The document discusses network neutrality and the transition of broadband ecosystems in Japan. It summarizes the government's attempts to address this transition by proposing new rules around network neutrality and platform dominance. Two surveys of Japanese broadband users are presented that assess the potential value of zero-rating offerings and the importance users place on basic network neutrality rights. The surveys find that Japanese mobile data usage is consistent and that most users do not exceed monthly data caps, calling into question whether new rules are needed to address problems not occurring in the market.

1. A New Framework for Japan’s Network Neutrality
The Government’s Proposal and Remaining Issues
Toshiya JITSUZUMI, D.Sc.
Professor, Chuo University
jitsuzumi@tamacc.chuo-u.ac.jp
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2. Background
With the help of network effect, unique
cost structure, and the power of big
data analysis, online platforms are
expanding their business and
dominating the broadband ecosystem
not only in Japan but also on a global
scale.
◦ The more the broadband ecosystem
is dominated by such online
platforms, the less relevant the
traditional regulatory framework,
which has focused mostly on
physical network infrastructure,
becomes.
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Since their business model is so much different from that of traditional players, it is very
important and inevitable for regulators to re-design their conventional telecom policy
package.
Source：http://www.soumu.go.jp/johotsusintokei/whitepaper/eng/WP2019_outline.pdf

3. Attempts by governments and international bodies
To deal with the emerging broadband ecosystem, policymakers have started efforts to transform the
system of regulations, including:
◦ The GDPR was finally approved by the EU Parliament on 14 April, 2016. It was enforced on 25 May, 2018 – and
organizations that are not compliant could now face heavy fines.
◦ In 2018, the EC proposed a new regulatory framework for controlling online platforms. (EC, 2018)
◦ The US FTC has started a series of hearings from academics, market players, and other stakeholders to examine if
changes in the economy or international developments may make it necessary to adjust competition and consumer
protection law, enforcement priorities, and policy.
◦ The recent treatment of network neutrality by the US government, minimizing regulatory intervention from the FCC,
and relying more on market dynamism under the FTC’s supervision (FCC, 2017), can be translated as an attempt
to address such transition.
◦ The French digital services tax legislation was signed by President Macron on 24 July, 2019 and published in the
official gazette on 25 July 2019.
◦ The OECD issued a report that deals with policy concerns related to the increasing penetration of online platforms.
(OECD, 2019a)
◦ The OECD has proposed a global shake-up of corporate taxation, overturning a century of rules that have allowed
digital groups such as Facebook, Apple, Amazon, Netflix and Google to shift profits around the world to minimize
their tax bills. (OECD, 2019b)
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4. Attempts by the Japanese government
In order to deal with market dominance of giant platforms
◦ Announcement of Options for Development of Rules in response to Emerging Platform-type Business
(MIC, METI, & Japan FTC, May 21, 2019)
◦ A study group on trading environmental improvements for digital platformers recently summarized
options for developing rules for securing the transparency and fairness of trading environments and
options regarding the transfer, release, etc. of data.
In order to preserve network neutrality
◦ On April 10th, 2019, the MIC released an interim report of the network neutrality study, in which the
MIC declares that broadband users are entitled to hold four fundamental rights:
1. The right to access web content and applications
2. The right to provide content and applications to other users
3. The right to connect his/her choice of customer-premises equipment to the network as long as
they comply with certain technical standards
4. The right to enjoy equitable services for fair prices
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5. Chasing the moving target
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These proposals are basically chasing the
moving target.
These proposals are designed to be
comprehensive and fine-tuned in order to
cover every potential wrongdoing by
operators.
However, since “comprehensive” and
“fine-tuned” proposals often turn out to be
overregulation and then jeopardize a
virtuous cycle in the emerging ecosystem.
Therefore, it is important to carefully
observe the status-quo of the market and
try to predict its direction of change as
accurately as possible.
Source：https://5goodexcuses.wordpress.com/tag/solutions/

