Japan: Snapshot of Internet around 2000

Kenjiro Cho

2013.2.4

Broadband

In early 2000s, Japan experienced a rapid and successful transitionfrom dialup services to high-speed broadband access. There were several factors for the success:

(1) the existence of physical infrastructure

(2) market potential

(3) deregulation and competition policy making

(4) market competition with strong entrants

However, this development was not fully intended by the stakeholders. In fact, the success in broadband deployment was brought by a series of interactions happened in a short period.

Starting in 1995, there was a decade-long battle regarding the telecommunication policies. The industry side (e.g., Keidanren) expecting the benefits of the IT revolution strongly pushed the government to introduce competition

policies into the telecommunication industry.

NTT's monopoly was also one of the main targets in the US-Japan trade negotiation where the U.S. Trade Representative (USTR) requested to open up the telecommunications industry in Japan.

On the other hand, NTT resisted against competition policies with the excuse of protecting the public universal telephone service in Japan.

Finally, the regulator side turned the policy in around 2000 from regulation to competition. Under the e-Japan Strategy of the government created in 2000, Ministry of Internal Affairs and Communications (MIC) was empowered to

make Japan a top IT nation in the world by 2005, with providing broadband to everyone as a major goal. MIC started to introduce a series of rules for deregulation and competition policies, requiring NTT to lease dark fibers at regulated rates, to unbundle the access networks, and to allow colocation in the telecommunication facilities.

NTT was privatized in 1985, but continued to be a giant incumbent telecommunication operator. NTT split up NTT DoCoMo (a mobile carrier) in 1993, and was reorganized in 1999 into NTT Corp. (a holding company), NTT-East and NTT-West (regional telephone monopolies), and NTT Communications (a long distance provider).

In late 1990s, dial-up was virtually the only method for residential users to access the Internet. There was no flat-rate local-call menu in Japan, although NTT have a time-limited flat-rate dialup service only during 23:00-8:00 that was started in 1995.

Consumers were already well aware of the Internet by 2000 when the dot-com bubble peaked. In addition, i-mode, NTT DoCoMo's pioneering Internet access service for cell-phones started in February 1999, helped spreading email and web to consumers.

The first (dialup) broadband service in Japan was a CATV service introduced in October 1996 by a local CATV company in Mitaka City. But the number of CATV subscribers was limited in Japan, and the CATV service in a region was a monopoly. As a result, CATV did not become a mainstream for broadband.

On the other hand, the telephone service was an universal service, with high-quality cables covering all over the country, which played a critical role as the broadband infrastructure.

The first always-on flat-rate service was NTT's OCN Economy that started in 1997, using a 128kbps digital leased line at the cost of 38,000JPY/month, but it was too expensive for most users. NTT also started Flet's ISDN, a flat-rate ISDN dialup service with 64kbps using a B channel of ISDN in May 2000.

The broadband deployment in Japan was driven by ADSL in early 2000s. Originally, NTT was pushing a plan to migrate from ISDN directly to FTTH and reluctant to adopt ADSL, insisting that the frequency of ADSL would interfere with that of ISDN and ADSL is only an unnecessary short-term solution for the eventual transition to FTTH.

Thus, the initial ADSL experiments were conducted on non-NTT locally-owned phone lines during 1997-1999, followed by the first commercial ADSL service in Nagano Prefecture by a local provider started in August 1999 where the maximum bandwidth was 1.5Mbps (download) and 272kbps (upload) at the cost of 5,500JPY/month. With these initial ADSL efforts, MIC started to establish colocation and unbundling rules for DSL service providers to provide services using access networks of NTT-East and NTT-West.

During 1999-2000, several startup companies including Tokyo Metallic Communications started ADSL services using NTT's access networks. However, there were many barriers to open up the telecommunication giant, and the initial ADSL deployment was slow due to bureaucracy and sabotage. Nonetheless, it gradually built the foundation for open access by refining the rules for colocation, unbundled access networks, and leased dark fibers. At the point, NTT still held most of the telecommunications infrastructure in Japan, and apparently NTT did not predict to lose their advantages just by opening up small part of their business. When NTT itself joined the ADSL market in December 2000, its Flet's ADSL service was a 1.5Mbps/512kbps at 4,800JPY/month.

The situation changed suddenly when SoftBank entered the competition whose financial power was by orders of magnitude bigger than the other ADSL providers. SoftBank's ADSL service, Yahoo!BB, was based on NTT's access networks and dark fibers, and launched in September 2001. It offered 8Mbps/900kbps at 2,280JPY/month, much faster at about a half price of the other ADSL services. It was not just high-speed and low price; SoftBank did aggressive sales campaign such as providing free installation and free DSL modems, as well as lobbying for accelerate market competition. Consumers jumped on the service, and the backlog of orders surged up to hundreds of thousands. This situation forced other providers to offer competitive services, and the broadband market competition and deployment started rolling.

NTT was forced to give up their plan to migrate from ISDN directly to FTTH, but NTT still continued to invest for FTTH. NTT tried to offer a choice of ADSL and FTTH to users, and gradually increased the FTTH coverage.

