Executive Summary

Japan’s telecommunications sector is one of the most active markets in the world. The year 2005 is witnessing the strong growth of Voice over Internet Protocol (VoIP) and triple play services, continued Third generation (3G) competition among mobile operators, the noteworthy uptake of Fibre-to-the-Home (FttH) and big strides in digital and mobile broadcasting.

Despite the fact that NTT Corp is the world’s largest telecommunications operator, it faces a challenging future in the Japanese telecommunications market, as KDDI leads by a wide margin in the 3G mobile field and Softbank rules the Asymmetrical Digital Subscriber Line (ADSL) broadband and VoIP markets. Entering 2005, Softbank has become the telecom player to watch as it makes strides to become a real force in the Japanese telecommunications scene. Toward that end, Softbank purchased C&W IDC and the fixed-line unit of Japan Telecom in 2004 and became the largest shareholder in Fuji TV in March 2005.

Japan is one of the world’s hottest markets for IP telephony. It is predicted that the country will have 28 million Internet phone lines up by 2007. NTT Corp, the fixed-line giant, is justifiably worried about VoIP and has begun to offer IP phone services of its own. The growing popularity of IP telephony is dealing a blow to fixed-line giant NTT. The fixed-line network in Japan is undergoing a major transformation as the traditional telephony voice services move into decline. The copper cable of the fixed network, nevertheless, remains significant in Japan as it must support the millions of ADSL broadband subscribers.

Though the 2G mobile telephone sector in Japan has entered a maturing market phase, the overall Japanese mobile market is in a dynamic period of activity, given the popularity of built-in camera mobile phones and 3G services. Wireless Internet and mobile services have helped to keep the mobile market stimulated. Into 2005, Japan leads the world in wireless Internet users. A hot topic in Japan in 2005 is mobile satellite and terrestrial TV broadcasting.

Though DoCoMo holds over 50% of the mobile market in Japan over its rivals KDDI and Vodafone K.K. (formerly J-Phone), KDDI dominates the 3G market by a wide margin. Vodafone K.K., formerly known as J-Phone, continued to struggle in the 3G arena into 2005, despite the earlier success of camera-equipped cellular phones for its PDC service. To further open up the market, the government is considering doubling the number of mobile operators in Japan, with Softbank, eAccess and NTT Com showing interest in securing 3G licences.

Though NTT DoCoMo offered the world’s first 3G mobile phone service in late 2001, KDDI has become the dominant force in the 3G market in Japan. Nevertheless, NTT’s FOMA service began making impressive strides in 2004 and into 2005. Vodafone K.K., which entered the 3G market in December 2002, only had about 260,000 3G subscribers entering 2005.

Into 2005, Japan has the third largest number of Internet users after the USA and China, if we include mobile Internet users in the tally.

Japan dominates e-commerce activity in the Asia Pacific region. Yahoo! Japan continues to be the country’s most popular Website and competes closely with Rakuten Ichiba in the online shopping space. Into 2005, online auctions appear to be the hot online market.

Entering 2005, Japan had over 17 million broadband lines in place, making it the third largest broadband country in the world after the USA and China (China surpassed Japan earlier in 2004). Japan, long considered a laggard in the broadband market, is living up to earlier expectations of becoming a dominant player in broadband use. Softbank, via its Yahoo! BB service, is largely credited with the success of ADSL as a broadband technology in Japan. NTT Corp and Yahoo! BB are competing almost neck-to-neck in this space. Enthusiasm for ADSL appears to be waning, however, as FttH is being perceived as the hot new broadband service in Japan.

Fierce competition has emerged among Japanese data service providers, spurred on by the remarkable growth of broadband in Japan. Sluggish corporate spending has been offset by government efforts to transition to an ‘e-Japan’.

It is expected that broadcasting in Japan will transition from analogue to digital by 2010. In a similar fashion to the country’s cable TV sector, Japan’s satellite TV market underwent a period of consolidation, leaving SKY PerfecTV! as the dominant DTH operator.

Japan will see significant network developments over the coming years as the Ministry of Internal Affairs and Communications (MIC) plans to completely replace the current system of domestic fixed-line telephone network with the IP system by the early 2010s. Although NTT dominates Japanese telecommunications infrastructure, KDDI and Softbank are taking steps to bypass NTT’s system.

