Broadband Situation in Japan Past, Present, and Future. June 6, 2011 Tatsuo Takita Chief Consultant InfoCom Research, Inc.

Transcription

1 Broadband Situation in Japan Past, Present, and Future June 6, 2011 Tatsuo Takita Chief Consultant InfoCom Research, Inc.

2 1 About Myself Academic Career: Graduated from Keio Gijyuku University, Bachelor in Law Graduated from Oregon State University, College of Business, Master in Business Administration Business Career: Joined Nippon Telegraph and Telephone Corporation (NTT) International Affairs Department, NTT Assistant Manager, Tokyo Chuo Branch, Corporate Sales Division, NTT Chief Consultant, InfoCom Research, Inc Strategic Manager, International Office, NTT East Chief Consultant, InfoCom Research, Inc. Research/study regulation, Internet applications/services, Venture business

3 Content of Today s Presentation Trend of Broadband Penetration <Past to Present> Aggressive Price Reduction <Past> Broadband Service Status - International Comparison <Present> Broadband User Demographics <Present> Broadband Usage <Present> Popular Sites <Present> An Interesting Case <Present> What We learnt (Hypothesis) <Present> ICT Utilization - International Comparison <Present> To the Future <Present to Future> Conclusion 2

4 Trend of Broadband Penetration <Past to Present> 3

5 Past to Present: Trend of Broadband Development Broadband difusion started from DSL,and changed to FTTH. Currently, FTTH is the most popular broadband service in Japan. 000 subscribers <Year to Year the Number of the Broadband users> CATV DSL FTTH CATV DSL 0, FTTH Source: MIC (Ministry of Internal Affairs and Communications) As of March of each year 4

6 Past: Trend of DSL Increase Dramatic Change The increasing trend changed August / September New entrant(s) to the market with price destruction drove the penetration. 000 subscribers 6000 <The Monthly Number of the DSL / FTTH users From 2001 to 2002> DSL FTTH Source: MIC (Ministry of Internal Affairs and Communications) 5

7 Aggressive Price Reduction <Past> 6

8 7 Past: Trend of ADSL Price Reduction New entrants with low price drove the others prices down. yen NTT East E Access Softbank BB Source: MIC Trends of ICT Charges and Competition Policy March 1, 2010

9 8 Past: Trend of FTTH Price Reduction Price reduction started from ADSL. That led to the price reduction of FTTH. yen KDDI NTT West NTT East K-Opti.com Source: MIC Trends of ICT Charges and Competition Policy March 1, 2010

10 Broadband Service Status International Comparison <Present> 9

11 Korea Iceland Sweden Norway Netherlands Denmark Finland Luxembourg United Kingdom Canada (2008) Germany United States Belgium Switzerland (2007) New Zealand Australia (2008) Estonia 10 Japan Austria France Slovenia EU27 Ireland Spain Poland Hungary Czech Republic Portugal Slovak Republic Italy Greece Turkey (2007) Chile (2006) Mexico Present: Status of Households Broadband Penetration Households broadband penetration is not significantly high in Japan % <Households with broadband access, 2009 or latest available year> Source: OECD Broadband Statistics 2010

12 Luxembourg Netherlands Portugal United Kingdom Belgium Korea Denmark Japan France Switzerland Sweden Czech Republic Spain Finland Italy 11 Austria Germany Greece Iceland New Zealand Mexico Australia Hungary Ireland Norway Canada OECD average United States Slovak Republic Poland Turkey Present: Status of xdsl Coverage Coverage of xdsl network in Japan is in the highest range. 120 <Coverage of xdsl networks (% population or % households or % lines)> Source: OECD Broadband Statistics 2010

13 Present: Status of 3G Coverage 3G population coverage is very high in Japan. % 120 < 3G Population Coverage> Source: OECD Broadband Statistics

14 Present: Status of FTTH/B Availability FTTH/B Household availability in Japan is extremely high % <FTTH/B Household Availability> Source: OECD Broadband Statistics

15 Mexico Chile Ireland Luxembourg Spain United States Israel Greece Turkey Germany Hungary Switzerland Canada New Zealand Estonia Poland Belgium Denmark Czech Republic United Kingdom Iceland Austria Italy Finland Australia OECD Netherlands Norway Slovak Republic Korea Slovenia France Japan Portugal Sweden Present: Status of Broadband Download Speed Average broadband download speed is in the highest range. Median download speed is the highest. Kbps <Average advertised broadband download speed, by country, kbit/s, September 20> Average advertised broadband download speed, kbit/s* Median Source: OECD Broadband Statistics

