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Broadband Development and Network NeutralityExperiences and Challenges in Japan
Toshiya JITSUZUMI, D.Sc.,Kyushu [email protected]
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Purposes and agendaJapan has become the world's most advanced IT nation thanks to the collaborative efforts between the government and public sectors. These collaboration was one of the key factors that prevent net neutrality issues from being a hot issue in 2007.
However, due to the technological and market developments, the Japanese government has to introduce a new approach for the “new” net neutrality issue.
The purposes of this presentation is to summarize the past development in Japan’spolicy and describe its challenges Japan currently faces.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Agenda
1. Development of Japanese broadband
and related policies
2. Net neutrality in 2006
3. Emerging issues
1. Popularity of mobile broadband
2. Fiber wholesale
3. Net neutrality 2.0
◦ Zero-rating
History of deregulation in the Japanese telecom market
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: MIC (2015a)
1985-1995Age of the Telephone
1995-2005Age of the Internet
and the Mobile Phone
2005-presentAge of Broadband
and the Smartphone
Staged Evolution of the Japanese Telecom Policy
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Stage 1: pre-1985Primary Beneficiary:1. POTS usersMain Policy Instruments: Quasi-state monopoly Financing from users Limited use of network
Stage 3: post-2004Primary Beneficiary:1. Service providers2. Enhanced usersMain Policy Instruments: Pro-competition policy
・ Asymmetric regulation・ Ex-post control・ MVNO・ Network neutrality
etc.
Stage 2: 1985-2003Primary Beneficiary:1. Enhanced users2. POTS usersMain Policy Instruments: Pro-competition policy
Asymmetric regulation De facto standard
Liberalized use of network
Stage 2-1: 1985-1996Main Target: Introduction of competition
Main Policy Instruments: Infant industry protection
Stage 2-2: 1997-2003Main Target: Fair & effective competition
Main Policy Instruments: Asymmetric regulation
“Quasi- state monopoly” “Industrial policy” “Minimum regulation”
Source: Jitsuzumi (2009)
Deregulation ⇒ More players ⇒ Fiercer competition
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
Number of telecom operators
Type1
Type2, special
Type 2, general
Registerd
Notified
Source: MIC (2015a)
…, and more value
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
CAGR 5.26%
Source: MIC (2015a)
Changes in the industrial structure
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: MIC (2015a)
Policy initiatives for ICT development
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Development of broadband availability in Japan
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: Created using the data in MIC whitepaper and http://www.soumu.go.jp/main_content/000371278.pdf
75%
80%
85%
90%
95%
100%
Household coverage of broadband
UltraBB
BB
Broadband coverage has become ubiquitous. Price level for fixed BB is among the best.
Source: OECD (2015)
On the demand side,
0%
25%
50%
75%
100%Penetration in Japan
mobile handset forHHsmartphone forHHPC for HH
Internet forindividual
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
65.8% of HH has fixed broadband and 52.7% of the population has LTE (assuming
each has only one connection).
Penetration of access equipment has been saturated mostly.
10
0
10
20
30
40
50
60
70
BWA
LTE
0
10
20
30
40
50
60
70
Subscribers of broadband (in million)
FTTHDSLCATVFWA
Source: MIC (2015b)
Internet usage in Japan has been exploding
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
189 209 224 259 295 351 398 447 494 574
655 769 835
741 715 693 640 658 666 770 834 905 929
1,086 1,051
216 241 257 344 390 459 540 629 708 799 939
1,102 1,206 1,235 1,363 1,516 1,600 1,730
1,905
2,275 2,584
2,892
3,549
4,582
5,423
0
1,000
2,000
3,000
4,000
5,000
6,000
Sep
-04
Mar
-05
Sep
-05
Mar
-06
Sep
-06
Mar
-07
Sep
-07
Mar
-08
Sep
-08
Mar
-09
Sep
-09
Mar
-10
Sep
-10
Mar
-11
Sep
-11
Mar
-12
Sep
-12
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Gbp
s
Estimated total traffic
Upload
Download
CAGR = 16.6%
CAGR = 33.5%
Source: MIC’s website and CISCO VNI (http://www.cisco.com/c/m/en_us/solutions/service-provider/vni-forecast-highlights.html#)
… which makes the pipe clogged.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
0%
25%
50%
75%
0 10 20 30 40 50 60 70 80
Actual Speed/Advertised Speed
Average Actual Download Speed(Mbps)
USA (2009)
UK (May 2010)
Australia (2008 Q4)
Ireland (2008)
Note: Due to the inconsistency between individual nation’s estimates, this graph is for reference only. Source: Created on the basis of Akamai, Epitiro, FCC, and the author.