6. Research purpose
Key question :
“What is the appropriate policy approach in the Japanese market to deal with the transition of the
broadband ecosystem in the near future?”
Twofold approach
1. Summarize the policy challenges for Japanese regulators
◦ Based on a literature survey and an observation of the MIC’s discussions, and using publicly
available documents, this presentation summarizes policy challenges in the Japanese
broadband ecosystem and evaluates them.
2. Empirically observe the status-quo of the market from the consumer side.
◦ The results of two empirical analyses are presented. These describe the potential of zero-
rating offerings in the Japanese mobile market and how much Japanese broadband users
value the four consumer rights that the MIC proposed in its report.
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7. Japanese approach to NN in the past
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Article 6 (Fairness in Use)
• No telecommunications carrier shall engage in unfair
and discriminatory treatment with regard to the
provision of telecommunications services.
Article 26 (Accountability of Terms and Conditions for the
Service Provision)
• When any telecommunications carrier … intends to
conclude a contract, …, they shall, …, explain to the
person an outline of the charges and other terms and
conditions for the provision of the telecommunications
services.
Article 32 (Interconnection with Telecommunications
Circuit Facilities)
• Any telecommunications carrier shall accept a request
from another telecommunications carrier to
interconnect the telecommunications facilities …
Fairness and transparency Safeguards of the TBA SMP regulation of the TBA and the NTT Act
Competitive fixed ISP marketBuilt-in NN principle
Dominant network operators, especially NTT-East/West
are not allowed to provide ISP functions by themselves.
Source: MIC (2019)
Note: Each color
represents an ISP
category and includes
many individual ISPs.
No need to introduce special rules for “net neutrality” at least in the days of fixed broadband

8. Challenges to the ecosystem in the mobile broadband era
Fixed Mobile Convergence
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Increasing dominance of
online platformsMobile broadband
Source: https://www.broadbandgenie.co.uk/mobilebroadband/help/mobile-broadband-beginners-guide, https://www.news-postseven.com/archives/20190215_870985.html?IMAGE&PAGE=1
These three factors have completely transformed the Japanese broadband ecosystem
and brought a brand-new challenge for Japanese policymakers

9. Changing the frontline for open internet
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Network
operators
Online
platforms
ISP
CAP
CPE makers
• Platform/search
engine neutrality
• Data portability
• Network neutrality
• Open network,
interconnection
• Unbundling network
element
• Carterfone rule
End-users
The days of fixed broadband
The days of mobile
broadband with GAFA
Where telecom regulators can deal with. Where we need to deal with.
• Consumer protection
• No unfair discrimination
• Privacy protection
Integrated
network
operator
Giant online
platform

10. Call for new rules in order to deal with broadband players
But, considering the emerging eco-
system in the broadband, does this
proposal really fit the needs of
Japanese people?
The results of two empirical analyses in
2018 and in 2019 are presented. These
describe the potential of zero-rating
offerings in the Japanese mobile market
and how much Japanese broadband
users value the four consumer rights
that the MIC proposed in its report.
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11. Two web-based questionnaire surveys in 2018 and in 2019
2018 survey 2019 survey
Survey period Jan. 25, 2018 – Jan. 30. 2018
Feb. 9, 2018 – Feb. 28, 2018
Jul. 31, 2019 – Aug. 3. 2019
Number of responses 1,504 1,000
Demographics
Gender balance Male: 52.3%, Female: 47.7% Male: 51.0%, Female: 49.0%
Average age 45.8
10s and 20s: 18.8%, 30s: 19.1%, 40s: 20.5%,
50s: 20.8%, Over 60: 20.7%
47.2
10s and 20s: 15.9%, 30s: 20.0%, 40s: 19.8%,
50s: 22.6%, Over 60: 21.7%
Average HH income 6.3M yen per annum 5.8M yen per annum
Average internet experience 9.5 years 9.4 years
Average mobile internet experience 7.5 years 7.6 years
Main purpose Value of zero-rating Value of 4 basic net neutrality
rights in the MIC’s proposal
Research firm NTTCom Online Marketing Solutions Corporation
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12. Main result of 2018 survey
T. JITSUZUMI ITS Bangkok Oct. 28, 2019＠ （ ） 12
NTTdocomo
, 35.0%
KDDI,
21.3%
Softbank,
15.0%
Y!mobile,
7.1%
Rakuten,
7.0%
NTTcommun
ications,
3.1%
Main handsets
N=1,504
MNO
78.5%
MVNO
21.5% 34.2%
68.5%
16.9%
11.4%
22.7%
8.3%
15.3%
7.4%
6.6%
1.9%
4.2%
2.5%
MNO
MVNO
Image of MVNO
Provide
equivalent
service with
less price tag
Provide more
innovative
service plan
Firms with less trust
Less-stable service
Untrusted
marketing
message
Inferior
customer
care
Provider of
main handset

