High Broadband Usage in Japan
The number of Internet users in Japan (estimated to be 69 million at the end of 2004) is the third largest total for any country in the world, after the US and China.
At the end of March 2005 the number of broadband users in Japan was 19.5 million, a higher total than any other country except the US and China. Much of this very strong showing in broadband usage can be attributed to the great success there has been in introducing DSL services into the Japanese market.
DSL Dominates Broadband Use
Though the extensive introduction of FTTH in Japan has been widely discussed, it is important to note that DSL has also been very widely adopted and is, in fact, currently much more widely used than FTTH. At the end of 2004 there were more than 5 times as many Japanese DSL subscribers (13.3 million) as FTTH subscribers (2.4 million). The number of cable modem subscribers (2.9 million) was also higher than the number of FTTH subscribers, though FTTH should overtake cable modems soon, if current growth trends are maintained.
DSL Flourishes after Price Cuts
DSL was first introduced in Japan in 1999, but initial take-up was very slow. NTT launched its own DSL service in late 2000. Competition increased and take-up of DSL broadband accelerated when Softbank Corp. (Yahoo! BB) entered the market. As also happened in some other countries where there were powerful incumbent telcos, after changes in the regulation of the telecom industry it took some time before the unbundling and co-location obligations imposed on NTT actually allowed new entrants to compete effectively. Price reductions by Softbank and others encouraged the DSL market in Japan to develop quickly between 2001 and 2004. Though FTTH is now growing in popularity as an alternative to DSL, some DSL service providers (e.g. eAccess) have plans for introducing higher speed versions of DSL technology.
DSL Growth Now Slowing
The number of Japanese DSL subscribers has continued to grow for virtually every quarter for the last five years, but the growth rate in recent quarters has slowed substantially. The growth of Japanese DSL subscribers, after accelerating very rapidly during 2001, moderated in 2002, then surged ahead again. Since Q1 2003 the growth rate has declined.
Major FTTH Initiative in Japan
Beginning in 2001, Japan was the first country in the world to launch a major FTTH programme. Under NTT’s plan, there would be a national rollout of fibre to the curb, potentially allowing all homes and businesses to have fibre optic connections. While much of the investment in FTTH and other broadband technologies has been privately funded, it has been strongly supported by the Japanese government as a key element of national policy, at a time when the economy has been generally weak and the overall level of investment has been low. There has been government assistance for private sector investment in broadband via low or zero interest loans, tax relief and debt guarantees.
Disappointing Take-Up of FTTH So Far, but …
Though there has been extensive investment in fibre optic cable infrastructure over the last three years, uptake of FTTH services by paying customers has been relatively slow. During 2002 and 2003 the number of FTTH subscribers grew steadily but the growth rate was hardly spectacular. Over the last 18 months the average growth has been approximately 0.4 million additional subscribers per quarter, which is a more encouraging trend.
Competition in FTTH Market
Though over half the FTTH subscribers are customers of NTT (NTT West or NTT East regions), other carriers also have a strong presence. Apart from the two NTT companies, other FTTH service providers in Japan include USEN, KDDI, K-Opticom (an affiliate of KEPCO, Kansai Electric Power Co.), POWEREDCOM (an affiliate of TEPCO, Tokyo Electric Power Co.) and Softbank.
In some cases prices for fibre-based Internet access have dropped to levels similar to, or even below, charges for equivalent ADSL services. FTTH service providers can allow their customers to obtain telephone services via VoIP technology, an advantage over ADSL where the basic line rental has to be maintained. FTTH also offers higher and more consistent performance than ADSL in terms of speed. These developments suggest that the take-up of FTTH services should accelerate as customers switch from ADSL or cable modems.