Presentation at APT seminar, “Training Workshop on Policy Development for High Level Officials” on June 26, 2023.

1. Recent ICT issues in Japan
that I find very interesting
Toshiya Jitsuzumi, D.Sc., MBA
Professor, Chuo University
T. JITSUZUMI@APT seminar Tokyo, 2023/6/26)
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2. Broadband in Japan
T. JITSUZUMI@APT seminar Tokyo,2023/6/26)
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Source: http://kouwa-cc.co.jp/images/06.jpg

3. An economic reason why we deploy broadband is…
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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because it is good for the overall economy.

4. Broadband is a foundation for economic prosperity
Society 5.0
◦ a human-centered society that balances
economic advancement with the resolution of
social problems by a system that highly integrates
cyberspace and physical space
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: Cabinet Office
Vision for a Digital Garden City Nation
◦ Aims of this vision it to maintain future prosperity
in the outlying regions of Japan and to encourage
many people around the world to gain a deeper
understanding of and connection with the
country’s rural areas, achieving rural-urban digital
integration and transformation.
◦ 4 initiatives:
1. Building digital
infrastructure
2. Developing and securing
human resources with
digital skills
3. Implementing digital
services to solve rural
issues
4. Initiatives to leave no one
behind

5. Economic impacts of broadband “penetration”
The findings based on cross-country data:
1. Developed countries with high penetration of fixed broadband enjoy a “return to scale” effect.
2. The impact of mobile broadband is driven by a “saturation” or “diminishing returns” effect.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: ITU (2020) “How broadband,
digitization and ICT regulation impact the
global economy: Global econometric
modelling November 2020,”
https://www.itu.int/dms_pub/itu-d/opb/pref/D-
PREF-EF.BDR-2020-PDF-E.pdf

6. Economic impacts of broadband “speed”
Research on the contribution of
broadband speed to economic growth
generally concludes that faster Internet
access has a positive impact on GDP
growth.
◦ Faster broadband contributes to an
improvement of productivity resulting
from the adoption of more efficient
business processes.
◦ Faster connectivity yields an
acceleration of the rate of
introduction of new products,
services, and the launch of
innovative business models.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: ITU (2020) “How broadband, digitization and ICT regulation impact the global economy: Global econometric modelling November 2020,” https://www.itu.int/dms_pub/itu-d/opb/pref/D-PREF-EF.BDR-2020-PDF-E.pdf
While all studies conclude that
broadband speed has an impact on
GDP, the range of contribution
varies.

7. Fixed Broadband “availability” in Japan (Source: MIC)
98.0%
98.3%
98.8%
99.1%
99.3%
99.7%
99.9%
97.5%
98.0%
98.5%
99.0%
99.5%
100.0%
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 target FY2030
HH coverage of FTTH
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Prefectural variation of FTTH coverage at the end of FY2020

8. Providers of fixed broadband
In most non-urban areas, a single fixed broadband
operator provides coverage, leading to areas with no
competition.
Fixed broadband services in these areas are entirely
dependent on the infrastructure of the sole operator.
It is estimated that the profitability of local operators is
deteriorating due to the declining population, making
it difficult to maintain the fixed broadband availability
in local areas.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Not yet covered
Covered less than 50%
Covered by a single operator
Covered by two operators
Covered by more than two operators

9. Coverage of Japanese mobile carrier, au
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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10. Japan: Fixed and mobile subscriptions
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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World
Source: ITU DataHub

11. Broadband Penetration of Japan
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: MIC (2022) “Information and Communications in Japan, WHITE PAPER 2022”
Total household in Japan is 48.85M in 2020
Total population in Japan is 125.7M in 2021

12. Traffic explosion, mostly by video.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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VNI Complete Forecast Highlights (CISCO, 2018)
Consumer Internet Traffic
◦ Globally, consumer Internet traffic will grow 4-fold
from 2017 to 2022, a CAGR of 31%.
Business Internet Traffic
◦ Globally, business Internet traffic will grow 3.1-fold
from 2017 to 2022, a CAGR of 25%.

13. Traffic explosion in Japan
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Possibility that viewers
who learned of Japan's
victory on the noon
news watched the
recording on the go.

