This annual report provides a comprehensive overview of the trends and developments in telecommunications and digital media markets in Japan. Subjects covered include:

Key Statistics
Market and Industry Overviews
Regulatory Environment
Major Players (fixed and mobile)
Infrastructure
Mobile Voice and Data Markets
Internet, VoIP, IPTV
Broadband (FttH, DSL, cable TV, wireless)
Convergence and Digital Media

Executive summary
Japan’s telecommunications sector is one of the most active markets in the world. Into 2007, there was continuing strong growth, with Third Generation (3G) mobile services and FttH broadband leading the way. And at the same time, the adoption of VoIP and triple play services has been signalling a significant shift in the market.

The local telecom landscape continues to be dominated by NTT Corp, the world’s largest telecommunications operator. The company has had to face up to some big challenges in the market place. NTT has been busy pursuing KDDI’s big lead in 3G mobile. After lagging KDDI in the market for some years, NTT caught up and passed its rival in 2006. By 2007 mobile operator NTT DoCoMo had a comfortable lead. Though the 2G mobile telephone sector in Japan has entered a maturing market phase, the healthy expansion of 3G has seen the overall Japanese mobile market in a period of dynamic activity. More sophisticated handsets, and the popular built-in camera phones in particular, have been an especially interesting phenomenon that is certainly stimulating the local mobile data market.

Softbank remains the player to watch in the Japanese market. Having purchased C&W IDC and the fixed-line unit of Japan Telecom in 2004 and becoming the largest shareholder in Fuji TV in March 2005, the expanding company was pushing hard for a 3G licence. After a number of attempts, Softbank finally succeeded in acquiring two licences. The Ministry of Internal Affairs and Communications (MIC) awarded Softbank a licence to provide a 3G mobile service in its on right in November 2005. Softbank then acquired mobile provider Vodafone K.K. for US$15.6 billion in early 2006. Having acquired Vodafone K.K., Softbank returned the licence it had been awarded in November 2005. The company said it was planning to unite its broadband services and Vodafone’s mobile services, including providing a video service to mobile subscribers. No doubt there will be much interest in how Softbank restructures its business. In any event, the operator was becoming a real force in the Japanese telecommunications scene. For more information, see chapter 4.2.3, page 32.

The IP telephony market in Japan has continued to run hot, with 14 million registered VoIP subscribers by early 2007. VoIP is an ongoing issue for NTT Corp, the operator having already begun to offer IP phone services to its own customers. NTT (NTT Com, NTT East, and NTT West) had a total VoIP subscriber base of 6 million by early 2007, representing a significant 43% of the market. As the traditional telephony voice services move into decline, however, NTT’s huge copper network remains significant in Japan as it must continue to support the millions of DSL broadband subscribers.

By start of 2007, Japan had more than 26 million broadband lines in place, making it the third largest broadband country in the world after the US and China (China surpassed Japan in 2004). Much of the success of broadband in Japan is owed to the stunning growth surge that occurred back in 2003; the growth took place on the back of DSL broadband technology. Other broadband services such as FttH have since attracted even greater interest in the Japanese market and the enthusiasm for DSL has begun to wane. By early 2006, there were 15 million DSL subscribers in the country, representing about 65% of the total broadband market. However, 12 months later the DSL subscriber numbers had remained almost the same, while other forms of broadband access, including FttH, were growing at an overall annual rate of around 45%. In the meantime, the DSL share of the total broadband market had dropped to 55%. The hot FttH market saw that subscriber base hit the eight million milestone in early 2007, up from just one million in early 2004. For more information, see chapter 7, page 61.

As for the players in the broadband market, Softbank continues to be a strong performer with its DSL and VoIP services. Although DSL growth levelled off in 2006, Softbank unit BB Technology had 5.2 million DSL subscribers by end-2006, representing 36% of the total DSL market.

