1. NETWORK
NEUTRALITY
IN JAPAN
TOSHIYA JITSUZUMI
KYUSHU UNIVERSITY

2. 2
IP traffic explosion
“IP traffic will grow at a
compound annual growth
rate (CAGR) of 32 percent
from 2010 to 2015.”
Source: Cisco VNI (2011)

3. 3
Internet penetration and
Broadbandization in Japan
Internet Penetration Home access
100% at the end of 2010
78% Narrowband
80% 11%
60%
BWA
FWA
40%
cable
FTTH
20% xDSL
0%
Broadband
89%

4. 4
Mori’s Law, not “Moore’s Law”
Daily average of download traffic speed of
broadband users in Japan (Gbps)
1,515
1500 1,363
1,2071,236
1,101
1000 939
Mr. Kiyoshi Mori 799
Former Vice Minister of MIC 708
http://www.ptcj.org/committee/ptcj_1.html
630
540
459
500 344 391
257
0

5. 5
Japan’s “best-effort” quality
72%
Demand of customers 69%
26%
Average 27%
41%
ADSL, up to 20 Mbps 42%
19%
ADSL, 20-35 Mbps 25%
13%
ADSL, over 35 Mbps 19%
37%
Cable 36%
23%
Nov. 2009 FTTH 24%
Jan. 2011
0% 25% 50% 75% 100%

6. 6
Users are not happy
Level of satisfaction (Jan. 2011)
5%
9%
26%
Satisfied
32%
Little satisfied
Neutral
28%
Little dissatisfied
Dissatisfied

7. 7
Japan as No.1 ……
….from the bottom
0% 20% 40% 60% 80% 100%
JAPAN (Nov. 2009) 26%
JAPAN (Jan. 2011) 27%
USA (average) 51%
USA (median) 44%
UK (May 2010) 46%
Australia (2008Q4) 66%
Ireland (2008) 60%
http://www.flickr.com/photos/tim_norris/2789759648/

8. 8
Essence of the Net Neutrality
problem
Too much
demand for the
existing Internet
infrastructure
1. Kill “bandwidth hogs”
2. Motivate ISPs to invest
3. Control monopolistic ISPs
http://www.flickr.com/photos/vshioshvili/388221237/

9. 9
In theory……
• Congestion fee
Manage • Smart market
IP • Metered rate
congestion • Direct subsidy
Control • SMP regulation
dominant • Anti-trust law
ISPs

10. 10
Uniqueness of Japan’s BB
market
Structural separation required
by NTT Act
Japan U.S.
BB ISP market ISP ISP ISP ISP
Service
Equal treatment -based
Operators Service
-based
BB access market Access
Operators
Wholesaler
Facility-based
Operators
(cables)
BB access line Facility-based Facility-based
wholesale market NTT-east/west Operators
Operators
(telco)
Local Loop Unbundling Local Loop Unbundling (dry copper)
Local loop unbundling (including fibers)
(dark fiber, dry copper, and line-sharing)
Structural Separation Telecom. Business Act
required by
Non-discrimination required by Telecom. Biz. Act

11. 11
Uniqueness of Japan’s BB
market
Japan
Estimated market share in Japan U.S.
Estimated market share in the US
BBBB ISP market
ISP market 29.1% ISP
3.8% ISP ISP
36.3% ISP 44.2%
Others Others
Service
-based
Operators Service
-based
BBBB access market
access market Access
49.1% 5.8% Operators
36.7% 53.9%
Wholesaler Other telcos
Facility-based
Powercos Operators
(cables)
BBBB access line
access line Facility-based Facility-based
wholesale market
wholesale market NTT-east/west
78.6% 13.5% 43.6%
Operators 53.9%
NTT Group Operators
(telco)
RBOCs Cablecos
0% Local Loop Unbundling
20% 40% 60% 80% 100% 0% Local Loop Unbundling (dry 60%
20% 40% copper) 80% 100%
(dark fiber, dry copper, and line-sharing)
Cablecos
Estimated market share Estimated market share
Structural Separation Municipalities
NTT group Power company Cables
Source: Created on the basis of MIC (2008), FCC (2008a, 2008b), and Noam (2009) RBOC
Other telcos Municipalities Others Cables Others
Note 1: ISP shares in the US are based on revenues in 2006 (Noam, 2009), which include satellite Internet; the shares
in other markets are based on the FCC’s line count and include fixed lines only.
Note 2: RBOCs stand for Regional Bell Operating Companies, telcos for telecommunications companies, powercos for power