14. Increasing stress on Japan’s broadband infrastructure
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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29.2%
27.2%
24.1%
32.7%
28.9%
30.8%
27.4%
22.3%
20.7%
19.2%
0.0%
10.0%
20.0%
30.0%
40.0%
0
30
60
90
120
Actual speed
/Advertised
Actual speed
（Mbps）
Download Upload Download actual/advertised
Source: Author

15. Speed is not the only problem
Latency and jitter also matter.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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16. Broadband as a universal service
The number of broadband service subscriptions is increasing yearly, making both the "development" and
"maintenance" aspects increasingly important.
Due to changes in socio-economic activities brought about by the COVID-19 pandemic, there is a
growing need for digital solutions in areas such as teleworking and remote learning.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Establish a grant system to ensure stable
broadband service provision in unprofitable areas
by designating certain broadband services as basic
telecommunications services (universal service).
Universal
Service
Fund
Eligible
Operators
Contributing
Operators
MIC
Source: MIC’s homepage, https://broadbandbreakfast.com/2022/12/how-long-will-it-take-congress-to-revamp-the-universal-service-fund/

17. From the viewpoint of economic security
TOKYO -- Japan is looking to expand submarine cables
that connect the country to the rest of the world as part
of the government's recent efforts to strengthen
economic security.
By developing a decentralized telecommunications
network -- vital for the internet -- Tokyo intends to make
the country more resistant to disasters and geopolitical
risks.
…
For financing, the government will increase the Digital
Infrastructure Development Fund established by the
Ministry of Internal Affairs and Communications in fiscal
2021. The fund has already secured 50 billion yen
($350 million). The government will subsidize a certain
percentage of project costs. Business consortiums are
expected to be eligible for support.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: Nikkei Asia (2023) https://asia.nikkei.com/Business/Telecommunication/Japan-
to-expand-number-of-submarine-cables-for-economic-security

18. … and from the viewpoint of national security,
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: https://blog.adaptivemobile.com/the-mobile-network-battlefield-in-ukraine-part-1, https://www.thesun.co.uk/news/22028050/china-taiwan-invasion-dry-run-internet/

19. Debate for fair contribution
T. JITSUZUMI@APT seminar Tokyo,2023/6/26)
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Source: http://kouwa-cc.co.jp/images/06.jpg

20. Remaining problem: How to finance network expansion?
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Capex per company (millions of yen)
Telecom. CATV
Source: Created by the author using METI data
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Monthly Yen
ARPUs of NTT
Mobile ARPU
Fixed ARPU (NTT East)
Fixed ARPU (NTT West)
Source: Created by the author using NTT Annual Report 2022 Source：omdia（2022/10/13）

21. Free rider？
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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CAPs

22. Total costs that can be attributed to OTT traffic across Europe
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: Frontier Economics (2022) “Estimating OTT Traffic-related Costs on European
Telecommunications Networks: A report for Deutsche Telekom, Orange, Telefonica and
Vodafone,” available at https://www.telefonica.com/es/wp-
content/uploads/sites/4/2022/05/2022-03-30-Frontier_Fair-Share_FINAL-REPORT.pdf

23. SPNP or “fair contribution”
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: https://www.slideshare.net/ictseserv/sending-party-network-pays-fv-bseserv-athens-jan12-v10

24. Expected impact of a fair contribution
AXON (2022)
Pollet (2023)
◦ Tech firms argue that they already do their "fair share" by spending around "€22 billion per year on
internet infrastructure for Europe" via subsea cables, content-delivery networks and data centers,
Borggreen said. "Telecom operators and other internet service providers in Europe actually save €1
billion annually thanks to tech’s infrastructure investments," he said.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: AXON Partners Group (AXON) (2022) “Europe’s internet ecosystem: socio-economic benefits of a fairer balance between tech giants and telecom operators,” available at https://etno.eu/library/reports/105-eu-internet-ecosystem.html,
Pollet, M. (2023) "Big Telco vs. Big Tech: The battle over ‘fair share,’ explained," POLITICO, Feb. 20, available at https://www.politico.eu/article/telecom-netflix-tiktok-youtube-fair-share-why-telcos-are-going-at-war-with-big-tech/

25. Arguments relating a fair contribution
Arguments for a fair contribution payment:
1. Stagnant telco shareholder returns and network costs
2. Surge in traffic and network pressures
Arguments against a fair contribution payment:
1. The Open Internet Access & Net Neutrality Principles
◦ Net neutrality could be jeopardized if Big Techs agree with network operators, resulting in fast lanes.
2. Identifying a non-discriminatory model to enforce payments
◦ Collecting payments generates concerns, as arbitrary firm selection may be discriminatory, and
utilizing network traffic offers no transparent payment model.
3. Big Tech R&D and subsea cable investments
◦ Big Techs make substantial investments in subsea cables and R&D, contributing to the internet
value chain, which casts doubt on the necessity for additional financial support.
4. Potential consequences for consumers
◦ Charging CAPs for delivering high-bandwidth use cases, and driving telco infrastructure demand,
seems counterintuitive, as telecom companies already reap benefits from these services.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: Satari, A. (2023) "A look at the pros and cons of the
‘fair contribution’ debate," telecoms.com, 11 January
2023@15:31, available at https://telecoms.com/519346/a-
look-at-the-pros-and-cons-of-the-fair-contribution-debate/

