The impact of fiber networks in Japan

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1 The impact of fiber networks in Japan Kiyoshi MORI President, Japan Data Communications Association (Ex-Vice Minister for Policy Coordination Ministry of Internal Affairs and Communications, JAPAN) 23, March 2009

2 Table of Contents 1. Overview of Japan s s Broadband 2. Why has FTTH grown in popularity in Japan? 3. Challenges for the future of FTTH 1

3 Transition in the Number of Japan s Broadband Subscribers Number of Telecommunication Service Users (Unit: 10 thousand) (Unit: 10 thousand) Number of Broadband Service Users 12,000 10,000 Fixed Communications (te lephony) Mobile Com m unication (te lephony) B roadband Service IP Telephony 10,942 1,600 1,400 CATV FW A DSL FTTH 1,376 8,000 1,200 1,000 FTTH exceeded DSL (June 2008) 1,197 6, ,936 4, ,000 1, Source : Ministry of Internal Affairs and Communications Source : Ministry of Internal Affairs and Communications 2

4 Japanese Broadband Service in Global Comparison Japan Korea Netherlands T aiw an,china Sweden S ingapore Malta Italy Finland France United S tates German UK L ithuania H ong Kong,C h ina Bosnia P o rtugal M acau(china) C an ada Brazil Broadband prices (100kbit/s) (US dollar) Source : ITU World Information Society Report 2007 (June 2007) Japan Korea Singpore Sweden Finland Netherlands Taiwan,China Italy France K azakhstan The U.K. P ortugal B razil Ic e land Hong Kong,China Poland Germany Philippines Speed of DSL (Mbit/s) Source : ITU Internet Reports 2006 digital.life (December 2006)

5 RepublicOECDJapanese Broadband Service in Global Comparison Percentage of FTTH Subscribers per Broadband Subscribers (June 2008) J0 apan45 39 Korea19 18 RepublicSwedenSlovak9 9 8 NorwayDenmark4 3 3 USACzechItalySource :OECD Broadband Statistics 4

Current Status of Broadband Services in Various Countries About 3.22 DSL About 4.09 CATV About 0.15 Others [Canada] (2006) About 17.60 About 10.17 About 3.13 DSL CATV [UK] (March 2007) About 57.

6 Current Status of Broadband Services in Various Countries About 3.22 DSL About 4.09 CATV About 0.15 Others [Canada] (2006) About About About 3.13 DSL CATV [UK] (March 2007) About About 9.73 About 4.65 FTTH About 4.85 DSL [South Korea] About 5.10 CATV (September 2007) About 1.40 FTTH About About DSL CATV [USA] (June 2007) About Others (Including mobile wireless access) About 0.02 DSL FTTH DSL [France] (March 2008, FTTH: Sept. 2007) Notes: 1. The penetration status of any broadband service is shown by the number of subscription contracts. 2. CATV services are super-high-speed Internet services utilizing CATV networks. About 0.90 CATV [Germany] (September 2007) About About 0.73 Others (Including mobile wireless access) About 1.17 About 2.59 DSL About 0.34 DSL CATV [India] (December 2007) Wireless access [Malaysia] (June 2008) About 6.00 About 0.36 DSL About 0.20 Others About 0.2 Others Others [China] About 0.50 April 2008, FTTH: Dec. 2007) About 0.40 DSL CATV [Singapore] (March 2008) About 2.75 Wireless access About Sources: USA (FCC), UK (Ofcom), Germany (BNetzA), France (ARCEP etc.), Canada (CRTC), China (Ministry of Information Industry), South Korea (Ministry of Information Communications), India (TRAI), Indonesia (Ministry of Communications Information) Singapore (Information Communications Development Authority), Malaysia(MCMC), Japan (Ministry of Internal Affairs and Communications), Tribune, Fuji Chimera Research Institute, Inc, etc. FTTH FTTH About About 3.96 DSL [Japan] (June 2008) CATV About 3.00 About 0.20 DSL 3G mobile phones [Indonesia] (2007) 5

8 Table of Contents 1. Overview of Japan s s Broadband 2. Why has FTTH grown in popularity in Japan? 3. Challenges for the future of FTTH 7

9 Why has FTTH grown in popularity in Japan? 1 National target 2 Competition policy 3 Continuous investment by NTT 4 Demand for FTTH services 5 Government support 6 Geographical features of Japan etc. 8

