2002Sep

2003Mar

2003Sep

2004Mar

2004Sep

2005Mar

2005Sep

2006Mar

2006Sep

2007Mar

Tota

l (M

illio

n)

-200

0

200

400

600

800

1000

1200

1400

Mon

thly

Incr

ease

(Tho

usan

d)


0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

FTTH (100Mbps)JPY4,100

ADSL (47Mbps)JPY2,500

ISDN (64kbps)JPY2,80064k

47M

100M

JPY5,590 = $48

ISPJPY700

ISPJPY850

Modemrental

JPY540

JPY5,200 = $44�1USD=JPY117�

ONU rentalJPY900

ISPJPY1,000

Indoor wiring

FTTB (100Mbps)JPY2,500

ISPJPY600 JPY3,950 = $34JPY350

Speed(bps)

POTSJPY1,700

POTSJPY1,700

VoIPJPY500

VoIPJPY500 JPY200

JPY6,700 =$57

Modem rental

FTTB : For buildings and apartments (Optical fiber + VDSL)

Monthly Charges of Broadband Services

(JPY/Month)

FTTH

FTTB*

ADSL

ISDN

Adapted from NTT EAST Corporate Information


Source: Information NTT EAST (As of Mar 2006)

Broadband Home Passed

98%=25M households

Home Passed

75%=18M households

In case of NTT EAST (Largest incumbent)

(FTTH)


BB Services Market Share

eAccess13.4%

Softbank (Yahoo! BB) 35.7%

Acca Networks8.1%

Incumbents (NTT East & West)

38.8%

Others3.9%

DSLDSLOthers11.7%

USEN7.3%

Electric utility

companies15.0%

Incumbents (NTT East & West)

66.0%

Sources:-DSL & FTTH (as of Sep 2006),

MIC, Dec 2006- 3G Mobile: as of Jan 2006, -3G Mobile (as of Dec 2006), TCA: Telecommunications Carriers Association

FTTHFTTH

KDDI 39.8%

Softbank (fmr Vodafone)

9.4%

NTT Docomo

50.8%

3G Mobile3G Mobile

63.2M

Mobile Total (2G+3G+PHS): 94.5M

14.4M 7.2M


Competitions in Broadband Market

Price & speed competitions (2000~2005)Average monthly price down 47% in 5 years$56 /mth (1.5Mbps) $30 /mth (50Mbps)

Services and content competitions (2005~)Quality IP telephonyBroadcasting TV over fiberInteractive TVFree “ad-supported” video streaming (GyaO)

Source: InfoCom Research


Towards Ubiquitous Net SocietyNext Generation Networks Initiatives

Super 3GCellular

Super 3GCellular

Conventional TV (RF TV)

Broadcasters

Home Networking

Interactive TV(IP TV)

Internet Access

Internet Telephony(VoIP)

InternetConventional

Telephony (PSTN)

ISPsISPs

Everything over FTTH & Super 3G CellularQuad Play & BeyondHome Networking Solutions

Everything over FTTH & Super 3G CellularQuad Play & BeyondHome Networking Solutions

FTTH

SeamlessRoaming


Advanced mobile phone applications e-payment

Electronic wallet

Retail shop Train ticket

Vending machine ATM


Advanced mobile phone applications Digital mobile TV

“One Segment Broadcasting” or “One Seg” based on ISDB-TAvailable nationwide by the end of 2006

Delivering richer content (visuals, related info, URLs)Benefits

Major broadcasters: more viewership, more ad revenuesMobile operators: increasing data ARPU, e-commerce opportunities

“One Seg” enabled devices

Service availability as of Apr 2006

Japanese Broadband Japanese Broadband PolicPoliciesies

Policies Accelerated BB DeploymentPolicy ImplicationsChallenges for the Future


u-Japan strategy & estimated impact

Estimated economic impact in 2010Ubiquitous networking industries: $730 billion*

Source: White Papers for Information Communication 2004

*1 USD = 120 JPY


Mitigating Digital Divide: Gov’t financial supports for broadband

Primary beneficiaries are municipalities

For public sectorMunicipality intranet projects (schools, CCs, libraries)Rural FTTH projects (details in later slides)

For both public and private sectorsZero- or low-interest-rate financing*

For private sectorTax incentives*

Deferred income tax paymentReduction of fixed asset taxes for designated network equipment

*a very limited financial impact for the private sector due to a zero-interest- rate policy of Bank of Japan


Gov’t-financed rural BB deployment: Rural FTTx Projects

Collaboration of municipalities and service providers1/3 of construction costs is subsidizedMunicipality-owned fiber networks to be wholesaledLevel playing field must be ensured

Source: MIC


US-Japan Telecom Policy Comparison

JPNUS: Bell Companies US:

Cable1996 Now 96-Now

Local copper loops unbundling Yes Yes Yes N/A

Line sharing on copper loops Yes YesNo

new rules since 2003

No

Local fiber loops unbundling Yes YesNo*

new rules since 2003

No

Open access to incumbent carrier’s Internet backbone Yes Yes

No new rules

since 2005No

* Some exceptions for high-capacity leased lines for enterprise use


Implications of Japanese BB Policies

Unbundling mandates for both copper and fiber loops

Line sharing requirement for primary lines

Mixed results in terms of “facility-based” competition

Fierce price competitions in DSL market forced incumbent

operators to move up to FTTH market

A role of national ICT strategies: “e-Japan” and “u-Japan”

Investors’ comparatively better understanding on long-term

investments


Conclusion

Fastest and least expensive broadband

Reasonable non-incumbent (CLEC) market share

Mixed results of facility-based competition

National ICT strategies played a significant role

A need for a good balance between long-term and

short-term development goals

Maintaining incentives for innovative investment is

the key to sustain broadband deployment

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