In one of the biggest challenges for the telecom industry in Japan, the government has been pushing hard to ensure that the domestic fixed-line telephone network is completely replaced with a fully integrated IP system. Japan’s Ministry of Internal Affairs and Communications (MIC) is seeking to make this strategic transition by 2010 at a cost of around ¥50 billion. KDDI has announced that it plans to replace its fixed-line services with an IP system by the start of 2008, while NTT Corp has plans to replace at least part of its fixed-line services with an IP system by 2010. For more information, see chapter 6.9.1, page 54.

VoIP subscriber growth – 2003 - 2007

Year Subscribers (million)
2003 -
2004 6.75
2005 10.60
2006 13.76
2007 (e) 18.00

Source: BuddeComm based on MIC data
Note: Above statistics only include VoIP subscribers who have been assigned a number


Broadband subscriber growth - DSL versus FttH - 2000-2007

Year DSL FttH
2000 9,700 -
2001 1,530,000 -
2002 5,645,700 271,000
2003 10,270,000 894,000
2004 11,200,000 2,450,000
2005 14,481,000 4,640,000
2006 14,236,000 7,940,400
2007 (e) 14,000,000 11,500,000

(Source: BuddeComm based on MIC data)

Key Highlights
In what remains a very sophisticated mobile market, Japan’s mobile penetration reached 76% in early 2007 and the overall market was growing at 5%.
The 3G mobile subscriber base reached 73 million by May 2007; this was almost 76% of the total mobile subscriber base. For more information, see chapter 9.5.4, page 109.
3G subscriber numbers grew at an annual rate of close to 50% in 2006 and were growing at an even faster rate in first half 2007.
In the broadband market, while DSL subscriber growth has flattened out, FttH subscriber numbers are expanding at a very healthy pace. For more information, see chapter 7.4.1, page 70.
The FttH market grew by 70% in 2006 and by end-2007 FttH services should comprise about 40% of the total broadband access market.
With strong regulatory support, Japan has embraced VoIP. For more information, see chapter 6.9.1, page 54.
Around 18 million registered VoIP customers are anticipated in Japan by end-2007.
The government is committed to seeing the domestic fixed-line telephone network completely replaced with a fully integrated IP system by 2010.
Data in this report is the latest available at the time of preparation and may not be for the current year.

