National policy boosts Japan’s broadband success

Japan's government policies drive low-cost broadband in the land of the rising sun

A wide-ranging government policy on broadband and healthy competition among providers gives Japanese customers greater speeds at a much cheaper price than US customers pay, says NTT executive Takashi Ebihara.

Japanese customers pay about US$0.70 (NZ$0.97) for each megabit per second of bandwidth, compared with US$4.90 per megabit on average in the US, says Ebihara, senior director of the corporate strategy department at NTT East and a visiting fellow at the Centre for Strategic and International Studies, a Washington think tank.

A typical Japanese broadband customer pays about US$30 a month for 50Mbit/s of bandwidth, he says. In the US, Comcast’s 6Mbit/s service is US$42.95 a month if you also subscribe to the company’s cable TV service. AT&T’s 3Mbit/s DSL (Digital Subscriber Line) service is US$29.95 per month for the first year.

While cable modem services aren’t a major player in Japan, the two incumbent telephone companies NTT East and NTT West face major competition in the DSL space, Ebihara says. The two incumbents have about a third of Japan’s 14.4 million DSL customers.

Japanese incumbents must maintain a “level playing field”, although there are no specific net neutrality rules, Ebihara says. Such rules prohibit broadband providers from blocking or slowing web content from competitors or from speeding-up their own or their partners’ content.

“If one customer doesn’t like an ISP, you have a lot of choices,” he says. “We have competition in the ISP space.”

The Information Technology and Innovation Foundation (ITIF), a think tank focused on tech issues and which hosted Ebihara at a recent forum has argued the US needs a more aggressive broadband policy, saying broadband adoption creates new jobs and new and innovative products. As of June 2006, the US ranked 12th among Organisation for Economic Co-operation and Development nations in broadband adoption, behind Canada, Iceland and Sweden, among other countries.

The ITIF and other critics of US broadband policy say many other countries offer faster broadband at cheaper prices than is commonly available in the United States.

Japan, through its u-Japan broadband strategy, provides money for cities to wire schools and community centres, provides zero-interest or low-interest loans for cities and businesses to deploy broadband. It also provides tax breaks for the purchase of networking equipment, Ebihara says.

Asked to compare Japan’s broadband policy with the US government’s, Ebihara noted that US President George Bush has called for all residents to have access to affordable broadband by the end of this year. But the US government has done little to make this happen.

“I don’t think at the moment, the United States has any national policy,” he says. “The idea is, let the market do it.”

Part of Japan’s policy focuses on incumbent carriers sharing their networks with competitors, a policy NTT East has criticised.

Unlike in the US, Japan’s two incumbents are required to share their last-mile copper loops, their fibre loops and their internet backbone with competitors, Ebihara says. Since 2003, the US Federal Communications Commission has ended most sharing requirements for incumbents such as AT&T, arguing providers should build their own networks.

Large US incumbents AT&T and Verizon Communications argue that requirements to share broadband facilities with competitors discourage them from improving their networks or building new fibre networks. They also called on the FCC to create regulatory parity between DSL and cable modem services, which aren’t required to share their lines with competitors.

NTT East has also lobbied to end the network-sharing rules, Ebihara says. But it has moved ahead with laying high-speed fibre networks to Japanese homes even though it has lost the network-sharing fight with the Japanese government so far, he says. NTT East’s fibre-to-the-home service now passes 75% of the households in the company’s region.

NTT East has “mixed feelings” about sharing its broadband networks, Ebihara says. The two incumbents have less competition in the fibre space than in DSL, partly because competitors want to recoup their investments in DSL, he says.

“The people are happy, and our competitors are happy,” he says. “Personally, I think [the policy] is right when you look at the long-term strategy.”

Asked why NTT East continues to invest in fibre when it must share its network, Ebihara said the company, partly owned by Japan’s government, sees the benefits for the country.

“We see the future, and then we do what we feel is right,” he says. “[Making low-yield investments is] very difficult for American companies like Verizon and AT&T. They have to answer every quarter to investors.”

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