2008 Asia - Telecoms, Mobile and Broadband in Japan

Japan’s telecommunications sector is one of the most active markets in the world. The telecommunications regulatory authorities in Japan have been instrumental in shaping the industry and as a result, Japan has assumed a dynamic leadership role in many aspects of global and regional telecommunications. The control that the incumbent operator, NTT Corp, has continued to exert over virtually all local customers remains a particular challenge for the regulator. In addition, a growing concern has been the development (and lack) of cyber law in a society that is increasingly spending its time online.

Japan has been an early adopter of triple play models which provide TV, broadband Internet and voice telephony as packaged services from a single provider. This has been enabled through Japan being a world leader in broadband Internet. Though there is little hope of surpassing the US and China in terms of numbers; the market in Japan remains as eager as ever for broadband connection to the Internet. Japanese broadband subscribers comprised around 8.5% of the world subscriber base going into 2008.

Coming into 2008, the country was witnessing the continued growth of VoIP and triple-play services in particular. Strong competition was also apparent among the mobile operators in the 3G segment of the market. Especially noteworthy has been the uptake of FttH services (with a corresponding move away from DSL) and the big strides taken in developing digital and mobile broadcasting.

Japan is one of the world’s leading mobile telephone markets, not only in terms of size but also in terms of innovation and its ability to be early with the introduction of advanced technologies. Japan is one of the world’s top 3G markets, with over 80 million (80%) 3G subscribers by the end of 2007, as well as plans for 4G.

Key Highlights:

• The number of broadband lines in Japan has posted dramatic growth, more than tripling in size over the four years to March 2007. In terms of quality and affordability, Japan’s telecommunications infrastructure is significantly ahead of those in the US and Europe. Going into 2008, DSL subscribers were declining from the peak in 2006, as customers continued to shift to FttH. The DSL and FttH platforms support the bulk of the country’s broadband market, with other technologies such as cable modem and wireless making up less than 10% of the total market. For more information, see chapter 7, page 66.
• During 2007, the number of fixed subscribers declined below 50 million (less than 40% penetration), and that of mobile subscribers surpassed 100 million (just less than 80% penetration). This trend highlights the severe pressure that NTT is experiencing, faced with declining fixed-line subscribers, and high levels of competition and low price plans eating away at the mobile market dominance. For more information, see chapter 4, page 26.
• The local market’s other significant growth area coming into 2008 was in IP based telephony, taking up more than 10% of all telephony subscriptions. Here Softbank is a major player, with 30% of the total VoIP subscriber base by September 2007, although NTT showed considerable increases during 2007 to obtain over 50% market share. For more information, see chapter 6.9.3, page 65.
• 3G accounts for almost 80% of the mobile market in Japan, providing a strong base for the development of richer content. DoCoMo has introduced HSDPA and plans to offer HSUPA in 2008. The company is also one of the strongest drivers of the Long-Term Evolution standard, and is expected to launch around 2009/10 before the standard is complete.
• NTT DoCoMo became the first mobile operator, in December 2007, to adopt an MIC panel recommendation, to stop subsidising mobile phone prices through rebates. Other operators showed reluctance due to concerns that handset sales could decline, resulting in the possible closure of retail outlets.
• EMobile launched its 3G service in October 2007 and by end January 2008 the operator had 238,500 subscribers. The plan to offer voice telephony services were, however, put in jeopardy as a result of difficult and protracted negotiations with DoCoMo on a roaming deal.
• IPMobile was awarded a licence restricted to 2.0GHz bandwidth in November 2005. After investing over US$426 million, in 2007 IPMobile abandoned its plans to enter the mobile market due to financial difficulties. The company returned its 3G mobile licence and filed for bankruptcy with the Tokyo District Court. For more information, see chapter 9.1.4, page 111.
• The Radio Regulatory Council awarded licences to KDDI and PHS operator Willcom in December 2007. KDDI plans to introduce WiMAX in 2009, while Willcom hopes to launch its own high speed service, also in 2009, using next generation PHS technology.
• Popular valued added services continue to be i-mode for Internet access via mobile phones, music downloads facilitated by linkage between the content providers and the operators, and Osaifu-Keitai which is a mobile wallet allowing subscribers to pay for train tickets and the like with their mobile phones. Out of NTT DoCoMo’s 53 million subscribers by September 2007, nearly 48 million used the i-mode service and 27 million the mobile wallet, an increase of 100% for the latter over the previous year. Japanese subscribers are well accustomed to accepting rich content advertising messages. Mobile operators establish their own mobile advertising agencies to support operators’ business models for mobile advertisements. By 2012, the total value of all mobile advertising and marketing is expected to reach US$1.2 billion in Japan. For more information, see chapter 9, page 108.
• In March 2008 US brand Walt Disney launched as an MVNO on Softbank’s network. MVNOs are common outside Japan, though they have had mixed results. Disney last year hung up on an MVNO in the US that used Sprint Nextel Corp’s network, and in 2006 discontinued a similar service based on its ESPN sports TV network. For more information, see chapter 9.1.4.1, page 112.

Internet, broadband, IP telephony and telecoms statistics for Japan – 2004 - 2007

(Source: BuddeComm based on Softbank, MIC, TCA)

For those needing high level strategic analysis and objective analysis on Japan, this report is essential reading and gives further information on:

• The re-entry of eBay into Japan through an association with Yahoo Japan, after leaving the market in 2002.
• Continued copyright infringements from the 2007 launched Japanese language site of YouTube, resulting in action by a coalition of Japanese television, music and film companies. YouTube is still more popular than any rival Japanese video sharing sites.
• Allocations of ¥14-15 billion (US$120-130 million) by The Ministry of Trade, alarmed by the global dominance of Google and other foreign Internet services, for 10 Japanese partnerships to try to gain the lead in new search technologies.
• The successful launch of an experimental satellite, in early 2008, aimed at providing high-speed Internet access across Asia. The Kizuna satellite will allow super-high speed data communications of up to 1.2Gb/s, making it one of the fastest connections in the world.
• The start of Japan’s research and development on technology for a new generation of network that would replace the Internet, eyeing to bring the technology into commercial use in 2020.
• The MIC announcement to set aside spectrum used by TV broadcasters for 4G mobile communication services. The government proposed terminating broadcast use of the 3.4-3.6GHz band by November 2012, with part of the spectrum to be released from January 2010 onwards for mobile services.

Data in this report is the latest available at the time of preparation and may not be for the current year.