2009 Japan - Telecoms, Mobile and Broadband

Japan’s telecommunications sector is one of the most active markets in the world. Coming into 2009, the country was witnessing the continued growth of VoIP and triple play services, and strong competition 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. The telecommunications regulatory authorities in Japan have been very active in shaping the industry in this country. As a result of their efforts, 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 takes the lead in broadband leadership which is defined by both penetration and quality. Most of today’s web applications require a relatively low quality threshold; however, the next wave of web applications demands a step-up improvement in broadband quality. Japan is one of the few countries well-prepared for this next wave of web applications. While quality correlates with a nation’s development as a knowledge-based economy, high penetration is associated with increased labour productivity. These both have a different and complementary socioeconomic impact.

Entering 2009, Japan had over 30 million broadband lines in place, making it the third largest broadband country in the world after the US and China. Much of the success of broadband in Japan is owed to the stunning growth surge that occurred back in 2003 on the back of DSL broadband technology. Other broadband services such as FttH have since attracted even greater interest in the Japanese market. Japan has also been an early adopter of triple play models which provide TV, broadband Internet and voice telephony as packaged services from a single provider. E-services are continuing to gain ground as a key driver of convergence in the country’s telecom market.

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. The market is characterised by intense competition and as user needs become varied, it becomes more difficult for any one carrier to hold on to a majority of market share. Japan is one of the world’s top 3G markets, with concrete plans moving towards 4G within the next five years.

Key highlights:

·         The number of broadband lines in Japan had posted dramatic growth to over 30 million by end-2008. In terms of quality and affordability, Japan’s telecommunications infrastructure is significantly ahead of that in the US and Europe. Going into 2009, DSL subscribers were still declining from the peak in 2006, as customers continued to shift to FttH. During the first half of 2008, FttH subscribers outnumbered DSL subscribers for the first time and had reached over 13 million by end-2008. The DSL and FttH platforms support the bulk of the country’s broadband market, with cable modem and wireless making up the balance.

·         During 2008, the number of fixed subscribers declined even further to 43 million (less than 35% penetration), and that of mobile subscribers surpassed 105 million (more than 80% penetration). The trend highlights the severe pressure on NTT, faced with declining fixed-line subscribers and high levels of competition eating away at its market dominance.

·         New mobile operator, eMobile, continued its network expansion and in early 2009 had attracted over 1.2 million subscribers.

·         The strong uptake of 3G continues, with over 90 million subscribers going into 2009, representing nearly 90% of all mobile subscribers. DoCoMo is one of the strongest drivers of the LTE standard and is expected to launch around 2009/10 before the standard is complete with its Super 3G version.

·         The local market’s other significant growth area coming into 2009 was in IP-based telephony, taking around 30% of all telephony subscriptions. Softbank is still a major player, with around 25% of the total VoIP subscriber base by September 2008, although NTT maintained its 50% market share after substantial gains in 2007.

·         Popular VAS continued 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, a mobile wallet that allows subscribers to pay for train tickets and the like with their mobile phones. Japan had over 90 million wireless Internet subscribers by early 2009.

Internet, broadband, IP telephony and telecoms statistics in Japan – 2004 - 2008

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

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

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

·         The government’s adoption of its New IT Reform Strategy to promote the installation of broadband in order to eliminate zero-broadband areas by 2010 together with the Next-Generation Broadband Strategy 2010 to advance the need for nationwide broadband installations.

·         The MIC plans to completely replace the domestic fixed-line telephone network with an IP system by 2010.

·         The construction of WiMAX networks by new licensees KDDI (operating in a consortium known as UQ Communications) and PHS operator Willcom. The winners are required to start services by December 2010, with networks covering at least half of the population within five years.

·         The termination of DoCoMo’s PHS service after having stopped accepting new subscribers during April 2005. This left Willcom as the only operator still offering a PHS service.

·         Softbank winning the coveted right to sell the iPhone in Japan. While much hype followed the launch, only time will reveal whether this gadget can meet the demands of the sophisticated Japanese market.

·         The successful launch of a Japanese experimental satellite aimed at providing high-speed data communications of up to 1.2Gb/s across Asia. This is 150 times faster than high-speed ADSL and 12 times the speed of a FttP connection, making it the fastest in the world.

·         The launch of services in Japanese by major social networking service (SNS) provider Facebook. Facebook’s launch is likely to stoke competition among SNS providers including Mixi, one of the largest providers in Japan with a membership of 14 million people.