Government policies add to Japan’s broadband success

A wide-ranging government policy on broadband and healthy competition among providers gives Japanese customers greater speeds at a much cheaper price than U.S. customers pay, a Japanese telecom executive said recently.

Japanese customers pay about US$0.70 for each megabit per second of bandwidth, compared to $4.90 per megabit on average in the U.S., said Takashi Ebihara, senior director of the corporate strategy department at NTT East Corp. and a visiting fellow at the Center for Strategic and International Studies, a Washington, D.C., think tank.

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

While cable modem service isn’t a major player in Japan, the two incumbent telephone companies NTT East and NTT West Corp. have major competition in the DSL space, Ebihara during a forum at the Information Technology and Innovation Foundation (ITIF), a think tank focused on tech issues. The two incumbents have about a third of Japan’s 14.4 million DSL customers.

One audience member asked Ebihara whether the Japanese government has network neutrality rules for the incumbent carriers, as are being considered in the U.S. Net neutrality rules would prohibit broadband providers from blocking or slowing Web content from competitors or from speeding up their own or their partners’ content.

Japanese incumbents must maintain a “level playing field,” although there are no specific net neutrality rules, Ebihara said. “If one customer doesn’t like an ISP, you have a lot of choices,” he said. “We have competition in the ISP space.”

Forum host ITIF has argued that the U.S. needs a more aggressive broadband policy, saying broadband adoption creates new jobs and new innovative products. As of June 2006, the U.S. 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 U.S. broadband policy say many other countries offer faster broadband at cheaper prices than is commonly available in the U.S.

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, and provides tax breaks for the purchase of networking equipment, Ebihara said.

Asked to compare Japan’s broadband policy with the U.S. government’s, Ebihara noted that U.S. President George Bush has called for all residents to have access to affordable broadband by the end of this year, but the U.S. government has done little to make that happen. “I don’t think at the moment, the United States has any national policy,” he said. “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 criticized.

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

Large U.S. incumbents AT&T and Verizon Communications Inc. argued that requirements to share broadband facilities with competitors discouraged 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 service, which was not required to share its lines with competitors.

NTT East has also lobbied to end the network-sharing rules, Ebihara said. 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 said. NTT East’s fibre-to-the-home service now passes 75 per cent of the households in the company’s region.

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

“The people are happy, and our competitors are happy,” he said. “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 said. “[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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