13. Main result of 2018 survey
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Number of data overages in 2017
Never, 79.5%
once, 4.2%
twice, 5.8%
three times, 3.9%
four times, 0.9%
five times, 2.8%
six times, 0.7%
seven times, 0.1%
eight times, 0.4% nine times, 0.1% ten times, 0.8%
eleven times, 0.1%
every month, 0.8%
The share of month in which subscribers
exceed monthly cap is 6.04%, or 1,091
months out of 18,048 months.
𝑃𝑃𝑜𝑜 0.045 ：P 𝑋𝑋 = 𝑘𝑘 =
0.045𝑘𝑘
𝑘𝑘!
𝑒𝑒−0.045
X: number of data overages in 2017
0%
25%
50%
75%
100%
0 1 2 3 4 5 6 7 8 9 10 11 12
# of data overages per year
# of data overages (actual)
Simulation
Estimated data overages of individual user
Japanese users have a good
grasp of their own mobile data
usages, which are very
constant in volume.

14. Main result of 2018 survey
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Using zero-rating
services
7.1%
Familiar
with but
not using
20.9%
Not
familiar
with
71.9%
N=1,504
Conditions
• No changes in voice communication
• Any charges incurred in the transition, such as cancellation charges for long-
term contracts and fees for getting new handsets, will be covered by the
provider.
• “Degraded video” offers video quality that is just right for smartphones but
insufficient for larger screens.
A8:
Assume the following three hypothetical data plans become available. In
addition, the fourth plan allows you to stay with your current provider. Select the
one that suits you best.
Option 1 Option 2 Option 3 Option 4
Zero-rating
availability
Not available
Zero-rating
for video
streaming
Zero-rating
for music
streaming
Continue the
current mobile
BIAS contract
Size of additional
monthly cap + 1GB + 3GB No addition
BIAS provider New MVNO Other MNO Other MNO
Additional
monthly fee + 500yen + 1,000yen + 500yen
Conjoint approach

15. Main result of 2018 survey: WTP estimation
T. JITSUZUMI ITS Bangkok Oct. 28, 2019＠ （ ） 15
Random Parameter Logit Model
njnjU ε+′= njnxβ
( )
( ) ( ) βθβ
xβ
xβ
njn
nin
dP
j
ni ∫ ∑ ′
′
= g
exp
exp
njU = � �𝛽𝛽𝑍𝑍𝑍𝑍𝑙𝑙
+ 𝜎𝜎𝑍𝑍𝑍𝑍𝑙𝑙
𝑣𝑣𝑍𝑍𝑍𝑍𝑙𝑙
� 𝑍𝑍𝑍𝑍𝑙𝑙
𝑙𝑙
+ �𝛽𝛽𝐶𝐶𝐶𝐶𝐶𝐶
+ 𝜎𝜎𝐶𝐶𝐶𝐶𝐶𝐶 𝑣𝑣𝐶𝐶𝐶𝐶𝐶𝐶�𝐶𝐶𝐶𝐶𝐶𝐶
+ � �𝛽𝛽𝐷𝐷𝑚𝑚
+ 𝜎𝜎𝐷𝐷𝑚𝑚
𝑣𝑣𝐷𝐷𝑚𝑚
�𝐷𝐷𝑚𝑚
𝑚𝑚
+ �𝛽𝛽𝐷𝐷𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
+ 𝜎𝜎𝐷𝐷𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝑣𝑣𝐷𝐷𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
� 𝐷𝐷𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
+𝛽𝛽𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹𝐹 + 𝜀𝜀𝑖𝑖𝑖𝑖
where 𝑙𝑙 = {MUSIC, dVIDEO, VIDEO}, 𝑚𝑚 = {MVNO, nMVNO}
Brand loyalty to the incumbent player can act as a barrier to
switching providers. Based on the estimates, “zero-rating” cannot
be a game-changer in the Japanese mobile broadband market.
Attribute Basic model Model A1 Model A2
Zero-rating for No zero-rating 0 yen (default) 0 (default) 0 (default)
Music streaming 187.4 yen 184.5 156.4
Degraded-quality
video streaming
Insignificant Insignificant Insignificant
Original-quality
video streaming
230.2 yen 281.9 268.8
Monthly cap No addition 0 yen (default) 0 (default) 0 (default)
+1GB 26.1 yen 101.2 93.5
+3GB 78.4 yen 212.4 296.5
+10GB 261.4 yen 264.1 285.0 yen
BIAS provider Incumbent MNO 0 yen (default) 0 (default) 0 (default)
Incumbent
MVNO
-45.6 yen -59.5 -67.8
New MVNO -203.3 yen -164.7 -178.7
Stay with current operator 704.7 yen 789.7 791.6
WTP for brand loyalty
for incumbent MNOs

