Broadband Development and Network Neutrality: Experiences and Challenges in Japan

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  • Broadband Development and Network NeutralityExperiences and Challenges in Japan

    Toshiya JITSUZUMI, D.Sc.,Kyushu Universityjitsuzumi@econ.kyushu-u.ac.jp

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

  • Purposes and agendaJapan has become the world's most advanced IT nation thanks to the collaborative efforts between the government and public sectors. These collaboration was one of the key factors that prevent net neutrality issues from being a hot issue in 2007.

    However, due to the technological and market developments, the Japanese government has to introduce a new approach for the new net neutrality issue.

    The purposes of this presentation is to summarize the past development in Japanspolicy and describe its challenges Japan currently faces.

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Agenda

    1. Development of Japanese broadband

    and related policies

    2. Net neutrality in 2006

    3. Emerging issues

    1. Popularity of mobile broadband

    2. Fiber wholesale

    3. Net neutrality 2.0

    Zero-rating

  • History of deregulation in the Japanese telecom market

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Source: MIC (2015a)

    1985-1995Age of the Telephone

    1995-2005Age of the Internet

    and the Mobile Phone

    2005-presentAge of Broadband

    and the Smartphone

  • Staged Evolution of the Japanese Telecom Policy

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Stage 1: pre-1985Primary Beneficiary:1. POTS usersMain Policy Instruments: Quasi-state monopoly Financing from users Limited use of network

    Stage 3: post-2004Primary Beneficiary:1. Service providers2. Enhanced usersMain Policy Instruments: Pro-competition policy

    Asymmetric regulation Ex-post control MVNO Network neutrality

    etc.

    Stage 2: 19852003Primary Beneficiary:1. Enhanced users2. POTS usersMain Policy Instruments: Pro-competition policy

    Asymmetric regulation De facto standard

    Liberalized use of network

    Stage 2-1: 19851996Main Target: Introduction of competition

    Main Policy Instruments: Infant industry protection

    Stage 2-2: 19972003Main Target: Fair & effective competition

    Main Policy Instruments: Asymmetric regulation

    Quasi- state monopoly Industrial policy Minimum regulation

    Source: Jitsuzumi (2009)

  • Deregulation More players Fiercer competition

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    0

    2,500

    5,000

    7,500

    10,000

    12,500

    15,000

    17,500

    Number of telecom operators

    Type1

    Type2, special

    Type 2, general

    Registerd

    Notified

    Source: MIC (2015a)

  • , and more value

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    CAGR 5.26%

    Source: MIC (2015a)

  • Changes in the industrial structure

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Source: MIC (2015a)

  • Policy initiatives for ICT development

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

  • Development of broadband availability in Japan

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Source: Created using the data in MIC whitepaper and http://www.soumu.go.jp/main_content/000371278.pdf

    75%

    80%

    85%

    90%

    95%

    100%

    Household coverage of broadband

    UltraBB

    BB

    Broadband coverage has become ubiquitous. Price level for fixed BB is among the best.

    Source: OECD (2015)

  • On the demand side,

    0%

    25%

    50%

    75%

    100%Penetration in Japan

    mobile handset forHHsmartphone forHHPC for HH

    Internet forindividual

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    65.8% of HH has fixed broadband and 52.7% of the population has LTE (assuming each has only one connection).

    Penetration of access equipment has been saturated mostly.

    10

    0

    10

    20

    30

    40

    50

    60

    70

    BWA

    LTE

    0

    10

    20

    30

    40

    50

    60

    70

    Subscribers of broadband (in million)

    FTTHDSLCATVFWA

    Source: MIC (2015b)

  • Internet usage in Japan has been exploding

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    189 209 224 259 295 351

    398 447 494

    574 655

    769 835 741 715 693 640 658 666 770 834

    905 929 1,086 1,051

    216 241 257 344 390 459

    540 629 708 799

    939 1,102 1,206

    1,235 1,363 1,516 1,600

    1,730 1,905

    2,275 2,584

    2,892

    3,549

    4,582

    5,423

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    Sep

    -04

    Mar

    -05

    Sep

    -05

    Mar

    -06

    Sep

    -06

    Mar

    -07

    Sep

    -07

    Mar

    -08

    Sep

    -08

    Mar

    -09

    Sep

    -09

    Mar

    -10

    Sep

    -10

    Mar

    -11

    Sep

    -11

    Mar

    -12

    Sep

    -12

    Mar

    -13

    Sep

    -13

    Mar

    -14

    Sep

    -14

    Mar

    -15

    Sep

    -15

    Gbp

    s

    Estimated total traffic

    Upload

    Download

    CAGR = 16.6%

    CAGR = 33.5%

    Source: MICs website and CISCO VNI (http://www.cisco.com/c/m/en_us/solutions/service-provider/vni-forecast-highlights.html#)

  • which makes the pipe clogged.

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    0%

    25%

    50%

    75%

    0 10 20 30 40 50 60 70 80

    Actual Speed/Advertised Speed

    Average Actual Download SpeedMbps

    USA (2009)

    UK (May 2010)

    Australia (2008 Q4

    Ireland (2008)

    Note: Due to the inconsistency between individual nations 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)

    Japan (May 2016)

    Case of fixed BB Case of mobile BB

  • Essence of net neutrality

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Source: Adapted from Fig. 1 in Jitsuzumi (2015)

    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

  • Industrial structure of fixed broadband

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    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-basedOperatorNTT East/West

    ISP

    PhysicalFacility

    BroadbandAccess

    ISPRetail

    Service

    Facility-based Operator(telco)

  • Rules that discipline NTT in the fixed broadband market.

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    Interconnection rule of the TBA

    SourceCreated using material provided by the MIC.

    SMP rules on NTT East/West

    Rules of the NTT Law

  • Resulted market share in the 2000s

    T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)

    78.6%

    49.1%

    29.1%

    13.5%

    5.8%

    3.8%

    0% 20% 40% 60% 80% 100%

    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 FCCs 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 in the US

    RBOCs Cablecos

    Others

  • Fixed ISP market in Japan vs. in the US