The wholesale broadband market in Japan.
The wholesale business model in Japan is predicated on simply providing high-speed access. It was believed that bandwidth would lead to new services, and these would generate revenue, and possibly even market share. The Japanese incumbents provide bandwidth only, while ISPs provide the services, and content providers provide the content. Select services are sometimes offered as an incentive to sign up for FttH. NTT East, for example, provided free video-on-demand channels in certain areas of Tokyo when new competition started to emerge. However, these services were strictly used to entice new subscribers and were not regraded as an independent revenue source.
FttH was regarded as a means to leapfrog over the competition, which in Japan meant DSL. DSL modems are often handed out for free in the subways and train stations in Japan, and DSL download rates of 40Mb/s are common. That said, bandwidth-hungry subscribers in Japan also regard DSL as unfair. The further subscribers are from the central office (CO), the less bandwidth they receive; only those closest to the CO achieve the full 40Mb/s speeds. FttH, on the other hand, offers the full bandwidth to all subscribers, regardless of their distance from the CO.
In addition to the steep competition from DSL, a strong government policy also drives deployments in Japan. In many Asian countries, the regulatory environment is built around creating incentives to invest in fibre – its not as much of a free market approach, nor ROI-driven, but rather a more proactive approach. The e-Japan initiative is a case in point.
To boost performance even further, the Japanese government mandated a switch from BPON to Gigabit Ethernet PON (GE-PON) architecture. IP Ethernet-based architectures are very cost-effective versus the BPON approach. Also, Ethernet can support the quality-of-service mechanisms they need to support now, whereas in the early 2000s, it probably couldn’t. In Asia, especially in places like China, the network is relatively new, and it is all IP-based.
Japanese carriers primarily provide data services. However, NTT is legally prohibited from providing broadcast video services, which is different to VoD. In Japan, households feature one screen for both computer and VoD applications – online instructions for installing high speed data services into the home also include directions for setting up the home theatre around the computer screen. That contrasts with the US where the home computer is used mostly for data services and is not placed in a prominent position.
In Japan, FttH network providers routinely open their networks to content providers, which offer voice and video services to the customers, to complement high-speed internet access. Strong competition in the Japanese broadband market allows customers to choose the company with the fastest speeds and the best pricing, and has driven FttH network providers to engineer greater capacity and future growth potential against the ever improving DSL technologies.