1. EXECUTIVE SUMMARY
2. KEY STATISTICS
3. TELECOMMUNICATIONS MARKET
3.1 Overview
3.2 Fixed-line and mobile phones in Japan
3.3 Internet, broadband and wireless Internet in Japan
3.4 Broadcasting in Japan
3.5 Convergence / triple-play developments
3.6 Ubiquitous networks
3.7 Telecommunications carriers
3.8 Market highlights and analysis – 2004
3.9 Market highlights and analysis – 2005
4. REGULATORY ENVIRONMENT
4.1 Major stages of reform
4.2 The MPHPT / MIC
4.3 Telephone numbering plan
4.4 Mobile Number Portability (MNP)
4.5 Interconnection arrangements
4.5.1 Fixed-mobile interconnection
4.6 History of regulatory developments
4.6.1 Telecommunications Business Law of 1985
4.6.2 Years 1992 – 1999
4.6.3 Year 2000
4.6.4 Year 2001
4.6.5 Year 2002
4.6.6 Year 2003
4.6.7 Year 2004
4.6.8 Year 2005
5. MAJOR TELECOMMUNICATIONS PLAYERS
5.1 Market developments
5.1.1 Selected mergers and acquisitions
5.2 Overview of major players
5.2.1 NTT Corporation
5.2.2 KDDI Corporation
5.2.3 Softbank Corporation
5.2.4 Vodafone Holdings K.K. / Japan Telecom
5.2.5 POWEREDCOM and Power Nets Japan (PNJ)
5.2.6 Utility companies
6. FIXED INFRASTRUCTURE
6.1 Market overview
6.1.1 Dialing parity
6.1.2 Analysis of Local Loop Unbundling (LLU)
6.2 National services
6.2.1 Planned discontinuation of national fixed-line telephony
6.2.2 Local calls
6.2.3 National long-distance calls
6.2.4 International calls
6.3 Voice over Internet Protocol (VoIP) overview
6.4 Major VoIP providers
6.4.1 Softbank Corp / Yahoo! BB
6.4.2 NTT Corp
6.4.3 KDDI Corp
6.4.4 NEC Corp
6.4.5 Broadband Consortium Japan (BB Japan) (formerly Mega Consortium)
6.4.6 Fusion Communications Corp
6.4.7 Japan Telecom
6.4.8 USEN Corp
6.4.9 K-Opticom
6.4.10 Skype
6.5 Regulatory environment for IP telephony
7. DATA MARKET
7.1 Overview
7.2 Integrated Services Digital Networks (ISDN)
7.3 Frame relay
7.3.1 National
7.3.2 International
7.4 Asynchronous Transfer Mode (ATM)
7.4.1 National
7.4.2 International
7.5 Value-Added Networks (VANs)
7.6 Internet Data Centres (IDCs)
7.7 Online storage
7.7.1 IIJ Document Exchange Service
7.7.2 Storage Area Network (SAN)
7.8 Content Delivery Networks (CDNs)
7.9 Very Small Aperture Terminals (VSAT) multimedia
8. INTERNET MARKET
8.1 Market overview
8.2 Mobile Internet use
8.3 Internet via fixed-line phones
8.4 Info-communication industry trends
8.5 Internet regulation
8.6 Internet network
8.7 Internet roaming
8.8 Internet development
8.8.1 IPv6
8.9 ISP market
8.9.1 Major ISPs
8.9.2 Mega Consortium / Broadband Consortium Japan (BB Japan)
8.9.3 Internet access price war
8.9.4 Free ISP services
8.10 Japan Internet Providers Association (JAIPA)
8.11 Websites / Web properties
9. BROADBAND MARKET
9.1 Overview
9.1.1 Analysis of OECD Broadband Price Survey
9.2 Broadband on demand
9.3 Info-communications infrastructure
9.4 Government’s IT Basic Strategy
9.5 Regulatory environment for broadband
9.6 Multimedia and broadband
9.7 Impact of broadband on voice market
9.7.1 IP telephony
9.8 Broadband content
9.8.1 Online gaming
9.8.2 Video-on-Demand (VoD) and broadcasting over broadband
9.8.3 Digital photos
9.8.4 Electronic publishing / E-books
9.8.5 NTV / NTT
9.8.6 Mega Consortium / Broadband Consortium Japan (BB Japan)
9.9 Cable broadband
9.9.1 Market overview
9.9.2 @Home Japan
9.9.3 Jupiter Telecommunications (J-COM)
9.9.4 Sony/Tokyu
9.10 Fibre-to-the-Home (FttH)
9.10.1 Market overview
9.10.2 Analysis – Asia bucking the FttH trend – January 2005
9.10.3 NTT Corp
9.10.4 USEN
9.10.5 K-Opticom
9.10.6 Crosswave Communications
9.10.7 KDDI
9.10.8 Softbank
9.10.9 POWEREDCOM / TTNet
9.10.10 Japan Telecom
9.10.11 Fibre-to-the-Curb (FttC)
9.11 Wireless broadband
9.11.1 Wireless LAN (WLAN)
9.11.2 Voice over WLAN (VoWLAN)
9.11.3 Ultra Wideband (UWB)
9.11.4 Local Multipoint Distribution Service (LMDS)
9.11.5 Broadband internet via Satellite
9.12 Powerline broadband / powerline communications (PLC)
9.13 Global LAN Ethernet
9.14 Asymmetrical Digital Subscriber Line (ADSL) market
9.14.1 Market overview
9.14.2 Analysis of falling charges contributing to growth
9.14.3 Major ADSL providers
10. E-SERVICES
10.1 E-commerce
10.1.1 Online shopping
10.1.2 Online ticketing
10.1.3 B2B e-commerce
10.2 E-cash
10.3 E-banks
10.4 Online trading
10.5 E-government
10.6 E-entertainment
10.6.1 Online gaming
10.7 E-services providers
10.7.1 Softbank
10.7.2 NTT Data
10.7.3 Rakuten
10.7.4 Verio
11. MOBILE COMMUNICATIONS
11.1 Market overview
11.1.1 Statistical overview
11.1.2 Market developments
11.1.3 Mobile handset market
11.1.4 Mobile technologies
11.2 Major mobile operators
11.2.1 Statistical overview
11.2.2 NTT DoCoMo
11.2.3 KDDI
11.2.4 Vodafone K.K. (formerly J-Phone)
11.2.5 Potential entrants into the Japanese mobile market
11.3 Mobile services overview
11.3.1 Mobile voice services
11.3.2 Mobile data services
11.3.3 Mobile applications
11.4 Third generation (3G) mobile
11.4.1 Overview
11.4.2 3G operators
11.4.3 3G services and content
11.4.4 Fourth generation (4G) mobile
12. BROADCASTING MARKET
12.1 Terrestrial TV
12.1.1 Market overview
12.1.2 Regulatory developments
12.1.3 NHK
12.2 Free-to-Air TV
12.2.1 Major Free-to-Air players
12.2.2 University of the Air Foundation
12.3 Digital TV
12.3.1 Digital High Definition TV (DHTV)
12.3.2 Terrestrial digital TV
12.4 Satellite TV
12.4.1 Market overview
12.4.2 Regulatory environment
12.4.3 Digital satellite TV
12.4.4 Major satellite TV players
12.4.5 Regional satellite operators
12.4.6 Mobile satellite TV broadcasting
12.5 Interactive TV
12.6 Japanese TV content
13. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – NTT corporate structure
Exhibit 2 – Major members of MYLINE Carriers Association – January 2005
Exhibit 3 - Selected Japanese broadband content initiatives – 2002 - 2004
Exhibit 4 – Major broadcasting organisations
Exhibit 5 – NHK subscribers and fees – August 2004
Exhibit 6 – Terrestrial TV broadcasting channels
Exhibit 7– Japanese satellite TV overview of broadcasters – January 2005