1. KEY STATSTICS
2. REGULATORY ENVIRONMENT
2.1 Major stages of reform
2.2 The MPHPT / MIC
2.3 Telephone numbering plan
2.4 Mobile Number Portability (MNP)
2.5 Interconnection arrangements
2.5.1 Fixed-mobile interconnection
2.6 History of regulatory developments
2.6.1 Telecommunications Business Law of 1985
2.6.2 Years 1992 – 1999
2.6.3 Year 2000
2.6.4 Year 2001
2.6.5 Year 2002
2.6.6 Year 2003
2.6.7 Year 2004
2.6.8 Year 2005
2.6.9 Year 2006
2.6.10 Year 2007
3. FIXED NETWORK MARKET
3.1 Market overview
3.1.1 Dialing parity
3.1.2 Analysis of Local Loop Unbundling (LLU)
3.2 Domestic services
3.2.1 Planned discontinuation of domestic fixed-line telephony in Japan
3.2.2 Local calls
3.2.3 National long-distance calls
3.2.4 International calls
4. MAJOR OPERATORS
4.1 Market developments
4.1.1 Selected mergers and acquisitions
4.2 History of major players
4.2.1 NTT Corporation
4.2.2 KDDI Corporation
4.2.3 Softbank
4.3 Defunct companies
4.3.1 Cable & Wireless IDC (defunct)
4.3.2 Vodafone Holdings K.K. / Japan Telecom (defunct)
4.3.3 POWEREDCOM and Power Nets Japan (defunct)
5. TELECOMMUNICATIONS MARKET
5.1 Overview
5.2 Fixed-line and mobile phones in Japan
5.3 Internet, broadband and wireless Internet in Japan
5.3.1 Japan Internet Providers’ Association (JAIPA)
5.4 Television broadcasting in Japan
5.5 Telecommunications carriers
6. TELECOMMUNICATIONS INFRASTRUCTURE
6.1 Overview of infrastructure developments in Japan
6.1.1 The push to develop Next Generation Network (NGN) standards
6.1.2 Opening up the last mile
6.2 Regulatory issues
6.2.1 Policy on national information superhighway
6.2.2 Government’s IT Basic Strategy
6.2.3 Government plan for ubiquitous networks
6.3 Major national infrastructure players
6.3.1 Crosswave Communications
6.3.2 KDDI Corp
6.3.3 NEC and Hitachi make next-generation routers
6.3.4 NTT Corp
6.3.5 Softbank
6.3.6 Tokyo Electric Power (TEPCO) and Kansai Electric Power (KEPCO)
6.3.7 Willcom (formerly DDI Pocket)
6.3.8 Internet Initiative Japan (IIJ)
6.4 Broadband networks
6.5 Fibre-to-the-Home (FttH)
6.5.1 Market overview
6.5.2 Development patterns
6.5.3 Fibre-to-the-Curb (FttC)
6.6 IPv6
6.7 International submarine cable infrastructure
6.7.1 Overview
6.8 Satellite infrastructure
6.8.1 Overview
6.8.2 Plans for powerful broadband satellite for 2015
6.8.3 Global Multimedia Mobile Satellite Communications (GMMSC)
6.8.4 Inmarsat
6.8.5 Asia Pacific Mobile Telecommunications (APMT)
6.8.6 Japan’s Space Development Plan
6.8.7 Major satellite operators
6.9 Voice over Internet Protocol (VoIP)
6.9.1 Overview
6.9.2 Major VoIP providers
6.9.3 Regulatory environment for IP telephony
7. BROADBAND MARKET
7.1 Overview
7.1.1 Mega Consortium / Broadband Consortium Japan (BB Japan)
7.1.2 Impact of broadband on voice market
7.2 Cable modems
7.2.1 Market overview
7.2.2 Regulatory issues
7.3 Digital Subscriber Line (DSL)
7.3.1 Market overview
7.3.2 Major DSL providers
7.4 Fibre-to-the-Home (FttH)
7.4.1 Market overview
7.4.2 Major FttH players
7.5 Broadband over powerline (BPL) / powerline communications (PLC)
7.6 Wireless broadband
7.6.1 Wireless LAN (WLAN)
7.6.2 Major WLAN providers
7.6.3 World Interoperability for Microwave Access (WiMAX)
7.6.4 Voice over WLAN (VoWLAN)
7.6.5 Ultra Wideband (UWB)
7.6.6 Local Multipoint Distribution Service (LMDS)
7.6.7 Broadband Internet via satellite
7.7 Global LAN Ethernet
8. CONVERGENCE
8.1 Overview of media convergence
8.2 Triple play models
8.3 Digital TV
8.3.1 Overview
8.3.2 Broadband TV
8.3.3 Cable TV (CATV)
8.3.4 Satellite TV
8.3.5 Digital Terrestrial TV (DTTV)
8.4 E-services
8.4.1 Overview
8.4.2 E-commerce
8.4.3 E-cash
8.4.4 E-banking
8.4.5 Online trading
8.4.6 E-government
8.4.7 E-entertainment
9. MOBILE COMMUNICATIONS
9.1 Overview of Japan’s mobile market
9.1.1 Mobile statstics
9.2 Market developments
9.3 New entrants into the mobile market
9.3.1 Mobile Virtual Network Operators (MVNO)
9.4 IP mobile telephony to hit the Japanese market around 2008
9.5 Mobile technologies
9.5.1 PDC
9.5.2 CDMA
9.5.3 PHS
9.5.4 Third Generation (3G) mobile
9.5.5 Fourth Generation (4G) mobile
9.6 Major mobile operators
9.6.1 Brief company descriptions
9.7 Mobile voice services
9.7.1 Prepaid cards
9.7.2 Mobile Satellite Services (MSS)
9.8 Mobile data services
9.8.1 Analysis – mobile data market
9.8.2 Mobile Internet
9.8.3 Short Message Service (SMS)
9.8.4 Multimedia Messaging Service (MMS)
9.8.5 General Packet Radio Service (GPRS)
9.8.6 Push-to-Talk (PTT)
9.8.7 BlackBerry
9.9 Mobile content and applications
9.9.1 Content for mobile market
9.9.2 Global Positioning System (GPS)
9.9.3 M-commerce / m-cash
9.9.4 Mobile gaming
9.9.5 Mobile conferencing
9.9.6 Mobile videoconferencing / mobile video
9.9.7 Mobile TV and radio
9.9.8 Mobile ringtone and music downloads
9.9.9 QR code readers
9.10 Mobile Internet services
9.10.1 Overview
9.10.2 Mobile Enterprise Alliance Japan
10. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – Major members of MYLINE Carriers Association – 2007
Exhibit 2 – NTT Milestones – 1952 - 2007
Exhibit 3 – Timeline of events leading to formation of KDDI – 1984 - 1999
Exhibit 4 – KDDI – subsequent events – 2000 - 2006
Exhibit 5 – Softbank history – 2000 - 2006
Exhibit 6 – Major global/regional submarine cables with landing point in Japan - 2006
Exhibit 7 – Types of telecom convergence
Exhibit 8 – Japanese satellite TV – overview of broadcasters