16 Present: Status of Fiber Connection The percentage of the Fiber Connections is extremely high among the countries. <Percentage of Fiber Connections in Total Broadband Subscribers, June 2010> Japan Korea Slovak Republic Sweden Norway Denmark OECD Czech Republic Hungary Iceland United States Portugal Netherlands Italy Poland Turkey Switzerland Finland Germany Ireland 0% 10% 20% 30% 40% 50% 60% Source: OECD Broadband Statistics

17 Broadband User Demographics <Present> 16

18 17 Present: BB User Demographics - Gender Among the internet users, there is no significant difference in terms of gender. Among the consumers as a whole, men have higher percentage as broadband users. Total Men <Broadband Users <Broadband Users as a % of Total Men and Women> as a % of the Internet Users> % 60% 80% 100% 85,8 BB 86,3 NB 14,2 13, , ,3 45, ,7 36,3 44,2 42, Women 85,2 14,8 10 Source: MIC Trend in Info-Communications Usage Total Men Women

19 Present: : BB User Demographics Living Area Types As usually presumed, metropolitan areas have the highest percentage for the broadband users. Towns/villages have comparatively lower percentage, which may lead to digital divide. 60 % <Broadband Users as a % of Living Area Types> Metropolitan Areas Cities Towns/Vilagges Source: MIC Trend in Info-Communications Usage

20 Present: Influential Factors for Broadband Usage Age is the most influential factor for the broadband usage, but this may need further study <Factors for Broadband Use with Multivariable Analysis> yr to 59 yr Over 6 mil. yen Near Tokyo Metro Gender Age Annual Income Location Area Type Men Women < 20,000> 20,000-40,000 40,000-60,000 60,000-80,000 80, , ,000< Hokkaido Tohoku Kitakanto Minamikanto Hokuriku Koushinetsu Tokai Kinki Chugoku Shikoku Kyusyu Metro Areas Cities Towns/Villages Source: MIC Trend in Info-Communications Usage

21 Broadband Usage <Present> 20

22 Present: Comparison of Internet Usage by the User type Internet Activities are not significantly different between broadband users and narrowband users in Japan. Coporate/Government Web E-Commerce Personal Web Map/Navigation Services Digital Contents (Free) Motion picture sites Mail Magazines Net Auction Digital Contents Banking/Trading BBS/Chat Questionnaire Quize/Prize File Sharing <Internet Usage for Broadband / Narrowband Users> Broadband Narrowband % Source: MIC Trend in Info-Communications Usage

23 Present: Difference of usage by the user type The largest difference is personal web surfing. Not so bandwidth-consuming applications. Personal Web E-Commerce Motion picture sites Coporate/Government Web Mail Magazines Digital Contents (Free) Map/Navigation Services BBS/Chat Net Auction Banking/Trading Questionnaire Digital Contents Quize/Prize File Sharing <Internet Usage Difference between BB and NB Users > % Source: MIC Trend in Info-Communications Usage

24 Popular Sites <Present> 23

25 Present: Most Popular Sites top 15 <1> <6> <11> <2> <7> <12> <3> <8> <13> <4> <9> <14> <5> <10> <15> Source: Alexa Top Sites in Japan 24

26 An Interesting Case <Present> 25

27 Present: An Interesting Example Nico Nico Douga Japanese original motion picture site. Launched in 2007 Live streaming started in 2008 Nico Nico Channel started in 2008 The number of premium members is more than 1.2 million. Premium membership fee: approx. USD6.00/month Premium members can enjoy fast lane service to see motion pictures. Source: 26

28 Present: Nico Nico Douga Business Model The largest portion of the revenue comes from premium membership. Advertising accounts for rather small percentage (13%). In 2010, it moved into the black. Million Yen Premium Membership Advertising Affiliate Point Program, Others Operating Loss/Profit Revenue Approx. 80% of revenue From Red to Black Source: Financial report of dwango nd quarter 27

29 28 Present: Nico Nico Douga Competitive Advantages 1. Unique Community Unique comment feature makes users have sharing experience. If this is live streaming, it is like twitter and motion pictures at the same time and overlapping. Comments uploaded by users showing up in the pictures E-commerce products uploaded by premium members. These are merely links to Amazon or other e-commerce sites. Premium members do not get any fee. 1. Nico Nico Nama Hoso (Live Streaming) Since this service is live, general user sometimes could not enjoy the live streaming due to system constraints. This led to the increase of the number of the premium users. Source:

30 What We learnt (Hypothesis) <Present> 29

31 30 Past to Present: 3G and FTTH The increasing trend of FTTH and 3G is almost same. 000 subscribers <Year to Year the Number of the Broadband users (3G Included)> G CATV DSL FTTH G CATV DSL 0, FTTH Source: MIC (Ministry of Internal Affairs and Communications), TCA(Telecommunications Carriers Association), As of March of each year

32 31 Present: Why Choose FTTH The latest research shows that top 3 reasons for choosing FTTH is: Speed, Always-on, and Cheaper than other broadband services Speed 65,1 Always-On 53,1 Cheaper 43,4 Advertisment 34,4 Already Equiped 31,1 Source: MIC The result of questionnaire for ICT service monitors 2009

33 Present: Why FTTH is Cheaper DSL service needs basic line charge, but FTTH doesn t. Call charge of VoIP over FTTH doesn t have distance concept. Total Cost Total Cost of DSL = Basic Line Charge + DSL Charge Total Cost of FTTH = FTTH Charge Call Charge of Hikari Telephone (VoIP over FTTH) Hikari Telephone to Hikari Telephone/PSTN : Y8.4/3 min. Hikari Telephone to Mobile Phone : Y16.88, Y18.375/60 sec., Y11.34/3 min. Source: NTT East web site at Y stands for Japanese Yen. The total cost diagram is simplified for the explanation purpose. 32

34 33 Present: Hypothesis from Empirical Evidence Timing Issue: 3G and FTTH penetration was somehow related. Application Issue: Transition needs replacement from one thing to another, and voice is strong application. Feeling Issue: Fun is important. Giving customers more choice may be something good.

35 ICT Utilization International Comparison <Present> 34

36 Present: Status of ICT Utilization According to The Global Information Technology Report by World Economic Forum, Japan is in the lower range in terms of ICT utilization. Impact of ICT on Access to Basic Services Top Impact of ICT on New Services/Products Top ICT Use and Government Efficiency Top Sweden 6,15 Sweden 6,33 Qatar 6,16 Singapore 6,11 Taiwan, China 5,98 Singapore 6,15 Qatar 6,11 Korea, Rep. 5,88 Sweden 5,99 Taiwan, China 6,06 Singapore 5,83 United Arab Emirates 5,74 United Arab Emirates 6,03 France 5,83 Taiwan, China 5,73 Luxemburg 5,76 United Kingdom 5,82 Korea, Rep. 5,67 Iceland 5,76 Norway 5,76 Portugal 5,66 Korea, Rep. 5,73 Iceland 5,74 Estonia 5,57 Malta 5,67 Canada 5,69 Malta 5,54 Portugal 5,64 United States 5,67 Austria 5,54 Japan 4,87 (45) Japan 5,26 (26) Japan 4,28 (68) Source: World Economic Forum The Global Information Technology Report

37 To the Future <Present to Future> 36

38 Fundamental Principles of Path of Light Strategy 37 Present to Future: Fundamental Principles of Path of Light Strategy The Japanese government formulated the strategy to promote ICT utilization. Pillar1: Incentives to promote foundation of ICT utilization Financial support for municipalities to develop broadband facility for ICT in such as medical care, education, administration Realignment of frequency for wireless broadband Pillar 2: Review of rules for fair competition Review of dominant regulation such as reinforcing firewall, open access NW Deliberate NTT organizational formation from various perspectives etc. Pillar 3: Regulatory reform to promote ICT utilization Thrash out regulations to hinder ICT utilization Increase incentives for broadband utilization for municipalities Source: MIC Fundamental Principles of Path of Light Strategy August 31, 2010

39 38 Conclusion: Broadband penetration in Japan was driven mainly by price reduction backed by regulation. Hypothetically, migration to FTTH related to timing issue, application issue, and feeling issue from empirical evidence. However, remaining migration needs more, and ICT utilization as a whole is still on its way. Increase of broadband utilization and/ or develop killer application is the key for the future.

40 39 FYI: Comprehensive Data book about the Japanese ICT Market This is an ONLY English book describing ICT market and industry in Japan, that are drastically changing. Information & Communications in Japan 2011 CONTENTS Topics: The Latest Trend of ICT Chapter 1: A Big Picture of Info-Communications Industry Chapter 2: Domestic Info-Communications Market Chapter 3: Diversifying Personal Services Chapter 4: Corporate ICT Market on Its Way to Recovery