16. Main result of 2019 survey: 4 rights and congestion-free-ness
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Among four NN rights, “rights to access web content
and applications” is by far the most important.
468
109
74
57
50
246
167
245
69
219
305
115
121
134
162
291
0 200 400 600 800
The most important
2nd most important
3rd most important
4th most important
Comparative importance of 4 NN rights (N=1,000)
Right to access web content and applications
Right to provide content and applications to other users
Right to connect their choice of CPEs to the network as long as they comply
with certain technical standards
Right to enjoy equitable services for proper prices
258 685 57
0 200 400 600 800 1000
Options for prioritization during the peak time
Interested if the price is right Interested only if it's free
Not using mobile internet
0
200
400
600
800
Number of
respondents
Monthly Payment (in Japanese Yen)
Average: 336.6 yen
Std.: 1,062.9 yen

17. Main result of 2019 survey
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121 346 307 226
0 200 400 600 800 1000
N
Compensation for unfair treatment
Benefited so no need for compensation
Disadvantaged but no need for compensation
Disadbantaged so need some compensation
There exist no unfair treatment
0
100
200
300
400
Number of
respondents
Monthly Compensation (in Japanese Yen)
Average: 1,313.6 yen
Std.: 5,803.2 yen
422
368
346
319
259
168
150
103
3
226
0 100 200 300 400 500
vs. long-time users for a
specific handset
vs. long-time users for a
specific career
vs. users under student
discount
vs. data gluttony
vs. users of large family
vs. new users of smartphone
vs. heavy users of specific
content
vs. specific fixed network users
Other
No unfair treatment
Experiences of unfair treatment（N=1,000）

18. Main result of 2019 survey: Conjoint approach
T. JITSUZUMI ITS Bangkok Oct. 28, 2019＠ （ ） 18
Note:
• When Facebook access is blocked, users cannot access Facebook or Messenger.
• When LINE access is blocked, users cannot use LINE and its affiliated services,
such as LINE pay.
• When data upload is blocked, users cannot upload videos or photos to the net.
• When handset restriction is applied, users have to change their handsets to the
designated one that has equivalent functions. Data transfer between handsets are
taken care for free. Designated handsets have to be used at least for the next two
years.
• When in-house MFN is applied, users are guaranteed to enjoy most favorable terms
and conditions among users of the same mobile operators.
A11:
Assume the following three hypothetical mobile plans become available. In
addition, the fourth plan allows you to stay with your current condition. Select
the one that suits you best.
Option 1 Option 2 Option 3 Option 4
Access to Facebook Blocked Blocked Unrestricted Unrestricted
Access to LINE Blocked Blocked Unrestricted Unrestricted
Data upload Blocked Unrestricted Unrestricted Unrestricted
Handset restriction Designated
handset only
Designated
handset only
Designated
handset only
Unrestricted
In-house “Most Favored
Nation (MFN)” feature w/ MFN w/o MFN w/ MFN w/o MFN
Monthly discount No discount
75%
discount
No discount No discount
For all
respondents that
have non-negative
evaluation of
Facebook
(N=1,430)
Attribute Model 1 Model 2
Access to Facebook 728.32yen 798.64
Access to LINE 4,189.26yen 4,700.25
Data upload 2,062.35yen 2,366.54
No “handset restriction” 1,052.48yen 1,152.00
In-house MFN Insignificant Insignificant
Stay with current plan Insignificant Insignificant
Attribute Model 1 Model 2
Access to Facebook -635.63yen -802.75
Access to LINE 5,043.80yen 6,419.64
Data upload 1,698.55yen 2,339.03
No “handset restriction” 621.95yen 833.51
In-house MFN Insignificant Insignificant
Stay with current plan Insignificant Insignificant
For all
respondents that
have non-positive
evaluation of
Facebook
(N=3,020)

