7 Jul 2009Japan Broadband Overview

Japan has been relatively late in joining the broadband revolution, but started to show rapid growth in 2001. A major reason for the delay has been the slow liberalisation of the telecommunications market, which has allowed the incumbent NTT (Nippon Telegraph and Telephone) to control the market in many ways.

Liberalisation began in 1999, when NTT was re-organised into a holding company with five major businesses, namely NTT East, NTT West (local telephone companies), NTT Communications (long distance), NTT DoCoMo (mobile), and NTT Data (information services). Following liberalisation, broadband growth picked up rapidly and by the end of June 2009 Japan was the third largest broadband nation in the world after the USA and China.

As of November 2008, the total volume of traffic downloaded by Japan's broadband users was estimated at an average of 990 Gbps, showing an increase of 21.6 per cent year on year. As of Q109, broadband household penetration stood at 63 per cent and 1 Gbps download speeds were quite common. But the government has an even more ambitious target, to provide 100 per cent broadband coverage and 90 per cent ultra high speed FTTH coverage by mid-2010 (so called Elimination of Zero Broadband Areas policy). This goal has been backed by the consistently heavy investment over the last decade, with JPY 865 billion invested in 2008 alone.

At the end of December 2008, there were 58.76 million fixed lines in Japan. The combined share of NTT East and NTT West was 85.1 per cent. Fixed line market is shrinking due to the increasing popularity of VoIP and mobile communications including 3G, and by the end of December 2008 there were 19.59 million VoIP subscribers. NTT is doing well in this market too – while the shares of Softbank BB and NTT Communications Corp dropped to 21.4 per cent and 15.5 per cent respectively, the share of NTT East and NTT West continued to increase and reached 37.4 per cent (up 7.9 per cent year on year).

NTT East and NTT West introduced ADSL over a decade ago. Market liberalisation resulted in the entry of new broadband access providers such as eAccess and ACCA, and over the last few years broadband access prices fell dramatically while ADSL speeds reached 50 Mbps. DSL subscriber numbers peaked in 2006. Since then it started falling, with an increasing number of customers choosing high speed FTTx services. In Q209, the number of FTTx subscribers for the first time exceeded that of DSL customers.

Despite liberalisation, the government still owns over 30 per cent of NTT. As a result, the operator faced less pressure from capital markets for short-term profits and was less nervous to invest in fibre network deployment. Also, NTT used profits from its mobile division, NTT DoCoMo, to invest in FTTH, and today NTT has the largest FTTH network in the world in terms of homes passed. In densely populated areas GE-PON is the most popular fibre access technology used mainly by NTT East, NTT West, and KDDI. In most cases the operators use FTTB, combining GE-PON with 100 Mbps VDSL.

As of April 2009, there were 107.84 million mobile subscribers in Japan resulting in the penetration rate of over 80 per cent. The NTT DoCoMo and KDDI shares fell slightly to 49.1 per cent and 27.7 per cent respectively, while the share of Softbank Mobile (ex Vodafone Japan) increased slightly to 18.1 per cent. A recent entrant, eMobile (a subsidiary of eAccess), continued its network expansion and by early 2009 had signed up over 1.2 million subscribers.

At the end of 2008, there were 92.72 million mobile broadband subscribers. Japan does not stop there however – it has plans to move to 4G in the next few years. DoCoMo is a leader when it comes to developing the fourth generation LTE (Long Term Evolution) standard. The operator plans to invest JPY 300-400 billion in LTE during the next five years and to cover 50 per cent of the population with the new network by 2014. Commercial LTE services are expected to be launched in H2 2010.