Japan (Mar. 2014)
Japan (Mar. 2013)
Japan (Mar.-Apr. 2012)
Japan (Jan. 2011)
Japan (Nov. 2009)
Japan (Apr. 2015)
Japan (May 2016)
Case of fixed BB Case of mobile BB
Essence of net neutrality
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: Adapted from Fig. 1 in Jitsuzumi (2015)
Low barriers to entry
High barriers to entry
Demand management
Capacity development
Short-term solution
Long-term solution
How to achieve efficient and fair traffic management in the dynamic condition?
How to calculate the optimal capacity and how to finance it?
Congestion control over the Internet backbone facing the exaflood of network demand Controlled by vertically
integrated network providers
Leverage into the neighboring market
How to discipline the behaviors of SMPs in the communication market?
Is it efficient?How to restrain the anti-competitive behaviors?
Control the monopolistic leverage of SMPs
ISPs
Network operators
UsersContent providers
Application providers
Natural monopoly
Unique business practices
Industrial structure of fixed broadband
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Local Loop Unbundling(dark fiber, dry copper, and line-sharing)
Service-based
Operator
ISP
Facility-basedOperator(cableco)
ISP
Local Loop Unbundling (dry copper)
The USJapan
Wholesale or Interconnection
NTT-east/west
AccessWholesaler
Independent ISP
Service-based
Operator
Facility-basedOperatorNTT East/West
ISP
PhysicalFacility
BroadbandAccess
ISPRetail
Service
Facility-based Operator(telco)
Rules that discipline NTT in the fixed broadband market.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Interconnection rule of the TBA
Source:Created using material provided by the MIC.
SMP rules on NTT East/West
Rules of the NTT Law
Resulted market share in the 2000s
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
78.6%
49.1%
29.1%
13.5%
5.8%
3.8%
0% 20% 40% 60% 80% 100%
BB access line wholesale market
BB access market
BB ISP market
NTT Group
Powercos
Other telcos
Cablecos
Others
Municipalities
Estimated market share in Japan
Source: Created on the basis of MIC (2008), FCC (2008a, 2008b), and Noam (2009)Note 1: ISP shares in the US are based on revenues in 2006 (Noam, 2009), which include satellite Internet; the shares in other markets are based on
the FCC’s line count and include fixed lines only.Note 2: RBOCs stand for Regional Bell Operating Companies, telcos for telecommunications companies, powercos for power companies, and cablecos
for cable companies.
43.6%
36.7%
36.3%
53.9%
53.9%
44.2%
0% 20% 40% 60% 80% 100%
Estimated market share in the US
RBOCs Cablecos
Others
Fixed ISP market in Japan vs. in the US
NTT communications
19.0%
NTTpulala7.4%
other NTT0.6%
KDDI8.5%
J:COM8.3%
other KDDI2.1%
SoftbankBB10.9%
Softbank telecom1.2%
other SB0.2%
Biglobe9.4%
nifty6.3%
sonet6.7%
other vendors2.7%
PowerCos6.3%
cableCos2.4%
other8.2%
Subscriber share
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: MIC (2015c) and FCC (2016)
Japanese approach on net neutrality in 2006Consumers are entitled to:
1. use IP-based networks flexibly and access the content/application layer freely.
2. connect to IP-based networks freely through terminals that comply with technical standards provided by laws and regulations and these terminals may connect to each other flexibly.