In January 2000, the breakdown of residential Internet users were 11,000,000 dialup users, 140,000 CATV users, and almost zero ADSL users. The number of ADSL subscribers surged from 16 thousand in January 2001, to 1.5 million in December 2001, and to over 10 million in December 2003. At this point, SoftBank was the top ADSL provider whose share was about 1/3 of the market. It is worth noting that SoftBank made a huge investment for the broadband business and its losses accumulated over 260 billion JPY during 2001-2005.

The maximum download speed of ADSL services was also quickly improved: 1.5Mbps in 2000, 8Mbps in 2001, 12Mbps in 2002, 24M and 40M in 2003, and 50Mbps in 2004.

After the successful deployment of ADSL services, transition to FTTH occurred. The same open access rules were applied to NTT's fiber access networks so that most ISPs providing ADSL services using NTT's access networks started to provide FTTH services.

However, the competition for FTTH was driven between NTT and power companies who own their own fiber cables. It was also a competition against ADSL services.

The first commercial residential fiber service by USEN Broadband Networks, with the bidirectional bandwidth of 100Mbps at 6,100JPY/month, started in March 2001. Shortly after, NTT-East, NTT-West, K-Opticom, Tokyo Electric Power joined the FTTH market. NTT's FTTH service, B Flet's family type, started in August 2001 with 10Mbps at 6,100JPY/month where 10Mbps was shared by max 256 users. K-Opticom was leading the price competition, and also started the first 1Gbps service in July 2005 at 8,800JPY/month.

The visible shift from ADSL to FTTH started in 2003 when K-Opticom followed by NTT-East and NTT-West started sales campaign of FTTH. In 2005, the number of new contracts of FTTH exceeded that of ADSL, and the total number of ADSL subscribers started to decrease in 2006.

"Broadband Sbscribers in Japan" source: Information and Communications in Japan, White paper 2012

Backbone Networks

IX:

The first IX in Japan, NSPIXP, was established in 1994 shortly after the launch of commercial ISP operations in Japan. It was a research experiment by the WIDE project to establish business practices for ISPs to interconnect their networks. The initial NSPIXP-1 was a L3 IX with WIDE as a core, and moved to a L2-based mesh configuration. Its successor, NSPIXP-2, was established in 1996 with the current L2 bi-lateral peering policy. Later, two commercial IXes started, JPIX in 1997 and JPNAP in 2001, using the L2 bi-lateral peering policy.

Submarine cables:

During 1990s, submarine cables were transitioned from copper wire to fiber optics. The first fiber trans-Pacific cable was TPC-3 that became operational in 1989 with the capacity of 560Mbps. Optical amplifiers were employed for TPC-5CN that became operational with the capacity of 10Gbps in 1996. TPC-5CN was the first trans-Pacific cable with a redundant loop configuration. TPC-5CN was then connected to APCN, submarine fiber cables connecting

east Asian countries, in Japan in 1996, and formed pan-Pacific submarine fiber cables. More recent trans-Pacific fiber cables include China-US since 2000 with the capacity of 80Gbps, and Japan-US using DWDM since 2001 with the design capacity of 640Gbps.

"Domestic Backbone Cables in 2001" source: Information and Communications in Japan, White paper 2001 [2]

"Submarine Cables around Japan as of February 2001" source: Information and Communications in Japan, White paper 2001 [2]

Root Name Servers:

The first root DNS server in Asia, m-root, started operation in August 1997 as part of the critical Internet infrastructure in Asia. It was the only root DNS server in Asia until 2002 when the root name servers started deploying multiple instances using BGP-anycast.

IPv6:

The IPv6 development and deployment around 2000 were lead by the WIDE project. WIDE created the IPv6 Working Group in September 1995, and started to operate the 6Bone, the first IPv6-only testbed network, in 1996. In 1998, the KAME project was launched with the goal to deliver an open-source IPv6 reference protocol-stack implementation for BSD UNIX. In 2000, the USAGI project was started with the same mission of KAME but for the Linux based systems. The TAHI project was started in 1998 to develop the conformance and interoperability testing platform for IPv6.

References

[1] Benkler, Y., Faris, R., Gasser, U., Miyakawa, L. & Schultze, S.

Next Generation Connectivity. A review of broadband Internet

transitions and policy from around the world.

Cambridge: Berkman Center for Internet & Society. February 2010.

http://cyber.law.harvard.edu/pubrelease/broadband/

[2] Information and Communications in Japan, White paper 2001.

Ministry of Public Management, Home Affairs, Posts and

Telecommunications, Japan.

http://www.soumu.go.jp/johotsusintokei/whitepaper/ja/h13/html/D1110000.htm

http://www.soumu.go.jp/johotsusintokei/whitepaper/eng/WP2001/2001-index.htm

[3] Hiroshi Esaki, Hideki Sunahara, Jun Murai (Eds.)

Broadband Internet Deployment in Japan.

Ohmsha/IOS Press. 2008.