1National target : Steps taken in Japan on ICT Strategies e-japan Strategy (January 2001) e-japan Strategy Ⅱ (July 2003) e-japan Strategy II Acceleration Package (February 2004) IT Policy package

e-japan Priority Policy Program (March 2001) e-japan Priority Policy Program - 2002 (June 2002) e-japan Priority Policy Program - 2003 (August 2003) e-japan Strategy e-japan Priority Policy Program -

10 1National target : Steps taken in Japan on ICT Strategies e-japan Strategy (January 2001) e-japan Strategy Ⅱ (July 2003) e-japan Strategy II Acceleration Package (February 2004) IT Policy package (February 2005) New IT Reform Strategy (January 2006) New IT Reform Strategy Policy package (April 2007) IT Basic Law Establishment of IT Strategy Headquarters (Director General: Prime Minister) e-japan Priority Policy Program (March 2001) e-japan Priority Policy Program (June 2002) e-japan Priority Policy Program (August 2003) e-japan Strategy e-japan Priority Policy Program (June 2004) Priority Policy Program (July 2006) Priority Policy Program (July 2007) u-japan Promotion Program 2006 (September 2006) Realizing a Ubiquitous Network Society u-japan policy of MIC 2007 Realization of a self-sustaining ICT Society

11 Next Generation Broadband Strategy 2010 (August 2006) 93.9% 100% Broadband (47.33 m (48.63 m (50.83 m 100% households) (Estimation) 95.2% households) 98.6% households) FY2010 Targets (by March 2011) March 2006 March 2007 September 2008 Ultra-High- Speed 79.7% (40.15 m households) 83.5% (42.68 m households) 89.5% (44.71 m households) 90% Total number of households: (Census in 2005) 10

12 2Competition Policy Promote Service Based Competition Policy Collocation Rules (Oct.2000) Unbundling Rules (Apr. 2001) Promote Facility Based Competition Policy Facilitation of applying into public property such as roads (Nov.2000) Guidelines on right of way (Apr. 2001) 11

13 Background of ADSL Development 1. Government s quick and thorough measures for collocation and unbundling 2. Introduction of flat-rate fee 3. New entries with drastic markdown 4. Early settlement of dispute between telecommunication operators through utilizing ADR 5. Low-penetration rate of CATV 6. NTT s inactive preparation for ADSL 12

14 Trend in the Number of Japan s Broadband Subscribers (s) Others Approx. 57.2% NTT E/W Approx. 38.0% End-Mar DSL Autumn 2000 Establishment 0 of collocation 7 and 8 unbundling rules for access networks of NTT E/W Cable Modem 4 2 FTTH 0 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 13

Competition in DSL Market EU(27) 69.6% 30.4% Netherlands 72.4% 27.6% Spain 78.1% 21.9% Finland 76.0% 24.0% Sweden 62.6% 37.4% Italy France Germany 76.6% 59.2% 61.9% 23.4% 40.8% 38.

15 Competition in DSL Market EU(27) 69.6% 30.4% Netherlands 72.4% 27.6% Spain 78.1% 21.9% Finland 76.0% 24.0% Sweden 62.6% 37.4% Italy France Germany 76.6% 59.2% 61.9% 23.4% 40.8% 38.1% Incum bents New Entrants United Kingdom 59.8% 40.2% Korea 84.3% 15.7% United States 81.9% 18.1% Japan 37.7% 62.3% 0% 20% 40% 60% 80% 100% Date European Countries:Jun.2007(European Committee) Japan:Jun.2007(MIC) USA:Jun.2006 (FCC) 14 Korea:Jan.2006 (MIC)

16 DSL Market Share of NTT East and West Others 3.3% Acca Networks 7.3% E-access 15.1% NTT West 17.5% NTT East 18.8% Softbank BB 38.0% (From data) MIC 15

17 ADSL Service Speed and Price (yen/month ) 7, (M ) 6,000 5,000 4,000 3,000 2, , fastest 10 highest cheapest 0 FY2006 Evaluation of Competitive Situation in the Telecommunications Business Field (MIC) 16

18 Trend in the Number of Japan s Broadband Subscribers (s) September 2004 K-OPTI. Com, a subsidiary of an electric power company, introduced a low-price double play. 12 DSL Cable Modem 2 FTTH 0 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 17