3. use the communication layer and the platform layer free from discrimination at a reasonable price.
Basic viewpoints that ensure net neutrality
1. Fairness in network cost sharing of network enhancements
2. Fairness in network use when market power exists on a specified layer
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
ISPs and network operators presented the “Guideline for Packet Shaping” in May 2008
1. Increased traffic must be primarily dealt with by network investments
2. Packet shaping should be targeted solely at network congestion.
3. “Clear” and “individual” consent of users is required, unless the practice is a pursuit of lawful business.
4. Packet shaping must be nondiscriminatory and adequate.
5. ISPs must disclose their packet shaping information beforehand.
Japan’s approach on Net Neutrality in the fixed BB
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Interconnection rulesSMP Regulations
NTT Law
• Guidelines for Consumer Protection Rules for the TBA
• Measurement of mobile QoS
• Anti-DoS/DDoS Guideline
• Packet Shaping Guideline
Co-regulation?
Create Competitive Conditions
NTT communications
19.0%
NTTpulala7.4%
other NTT0.6%
KDDI8.5%
J:COM8.3%
other KDDI2.1%
SoftbankBB10.9%
Softbank telecom1.2%
other SB0.2%
Biglobe9.4%
nifty6.3%
sonet6.7%
other vendors2.7%
PowerCos6.3%
cableCos2.4%
other8.2%
Subscriber share
New factors
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: https://upload.wikimedia.org/wikipedia/commons/thumb/9/9e/Wifi.svg/2000px-Wifi.svg.png, http://asia.nikkei.com/Business/Companies/NTT-going-wholesale-with-fiber-broadband
Transition to the mobile broadband
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
◦ Technologically speaking, mobile access has come to be a true substitute to the fixed counterpart.
◦ According to the MIC’s a survey, not only has the user share of mobile broadband become larger than that of fixed broadband, but its usage time is now longer.
Rules for mobile giants are much less strict.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Interconnection rule of the TBA
Source:Created using material provided by the MIC.
SMP rules on mobile giants
KDDI and Softbank are pure private.
NTT DoCoMo is one of the major members of the NTT group and 59.27% of its shares is owned by NTT holding company; however, it is free to expand its business domain.
◦ NTT DoCoMo provides Internet access services on its own.
, resulting in a more oligopolistic mobile ISP market.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Fiber wholesale by NTT will complete the mobile dominance.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Source: Press release by NTT Docomo (Jan. 29, 2015). https://www.nttdocomo.co.jp/english/info/media_center/pr/2015/0129_00.html, http://www.ntt.co.jp/news2014/1405eznv/ndyb140513d_01.html
Virtual integration of NTT DoCoMo and NTT East/West has became possible.
Japan’s approach on Net Neutrality in the mobile BB
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea) 26
Mobile migration
Less tight control on mobile SMPs
Fiber wholesale of NTT East/West
NTT’s expected dominance in the overall ISP market
NTT’s Dominance in the fiber market
NTT group KDDI group Softbank
0% 25% 50% 75% 100%
Fixed ISP
Mobile ISP
The MIC may need a new regulatory tool
for solving net neutrality “problems,”
because it cannot rely on the market dynamism in the
near future.
New aspect of net neutrality
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
How to discipline the market power in thebroadband ecosystem? Who can control OTT giants and how? Will telecom operators remain to be the
focus of broadband regulation? How should the government
protect/maximize consumers’ welfare? To what extent do mobile operators
monetize subscribers’ information? How should the OTT innovation policy be
designed? What kind of international cooperation is
required? Internet governance
Focus of net neutrality
Net Neutrality 2.0
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
How to coordinate the use of DPIwith the “privacy of correspondence”?How to guarantee that the use of DPI does not harm the “freedom of expression”?
Protect the interest of end users
Leverage into the neighboring market
Is it efficient?How to restrain the anti-competitive behaviors?How to discipline the behaviors of SMPs in the BIAS market?
