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In Japan, broadband moves toward ubiquity

By Geoff Hiscock
CNN

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TOKYO, Japan (CNN) -- In the heady days before the 2000 dotcom meltdown, "mobile Internet" was one of the hottest catch phrases tossed around by entrepreneurs in search of venture capital.

It's taken a while for consumers to come to the party, but six years on, mobile Internet is indeed firmly embedded in what is perhaps the world's most gadget-friendly market, Japan.

A myriad of applications, from watching TV, accessing online shopping malls, bidding at auction sites, paying utility bills, downloading music, videos and e-books, as well as the basic functions of voice, text and data, all help drive the mobile market in Japan.

Now the next commercial goal is "ubiquitous broadband" -- the jargon that Japanese telecommunications giant NTT uses for its plan to roll out high-speed broadband to a majority of the country's 45 million households.

Underpinning that "broadband everywhere" aspiration is an investment of staggering proportions. Between 2005 and 2010, NTT will spend more than $40 billion on a strategy that will test both its competitors and the appetite of its customers for new ways to spend their money.

The money will go on upgrades to its existing fixed-line phone network -- which already supports about 7 million ADSL broadband subscribers -- and to build what NTT calls the "Next Generation Network" -- a fully integrated IP (Internet Protocol) system.

Government priority

The IP network, which is a government priority on security and disaster "survivability" grounds, promises "always there and always on" broadband service, with boundless opportunities for e-commerce.

But the logistical and financial challenges are immense, even for a company such as NTT, which is owned 34 percent by the Japanese government and makes a profit of about $5 billion a year.

In what sounds like a competition regulator's dream, NTT identifies the goal for this IP project as to 'build an open network environment that a variety of players can use ... to develop a variety of services."

NTT says it will look to form alliances with these service providers.

Field trials are due to start in December 2006, with NTT's two regional arms, NTT East and NTT West slated to begin construction work on transmission equipment in early 2007.

Japan already has 24 million broadband services, making it the third largest broadband market behind the United States and China.

But unlike the mobile phone arena, where NTT's mobile offshoot DoCoMo dominates, broadband is one area where NTT is not the leading player. Instead, telco rival Softbank leads the way, with about 22 percent of the market, followed by NTT and KDDI.

Softbank took an early lead through aggressive marketing of its ADSL offering under the Yahoo! BB brand, but as content gets richer, so optical fiber has started to look more attractive to consumers.

And this is where NTT may have muscle on its side. As at September 2006, NTT had 4.7 million optical fiber subscribers, including business customers.

It is now adding more than 200,000 FTTH (fiber to the home) subscribers a month, with a target this year of 2.7 million household subscribers, up substantially from 1.7 million in 2005.

But unless there is a massive acceleration over the next four years, even this sort of growth will see it fall well short of the 30 million households target that it has set for 2010.

Still, NTT professes to be unconcerned.

"We are not pessimistic about that," a spokesman for NTT told CNN in Tokyo recently.

"FTTH (fiber to the home) is the main thrust of our company's operations. It has been NTT's dream of 30 years to change our copper wires over to optical fiber," the spokesman said.

The problem is cost; changing copper to fiber is an expensive exercise, most easily justified in dense population centers. That works for much of Japan, where the Tokyo-Nagoya-Osaka-Kobe megalopolis along the eastern seaboard accounts for 60 percent of the country's total population.

But in the remoter parts of Japan's long string of islands, getting fiber into the last handful of homes is a challenge for NTT, and indeed for KDDI and Softbank, which also are rolling out optical networks.

According to the NTT spokesman, the company already has fiber to 100 percent of its servers, and from the servers to 86 percent of its feeder points. From these feeder points to the home, the figure falls dramatically to just 10 percent. NTT's goal is to lift that to 50 percent within four years.

And that may be as close as it gets to the promise of "ubiquitous broadband" for some of Japan's 127 million people. For the remainder, wireless will be the way.

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