Table 1 – Country statistics Japan – 2006
Table 2 – Telecom revenue and investment statistics – 2005
Table 3 – Telephone network statistics – 2006
Table 4 – Internet user statistics – 2006
Table 5 – Broadband statistics – 2006
Table 6 – Mobile statistics – May 2007
Table 7 – National telecommunications authorities
Table 8 – Number of telecommunications carriers in Japan – March 2007
Table 9 – MYLINE subscribers by category – May 2007
Table 10 – Subscriber growth and penetration: fixed-line versus mobile – 1993 - 2007
Table 11 – Internet subscriber growth, cable modem, DSL and FttH – 2002 - 2007
Table 12 – VoIP subscriber growth – 2003 - 2007
Table 13 – VoIP subscribers and market share by operator – 2006
Table 14 – VoIP subscribers by number category – 2006
Table 15 – Broadband subscriber growth – 2000 - 2007
Table 16 – Broadband subscribers and households - 2006
Table 17 – Broadband subscribers and annual change by access type – 2006
Table 18 – Cable modem broadband subscriber growth – 1998 - 2007
Table 19 – DSL broadband subscriber growth – 1999 - 2007
Table 20 – DSL subscribers and market share by operator – 2006
Table 21 – Softbank’s broadband capacity and lines in service – 2002 - 2006
Table 22 – FttH broadband subscriber growth – 2002 - 2007
Table 23 – FttH subscribers and market share by operator – 2006
Table 24 – ‘New type’ WAN - subscriber growth – 2001 - 2006
Table 25 – FWA subscriber growth – 2002 - 2006
Table 26 – Softbank and the world’s leading IPTV operators – 2006
Table 27 – Cable TV subscribers – 2002 - 2007
Table 28 – Cable TV operators – 1998 - 2007
Table 29 – J-COM subscribers by service – 2000 - 2007
Table 30 – BS and CS subscribers – 2003 - 2007
Table 31 – Number of satellite broadcasters – 2003 - 2006
Table 32 – SKY PerfecTV! subscribers – 1998 - 2007
Table 33 – Mobile subscriber growth – 1995 - 2007
Table 34 – Mobile subscribers by system – May 2007
Table 35 – cdmaOne subscribers – 1999 - 2007
Table 36 – CDMA2000 1x subscribers – 2003 - 2007
Table 37 – WCDMA subscribers – 2003 - 2007
Table 38 – PHS subscribers by carrier – 2005 - 2007
Table 39 – PHS subscribers – 1995 – 2007
Table 40 – 3G mobile subscribers by operator – 2006
Table 41 – NTT DoCoMo FOMA WCDMA subscribers – 2001 - 2007
Table 42 – Mobile subscribers by operator – December 2006
Table 43 – Prepaid mobile subscribers – May 2007
Table 44 – Mobile wireless Internet subscribers by providers – May 2007
Table 45 – Mobile wireless Internet subscriber growth – 2000 - 2007