19 3Investment Trend for Optical Fiber of NTT East and West (unit: hundred yen) Total NTT investment 東西の設備投資総額とアクセス網の光化投資額の推移 and trend of investment for fiber local loop 12,000 10,000 8,000 10,977 7,662 Totalinvestm ent Investm ent for fiber localloops 8,851 8,483 8,235 7,969 7,754 6,966 6,000 4,000 2,000 1,490 1,640 2,370 3,330 2,830 3,490 3,560 3, feeder points. The rate of coverage is the average of NTT East and West. The opticalization of access network means the ratipo of opticalized feeder points of the all the

20 Opticalization of NTT East and West The trend of Opticalization of access network The ratio of coverage is the average of NTT East and West. The ratio of opticalized access network means that of opticalized feeder 19

21 Feeder Point AO Closure Outdoor Splitter Feeder Point NTT East/West Bldg Indoor Equipment Cabinet 8 branches from 1 strand Internal Splitter Optical Signal Transmission Equipment (OLT) 100 m 600 m Conduit/Culvert 1,500 m (one strand) (24 to 100 strands) (100 to 1,000 strands) Drop Cable (East: 655, West: 707) Main Cable (East: 5,020, West: 4,987) 20

22 4Demand for FTTH Service 1 Speed Demand for high speed data transmission 2 Price - Demand for high grade and low price 3 Service - Demand for Video Broadcasting Triple play (Data, Voice, Video) 21

23 Examples of services provided through NGN Business: Home: SaaS Telepresence Digital Cinema Digital Signage IPTV High-quality optical IP telephony Home ICT-Security, Remote control 22

24 5Government Support 1.Support for telecommunication operators (1) Low-interest loans provided by Development Bank of Japan (DBJ) (introduced in 1995) (2) Preferential corporate tax and fixed asset tax treatment (3) Debt guarantee by government agency (introduced in 1991) 2.Support for local governments (1) Subsidies to promote broadband infrastructure (introduced in 2006) (2) Subsidies to build local public network (introduced in 1999) Annual budget: Approx. 10 billion JPY. In 1,092 cases, local authorities have already been subsidized. 3.Other government agencies subsidies (1) Ministry of Agriculture, Forestry and Fisheries: Revitalization of agricultural, mountain, and fishing villages (2) Ministry of Land, Infrastructure, Transport and Tourism: Urban regeneration (3) Cabinet Office: Remote islands development

25 Conceptual Diagram of Local Intranet Project (Case of remote islands) Building BB infrastructure using optical cable and wireless network Island C Toshima Village office (Center) Island A Branch Local Intranet Schools Branch Clinic Optical undersea cable Schools Clinic 診療所 Island D Clinic 小中学校 Branch Schools Clinic Remote Health Consultation System Connecting each Island islands G nurses and doctors by means of the TV conference system. Health consultations for residents can be held referring to measured data such as blood pressure. Branch Schools Clinic Homes Schools Island F Clinic Island E Schools Branch Branch Remote teaching system Island B Connecting schools by BB network to enable remote teaching through TV conference system and to promote IT use in education. Antenna tower, BB cabinet Wireless access FTTH

26 FTTH Penetration Rate Number of local communities where FTTH is available (by population) Population (Number of local communities) 0% 20% 40% 60% 80% 100% Over 50,000 (478) 449 (93.9% ) 29 10,001-50,000 (1,186) 401 (33.8% ) 785 5,001-10,000 (783) 83 (10.6% ) 700 Less than5,000 (676) 14 (2.1% )

27 Why has FTTH grown in popularity in Japan? 1 National target 2 Competition policy 3 Continuous investment by NTT 4 Demand for FTTH services 5 Government support 6 Geographical features of Japan etc. 26

30 Table of Contents 1. Overview of Japan s s Broadband 2. Why has FTTH grown in popularity in Japan? 3. Challenges for the future of FTTH 29

31 1000 Broadband Usage : IP Traffic on the Networks (Total Volume) The total amount of IP traffic in Japan was estimated at 988.4Gbps (November 2008), which accounts for 1.2 times more than that of last year(812.9 Gbps), and about double that of three years ago (469.1Gbps). (Gbps) (2005.5) ( ) ( ) (2004.9) ( ) (2006.5) ( ) ( ) (2007.5) ( ) (2008.5) 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1 月 3 月 5 月 7 月 9 月 11 月 1997 年 1998 年 1999 年 2000 年 2001 年 2002 年 2003 年 2004 年 2005 年 2006 年 2007 年 2008 年 Estimated download traffic of broadband users in Japan Monthly average of daily traffic of broadband customers (ADSL/CATV/FTTH) of major ISPs in Japan (ref.1) Monthly average of daily peak traffic exchanged at major IXs in Japan (ref.2) Monthly average of daily traffic exchanged at major IXs in Japan 30 (source: MIC Japan)