Table 1 – Mobile subscribers by system – March 2005
Table 2 – Country statistics Japan – 2005
Table 3 – Telecom revenue and investment statistics – March 2004
Table 4 – Telephone network statistics – 2004*
Table 5 – Internet provider statistics – 2005
Table 6 – Internet user statistics* – 2005**
Table 7 – Broadband statistics* – 2005**
Table 8 – Mobile statistics –March 2005
Table 9 – National telecommunications authorities
Table 10 – Subscriber growth and penetration: fixed-line versus mobile – 1993 - 2004
Table 11 – Telecommunications carriers in Japan – November 2004
Table 12 – ISDN line growth – 1992 - 2005
Table 13 – Japanese VSAT market forecasts – 2005 and 2010
Table 14 – Internet host computers – 1994 - 2005
Table 15 – Major forms of Internet access by subscription – 2002 - 2005
Table 16 – Cable modem and ADSL subscriber growth – 1998 - 2005
Table 17 – Broadband Internet subscribers – 2005*
Table 18 – Cable modem subscribers – 1998 - 2005
Table 19 – Cable operators providing broadband services – 2002 - 2005
Table 20 – FttH growth – 2002 - 2005
Table 21 – ADSL subscriber growth – 2000 - 2005
Table 22 – Mobile subscriber growth – 1995 - 2005
Table 23 – Mobile subscribers by system – March 2005
Table 24 – cdmaOne subscribers – 1999 – 2005
Table 25 – CDMA2000 1x subscribers – 2003 - 2005
Table 26 – WCDMA subscribers – 2003 - 2005
Table 27 – PHS subscribers by carrier – March 2005
Table 28 – PHS subscribers – 1995 - 2005
Table 29 – Mobile subscribers by operator – 2004 - 2005
Table 30 – Prepaid mobile subscribers* – March 2005
Table 31 – Wireless Internet subscribers – March 2005
Table 32 – 3G subscribers by operator in Japan – March 2005
Table 33 – FOMA WCDMA subscribers – 2001 - 2005
Table 34 – NHK’s terrestrial broadcasting service subscribers – 2003 – 2005
Table 35 – Terrestrial broadcasters* – 2003 – 2005
Table 36 – BS and CS subscribers – 2003 - 2005
Table 37 – Satellite broadcasters – 2003 – 2005
Table 38 – Digital satellite DTH households by operator – –2005*
Table 39 – SKY PerfecTV! subscribers – 1998 - 2005