26. The remaining question
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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27. T. JITSUZUMI@APT seminar Tokyo,2023/6/26)
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Spectrum auction at last

28. Wireless Business Outlook in Japan
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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0
20
40
60
80
100
120
2015 2020 2030 2040
Trillion yen
Size of Wireless Business
Network CPE Platform Content User industry
The market size of the radio wave-related industry is
expected to expand from 36 trillion yen in FY2015 to 92
trillion yen in FY2030 and 112 trillion yen in FY2040.
The share in the Japanese total production was
approximately 4% in 2015 and will be 12% in 2040.
Source: MIC

29. Hype Cycle
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: Thales Group HP
Infrastructure
CPEs
Use cases

30. Number of radio stations in Japan
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: MIC (2022) “Information
and Communications in Japan,
WHITE PAPER 2022”
The number of radio stations at the
end of fiscal 2021 was 291.98
million, an increase by 5.4% from the
previous year, including 288.59
million mobile phones and other land
mobile stations (increase by 5.2%
from the previous year).

31. Bandwidth needed for future use in Japan
System Mobile
Satellite,
HAPS
IoT, Wi-Fi MaaS Total bandwidth
At the end of
FY2020
4.2GHz 9.8GHz 9.5GHz 13.9GHz approx.37GHz
At the end of
FY2025
+6GHz +9GHz +1GHz +30MHz +approx.16GHz
In 2030s +38～52GHz +18～26GHz +7～10GHz +6～14GHz +approx.102GHz
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: MIC
At present, "conditional auctions" serve as the primary mechanism for spectrum allocation.
These auctions establish specific criteria for bidders to fulfill policy objectives while
simultaneously considering the economic value of the spectrum.
In the near future, it would be wise to investigate the potential implementation of "conditional
auctions" for high-frequency bands, specifically those projected for 5G allocation, such as the
4.9 GHz band, the 26 GHz band, and the 40 GHz band.

32. Various Methods for Frequency Allocation
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Pure Auction
Comparative review Not taking into account the
economic value of frequencies
Scoring Auction
Scoring of qualitative elements
of technology and service,
combined with the economic
value of frequencies
Conditional Auction Assign certain conditions when
allocating frequencies
Lottery
Pros for auction
1. Ensures transparency in procedures,
allowing for frequency allocation even
when there is insufficient information
on how effectively each operator can
utilize and create value from the
frequencies.
2. Promotes efficient use of frequencies.
3. By relaxing screening requirements,
more discretion can be given to
operators, encouraging innovation.
Cons for auction
1. Excessive bid prices can lead to
delays in infrastructure investment
and the transfer of costs to user fees.
2. Concentration of frequencies among
specific operators may result in a
decline in fair competition.

33. Japan’s Ministry of Internal Affairs and Communications
(MIC) is aiming to launch a 5G spectrum auction in early
2026, Japanese newspaper Nikkei reported.
This would be the first time that the Japanese government
has used an auction to award frequencies, as the MIC
usually allocated spectrum to local mobile operators for free.
The newspaper said that instead of a traditional auction
where the authorities take into account the price offered by
mobile operators, the auction will take into account several
factors, such as technology and business plans.
Nikkei also noted that the format of the auction has not yet
been determined. However, the ministry is analyzing the
possibility of including millimeter wave (mmWave)
frequencies in future auction processes.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Source: RCR Wireless News

34. Issues to be solved
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Measures to prevent soaring bid include:
◦ Upper limit of frequencies that can be acquired (frequency cap)
◦ Bidding round limits
Details of the auction design include:
◦ Size of frequency block
◦ Allocation units (per prefecture, etc.)
◦ Length of time for exclusive right to apply
◦ Details of conditions
◦ Minimum bid level
◦ Measures to deter anti-competitive behavior
Implementation process
Methods for monitoring the use of allocated frequency bands
Use of auction proceeds

35. Theoretically speaking,….
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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Auctions are a mechanism for discovering the most efficient users, not for obtaining
the greatest revenue.
◦ If it is designed to be a one-time, the amount of the winning bid may be refunded
later.
◦ The entity that offers the largest bid is either the entity that can provide the service
most efficiently, i.e., at the lowest cost, or the entity that can earn the most revenue
because it can provide the greatest value to the users. Allowing such operators to
use this valuable spectrum resources is economically optimal.
◦ Therefore, two things should be kept in mind when designing the auction: 1)
minimize the winner's curse and help entities to make honest bids, and 2) make the
entire process efficient and minimize transaction costs.

36. How to reallocate frequencies that have already been allocated.
T. JITSUZUMI@APTseminar Tokyo,2023/6/26)
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37. Recent ICT issues in Japan
that I find very interesting
Toshiya Jitsuzumi, D.Sc., MBA
Professor, Chuo University
T. JITSUZUMI@APT seminar Tokyo, 2023/6/26)
（