Control the monopolistic leverage of SMP
Users
OTT player(Content/application
provider)
FixedMobile
ISP
Unique business practices
Monetize the eyeballs by the access control
(e.g., zero-rating)Where is the limit of zero-rating practice?How will it affect the OTT development?Impact on copyright?
Use of Deep Packet InspectionHigh
switching cost
High barriers to entry
Help the development of new innovations
Can all this setting maintain the vibrant nature of the broadband ecosystem?
Vertically Integrated Network Operator
Zero rating in Japan by MVNOs
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
J:com mobile
LINE mobile
FREETELDTI
JCI
• Can MVNOs offer zero-rating program under the Japanese definition of “net neutrality”? Should MVNOs have a same level of
responsibility as MNOs? Can the higher competitiveness of
the MVNO market make the difference?
• To what extent should the usage of DPI be allowed from the viewpoint of communication secrecy? Is “opt-in” required, or is “opt-out”
allowed?
Issues to be solved ASAP
What does this change mean for the Japanese NN?
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Till the recent past, the MIC could let the market dynamism deal with the net neutrality issue without introducing any special rules, because the Japanese broadband market was very competitive.
As the focus of the broadband usage moves towards bandwidth rich contents and toward in the mobile environment, conditions that guaranteed the appropriateness of the Japan’s net neutrality approach cannot be hold any longer.◦ Fiber wholesale of NTT and MVNOs’ zero-rating start disturbing the market even more.◦ The mobile operators are much less disciplined in the current Japan’s framework than the fixed.
Also, core of the net neutrality is changing: once a simple congestion control problem with a flavor of competition policy now covers much wider “issues.”
A new approach have to be designed, which has to include a case-by-case judgment in order to deal with the ever-changing condition.◦ In order to minimize the regulatory uncertainty, MIC has to move fast to come up with a ground
rule that accommodates the market requirement.
However, …Whether the ground rule can be drafted in a timely fashion depends on how ordinary users perceive the network neutrality in their daily lives.
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)
Image source: http://www.channel4.com/media/images/Channel4/c4-news/2014/September/10/10_net_neutrality_march_g_w.jpg
Know the
concept very well
7.3%Only know
the term20.5%
Have not
heard of it
72.2%
DO YOU KNOW WHAT NET NEUTRALITY MEANS?
Case of Japan
ReferencesFederal Communications Commission (FCC) (2008a) “Local telephone competition: Status as of December 31, 2006,”
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-279231A1.pdf.
FCC (2008b) “Local telephone competition: Status as of June 30, 2007,” http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-280906A1.pdf.
FCC (2016) “2016 BROADBAND PROGRESS REPORT,” https://www.fcc.gov/document/fcc-releases-2016-broadband-progress-report
Jitsuzumi, T. (2009) “Conditions contributing to the success of the Japanese telecom policy over the past five decades,” Studies in Regional Science, 38(4), 99101005.
Jitsuzumi, T. (2015) “Network neutrality and QoS transparency: An economic perspective,” IEICE Transactions on Communications, J98-B(10), 1030-1037.
Ministry of Internal Affairs and Communications (MIC) (2008) “Competition review in the telecommunications business field in FY 2007” (in Japanese), http://www.soumu.go.jp/menu_news/s-news/2008/080905_3_bt.html.
MIC (2015a) “White Paper 2015: Information and Communications in Japan,” http://www.soumu.go.jp/johotsusintokei/whitepaper/eng/WP2015/2015-index.html
MIC (2015b) “White Paper 2015: Information and Communications in Japan” (in Japanese), http://www.soumu.go.jp/johotsusintokei/whitepaper/ja/h27/pdf/index.html
MIC (2015c) Evaluation of competition in the telecom business sector 2014 (in Japanese), http://www.soumu.go.jp/main_content/000392652.pdf.
Noam, E. M. (2009) “Media Ownership and Concentration in America,” New York, NY: Oxford University Press.
OECD (2015) “OECD Digital Economy Outlook 2015,” OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/9789264232440-en
T. JITSUZUMI@Workshop on ICT Developments in East Asia (Aug. 28-30, 2016 / Chuncheon, Korea)