32 Where to go, the Information Society? (Provided by Mr. Fujiwara) 1200 Mori s law Internet Broadband Traffic increase exponentially According to growth of Subscribers Moore s law Computer Performance of Computer will increase 2 times Every years(silicon Semiconductor)

33 Dr. Gordon.E.Moore recognized Mori s Law Mr.Kiyoshi Mori,Vice Minister of Ministry of Internal Affairs and Communications, presented experienced law about the growth of the broadband traffic in Japan in oct.2007 in North America. Only Japan has the experimental data of the broadband traffic on the world. With Dr.Gordon Moore (Founder of Intel Corporation) on May 1,2008 in Hawaii (Provided by Mr. Fujiwara) 32

34 IP Traffic Download Others( web or mail etc) Upload Others( web or mail etc)

Bandwidth Usage and P2P Users 10% of all users occupy 60 through 90% of the traffic Distribution of users in all traffic Traffic volume P2P users (10%) controls 60 through 90% of the traffic.

35 Bandwidth Usage and P2P Users 10% of all users occupy 60 through 90% of the traffic Distribution of users in all traffic Traffic volume P2P users (10%) controls 60 through 90% of the traffic. 75% P2P traffic (less than 10% of all users) 25% Other traffic (more than 90% of all users) 63% Heavy users (10% of P2P users) 37% average users (90% of P2P users) User (ascending sort ) Top 10% of P2P users(*) occupy more than 60% of the traffic Traffic volume Bandwidth used by heavy users completely differs from that used by average users. Top 10% among P2P users occupy over 60% of the traffic average user : 550Mbyte P2P user : 17Gbyte x 30 x 190 P2P heavy users: 104Gbyte P2P User (ascending sort ) (*) the P2P users are considered as the users whose P2P traffic exceeds over 1 Mbyte within 24 hrs. (Note) The data was provided by Plala Networks) (partly extracted) 2008 Ministry of Internal Affairs and Communications. All Rights Reserved. Measured : 2003/6/ /7/1 11:59 34 (*) the Plala Networks has controlled its P2P bandwitdth since November 2003, therefore the latest published data in uncontrolled situation is for 2003.

36 Measures to alleviate Traffic Jams 1. Reducing geographical concentrations Developing advanced P2P technologies to keep track of data location information Decentralization of IXs and Internet data centers 2. Reducing traffic congestion at peak times Developing traffic-sensitive P2P technologies Exploring methods that enable the prior downloading of data during off-peak times 3. Consideration of price plan diversification for the operators For example, plans such as a partially-metered rate system or premium flat rate system could be introduced to make for a level playing-field for all users 4. Reviewing the Guideline for Packet Shaping On going reviews of bandwidth control guidelines established and adhered to by the operators from the view point of user protection 35

37 New Competition Promotion Program 2010 Sep Main Policies Items 1. Promote Facility Based Competition (a) Promote open-up policy for establishment of network infrastructure 2. Review of Designated Telecommunications Facilities System (Dominant Regulations) 3. Review of Calculation Method for Interconnection Charges of NTT East/West 4. Promotion of Competition in Mobile Market 5. Development of Environment for Realization of IP-based Terminal Equipments 6. Review of Tariff Policy (b) Facilitate to use fibre networks owned by local governments etc. (e) Development of interconnection rules for NGNs of NTT E&W (a)review of calculation method for fixed line interconnection charge (b) Review of calculation method for optical fibre interconnection charge (c) Study of calculation method for interconnection charge of NGN 7. Review of Universal Service System 8. Development of Environment for Ensuring Network Neutrality 9. Strengthen Dispute Resolution Function 10. Strengthen Consumer Protection Policy 2008 MIC. All Rights Reserved. (a) Development of environment for effective operation of network (b) Study and review of network neutrality and procompetition framework (c) Study of measures to strengthen coordination among platforms 36

38 Thank You! 37

ICT Policy in Japan - Broadband and Mobile -

ICT Policy in Japan - Broadband and Mobile - April 16, 2009 Hiroyuki HISHINUMA Director for New Competition Policy Telecommunications Policy Division Telecommunications Business Department Telecommunications