19. 2018 survey 2019 survey
Consumers do not always value what
policymakers try to achieve.
1. Users value “rights to access” far more
than other rights.
2. Fast lane is what 94.3% of the respondents
want if the price is right.
3. Unfair treatment can be problem but only
30% of the respondents want some
compensation.
A flat ban for “content blocking” may not be
welfare-increasing. Optimal rules for open
internet should be granular enough to
accommodate individual needs.
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Main findings
1. Broadband users do not clearly understand
network neutrality.
2. Mobile users may not efficiently select their
monthly data cap, or their usage is quite
constant in volume.
3. The popularity of zero-rating in Japan is
quite limited, but it has a potential if users
are familiar with it.
4. Empirical estimation shows that zero-rating
does have the power to attract consumers,
especially video/music lovers, but on its
own zero-rating cannot be a game changer
in the mobile market.

20. New policy frontline for Japan’s policymaker
◦ Based on the analysis of the competitive
situation in Japan, it becomes clear that the
policy frontline where regulators need to
deal with is changing significantly.
◦ The traditional telecom framework covers
only part of the problem.
◦ Policymakers need other tools to address
those emerging challenges.
◦ If the existing tool cannot deal with the problem,
we need to introduce new rules.
Mismatch in the policy arena
◦ In order to take up such challenges,
Japanese “diligent” policymakers worked
very hard and came up with a policy
proposal that is very “comprehensive” and
“detailed”.
◦ But the empirical data indicate that their
agenda does not necessarily reflect the
market demand and thus it may not be able
to increase the consumers’ welfare.
◦ When designing a set of policy, policymakers
should conduct empirical surveys to check
the appropriateness of their proposal.
◦ Evidence-based policy making
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Summarized conclusion of the twofold approach

21. Proposal for Japanese policymakers
Due to the high volatility of the market, policymakers
has to suffer a lot from information asymmetry, thus
government intervention cannot always guarantee
optimal resource allocation.
Therefore, it is better to cultivate competition as much
as possible and to rely on a market-based approach.
◦ To ensure consumers’ welfare, it is important to
secure a competitive pressure throughout the
emerging ecosystem.
Guaranteeing “openness” at every interfaces of the
broadband ecosystem is the key.
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Integrated
network
operators
Giant Online
Platforms
CAP
CPE
makers
End-users
• Platform/search
engine neutrality
• Data portability
• Network neutrality
• Carterfone rule
◦ It is essential to guarantee interface neutrality between layers
that constitute the ecosystem, which is also proposed in
Easley et al. (2018).
◦ Now is the time to focus more on the remaining interface
between online platforms and content creators in order to
achieve a comprehensive net neutrality in Japan.

22. References
• Easley, R.F., Guo, H., and Krämer, J. (2018) “From Net Neutrality to Data Neutrality: ATechno-
Economic Framework and Research Agenda,” Information Systems Research, 29(2), 253-272.
• EC (2018) “Proposal for a Regulation of the European Parliament and of the Council on Promoting
Fairness and Transparency for Business Users of Online Intermediation Services,” 2018/0112 (COD).
• FCC (2017) “Declaratory Ruling, Report and Order, and Order, In the Matter of Restoring Internet
Freedom,” 33 FCC Rcd 311 (1), 83 FR 7852 (2018).
• MIC (2019) “Market Verification of the Telecom Sector, FY 2018, Annual report,”
http://www.soumu.go.jp/main_content/000645738.pdf
• OECD (2019a) “An Introduction to Online Platforms and Their Role in the Digital Transformation,”
OECD Publishing, Paris, https://doi.org/10.1787/53e5f593-en.
• OECD (2019b) “Public consultation document, Secretariat Proposal for a ‘Unified Approach’ under
Pillar One, 9 October 2019 – 12 November 2019,” http://www.oecd.org/tax/beps/public-consultation-
document-secretariat-proposal-unified-approach-pillar-one.pdf
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