Evolving broadband market Evolving broadband market

& & policy developmentspolicy developments

in Japanin Japan

April 27, 2006Taka Ebihara Japan Chair

Center for Strategic & International Studies

EDUCAUSE Policy Conference 2006

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Agenda

Broadband Market in Japan Market statistics

Services

Broadband Policies Policies that have accelerated BB deployment

Analysis of policy implications

Broadband Market in JapanBroadband Market in Japan

Market statisticsServices

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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: 22 mil*, (43 mil**)

BB Penetration: 17.6%***(16.8%***) 11th (12th)

* As of Dec 2005 (MIC)** As of Jun 2005 (FCC)*** As of Dec 2005 (OECD)

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Growing Broadband Market in Japan

Source: Ministry of Internal affairs and Communications (MIC)

1999 2000

5

10

20

2001 2002 2003 2004 2005DEC

FTTHFTTHFTTHFTTH

ADSLADSLADSLADSL

CABLECABLECABLECABLE

In Million

3.2mil (14%)

4.6mil (21%)

14.5mil (65%)Total: 22.3mil

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Broadband Monthly Net Increase

2004NOV

2005NOV

20

40

60

80

In Thousand

FTTH

ADSL

In case of NTT EAST (the largest incumbent operator)

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Source: Information NTT EAST (As of Mar 2005)

Broadband Home Passed

98%=25M households

Home Passed

73%=18M households

In case of NTT EAST

(FTTH)

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Broadband Competition

ADSL price & speed competitions (2000~mid 2005) Average monthly price down 47% in 5 years $56.30/mth (1.5Mbps) $29.8/mth (50Mbps)

Increasing value-added services (mid 2005~)

$35

$31Price for 1MbpsSpeed

$30

$23

$3.30

$2.50 $0.60

50Mbps45Mbp

s

40Mbps

26Mbps

12Mbps

8Mbps1.5Mbps

2000 20052004200320022001

Source: InfoCom Research

Price per 1Mbps in ADSLPrice per 1Mbps in ADSL

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Everything over FTTH

CellularCellular

RF TV

Broadcasters

Home Networking

IP TV Internet VoIP

InternetPSTNPSTN

ISPISP

Triple Play & Fixed Mobile ConvergenceBroadcasting & Telecom ConvergenceTriple Play & Fixed Mobile ConvergenceBroadcasting & Telecom Convergence

FTTH

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Advanced mobile phone applicationse-payment

Electronic wallet

Retail shop Train ticket

Vending machine ATM

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Advanced mobile phone applicationsDigital mobile TV

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

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

Major broadcasters: more viewership, more ad revenues Mobile operators: increasing data ARPU, e-commerce

opportunities

“One Seg” enabled devices

Service availabilityas of Apr 2006

Japanese Broadband PoliciesJapanese Broadband Policies

Policies that have accelerated BB deploymentGovernment initiativesAnalysis of policy implications

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u-Japan strategy & estimated impact

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

Source: White Papers for Information Communication 2004

*1 USD = 120 JPY

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Mitigating Digital Divide:Gov’t financial supports for broadband

Primary beneficiaries are municipalities

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

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

For private sector Tax incentives*

Deferred income tax payment Reduction 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

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

Collaboration of municipalities and service providers 1/3 of construction costs is subsidized Municipality-owned fiber networks to be wholesaled Level playing field must be ensured

Source: MIC

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Analysis of Policy Implications

Unbundling mandates for dry coppers and dark fibers

Line sharing requirement

Appropriate guidelines for co-locations and ROW

Less technological complexities in BB deployment

Fierce price competitions in ADSL market forced

incumbent operators to move up to FTTH market

Role of e-Japan and u-Japan

Comparatively better understanding on long-term investme

nts

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Net Neutrality Debate in Japan

Consumers have sufficient choices “ISP-free” resale business model prevails CLECs have full-control over their networks Bandwidth limitation in access networks is NOT significant

Sustainable development and “free rider” issues Demise of flat rate model? ISPs’ self-regulation against P2P traffic Rapidly increasing ad-supported FREE IP unicast video co

ntent

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Conclusion

Fastest and cheapest broadband Reasonable CLEC market share Mixed results of facility-based competition National broadband strategies played a significant

role Need a good balance between long-term and short-t

erm development goals Maintaining incentives for innovative investment is t

he key to sustain broadband deployment