12. 12
Uniqueness of Japan’s BB
market
Japan
Estimated market share in Japan U.S.
Estimated market share in the US
Merger guidelines of Japanese FTC
BBBB ISP market
ISP market 29.1% ISP
3.8% ISP ...., when the company group after
ISP
36.3% ISP 44.2%
Others Others
Service the business combination falls under
-based
Operators either ofServicefollowing standard..., it
the
-based
BBBB access market
access market Access
49.1% 5.8%
is normally considered that the effect
Operators
36.7% 53.9%
Wholesaler Other telcos
of a horizontal business combination
HHI = 1,289 Powercos
Facility-based
may not be substantial to restrain
Operators
(cables)
BBBB access line
access line (as of March 2011) Facility-based competition,...
Facility-based
wholesale market
wholesale market NTT-east/west
78.6% 13.5% 43.6%
Operators 53.9%
NTT Group Operators
(telco)
RBOCs Cablecos
Local Loop Unbundling
(a) HHI after the business
0% 20% 40% 60% 80% 100% 0% Local Loop Unbundling (dry 60%
20% 40% 80% 100%
(dark fiber, dry copper, and line-sharing)
Cablecos combination is notcopper) than more
Estimated market share Estimated market share
NTT group
Structural Separation
Power company
Municipalities
Cables
1,500.
Other telcos Municipalities Others (b) ...
Source: Created on the basis of MIC (2008), FCC (2008a, 2008b), and Noam (2009) RBOC Cables Others
Note 1: ISP shares in the US are based on revenues in 2006 (Noam, 2009), which include satellite Internet; the shares
in other markets are based on the FCC’s line count and include fixed lines...
(c) only.
Note 2: RBOCs stand for Regional Bell Operating Companies, telcos for telecommunications companies, powercos for power

13. 13
Japan’s Net Neutrality Report
(September 2007)
We must cope with the rapidly changing Internet market
and achieve the situation that satisfies the network
neutrality.
Principle 1
Unrestricted Internet experience
Principle 2
“Carterfone” rule
Principle 3
Non-discrimination and reasonable price

14. 14
For fighting IP congestion
IP traffic explosion
Analyzed a list of options
for building “scalable” networks
or ensuring “efficient” network management
Fairness in Cost Sharing
Proposed a general direction for solving the
net neutrality problem
In most cases, it recommended to trust
the outcome of market competition

15. 15
No micromanagement

16. 16
Competition will decide

17. 17
Co-regulation?
Enforcement Auditing
GUIDELINE Mechanism Mechanism
FOR
PACKET SHAPING
“…., the Guideline is not legally
Japan Internet Providers Association
Telecommunications Carriers Association
Telecom Services Association
binding, and whether to observe it or
Japan Cable and Telecommunications
Association not is at the discretion of individual
May 2008
telecommunications carriers.”

18. 18
“Co-regulation”-like rule
 Japan Internet Providers Assoc.
GUIDELINE  Telecom. Carriers Assoc.
FOR  Telecom Services Assoc.
PACKET SHAPING  Japan Cable and Telecom. Assoc.
What are
reasonable packet
shaping practices?
Japan Internet Providers Association
Telecommunications Carriers Association
Telecom Services Association
Japan Cable and Telecommunications
Association
May 2008
Voice of users

19. 19
“No taxation without
representation”

20. 20
Let the users be involved?

21. 21
Consumers’ knowledge on
actual QoS
Is the actual download speed important
for your Internet experience?
No Don't
2% know
16%
Yes, 38
%
Very No, 5
much
Little 54% 3% Only
28%
know
the
name, 9
%
Have you known what
“best-effort” means?

22. 22
Happy overestimation
More
than More 0% 25% 50% 75% 100%
once in than
a week once in
1% a month
5%
24.5%
FTTH
61.1%
Several
Never times in
39% a year
30.5%
ADSL
24% 58.6%
Seldom 36.8%
31% Cable
64.0%
How often have you measured your
Actual DN speed User estimation
actual download speed before?

23. 23
Involvement of uninformed users

24. 24
Rules for “disclosure”
FCC rule (Dec. 2010)
Article 26 of TBA
When any 1. Transparency
telecommunications carrier 2. No Blocking
or any person who engages
in acting as an 3. No Unreasonable Discrimination
intermediary, agency or
agent for concluding a BEREC proposal for
contract… intends to Transparency (Oct. 2011)
conclude a contract, …, they 1. Accessibility
shall, …, explain to the 2. Understandability
person an outline of the 3. Meaningfulness
charges and other terms 4. Comparability
and conditions for the 5. Accuracy
provision of the and
telecommunications • Proportionality
services.

25. 25
Providing detail information is
not enough

26. 26
Not everybody is perfect
• Jitsuzumi (2011) suggests that there
is a group of people who need more
effort and cost to be as QoS literate
as others.
It is not optimal and cost effective to
make everybody equally QoS literate.
Previous studies (Candeub &
McCartney, 2010; Henze et al. 2010)
showed that if detail information
about the actual QoS is available
for high-literate end-users, all
end-users including low-literate
group may be better off.
http://farm7.static.flickr.com/6237/6301178811_9cbb30c6d3_o.jpg
http://farm4.static.flickr.com/3033/2438910842_3faff2e1c7_o.jpg

27. 27
“ISP Sommelier” wanted
Gérard Basset, the Best Sommelier of the World in 2010
http://www.sommeliers-international.com/Images/Articles/SI%20129/concours-MSM-4.jpg

28. 28
Thank you for your attention.
Toshiya Jitsuzumi
Professor, Kyushu University
jitsuzum@en.kyushu-u.ac.jp