ICT Policy & Investment in Japan

______2009/TEL40/DSG-LSG/WKSP/002

Submitted by: Japan

Workshop on Enabling ICT Infrastructure Investment for Growth and Recovery Cancun, Mexico 24 September 2009

ICT Policy & Investment in Japan

24 September, 2009

Shoji Mihara Director for International Affairs, Global ICT Strategy Bureau, Ministry of Internal Affairs and Communications (MIC), Japan

1. Overview of Japan’s Telecom Market Contribution of Information and Communications Industry to Economic Growth

■ The information and communications industry market accounts for about 10% of the nominal domestic output of all industries. ■ The industry has been consistently and positively contributing to real GDP growth regardless of economic fluctuations. The contribution to growth over the past five years is about 34% on average.

Nominal Domestic Output of Major Industries (2007) Contribution of Information and Communications Industry to Real GDP Growth Information and communications Information and industry Electrical machinery 情報通信産業communications その他の産業Other industries 実質Real GDPGDP成長率 growth rate 97.9 trillion yen (excl. information and industry 9.7% communications equipment) 3.0 2.7 39.0 trillion yen 3.9% 2.4 Transportation equipment 2.0 61.4 trillion yen 1.9 6.1% 2.0 Construction Others Nominal domestic 2.0 (excl. construction of 1.4 576.0 trillion yen output of all industries telecommunications facilities) 1.6 57.3% 62.0 trillion yen 6.2% (2007) 1.2 1.6 1004.8 trillion yen Wholesale trade 1.0 0.7 65.0 trillion yen 6.5%

Retail trade 31.7 trillion yen 0.7 0.8 0.7 0.8 3.2% 0.4 Transport 0.0 40.9 trillion yen 4.1% 平成１５2003 2004162005 172006 18 2007(Year)19（年） Iron and steel 31.0 trillion yen 3.1% The average contribution is 34% over the past five years.

Note: The information and communications industry consists of 8 sectors: (1) communications, (2) broadcasting, Note: The contribution of the information and communications industry is the share of (3) information services, (4) video, audio and written information production, (5) information and growth of the real GDP of all industries attributable to the information and communications related manufacturing, (6) information and communications related services, (7) communications industry. information and communications related construction, and (8) research. It is defined as “the production, processing, accumulation, distribution, and supply of information, including related industries, such as those pertaining to the provision of materials and equipment necessary for the industry.” Source: Data of the Ministry of Internal Affairs and Communications

Ripple Effect of Information and Communications Industry on Economy

■ The information and communications industry (market size: 95.2 trillion yen in 2006) is closely related to all industries and therefore has a strong ripple effect on the economy.

◇ The ripple effect on production activities of all industries is equivalent to as much as about 42 trillion yen (on a value-added basis in 2005).

◇ The ripple effect on employment in all industries is equivalent to as many as about 2.86 million people (in 2005).

Changes in Added Value Attributable to the Changes in Employment Attributable to the Information and Telecommunications industry Information and Communications Industry

(100 millions of yen) (No. of people) 2.86 million people

42 trillion yen

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Communications Broadcasting Communications Broadcasting Information services Video, audio and written information production Information services Video, audio and written information Information and communications related Information and communications related production manufacturing Information and communications Information and communications services related manufacturing related services Information and communications Research Information and communications related construction related construction Research Source: White Paper 2007 – Information and Communications in Japan Current State of Information and Communications Infrastructure Development

◆ It is necessary to aim to eliminate “zero broadband” areas (areas which have absolutely no broadband reception) by FY 2010 and clarify the process for the expansion of the mobile phone service area in such areas where conditions are disadvantageous. ◆ In order to ensure the completion by the deadline (July 24, 2011) of the shift to “digital terrestrial broadcasting,” which will provide a base for the acceleration of the convergence and cooperation of communications and broadcasting, it is necessary to gain the understanding of the entire population. Therefore all government actions must be further accelerated.

Source: Survey by the Ministry of Internal Broadband development status (Estimated household coverage by service areas) Affairs and Communications FY 2010 government End March 2006 End March 2008 End September 2008 target

“Zero broadband” areas Broadband 93.9% 98.3% 98.6% (47.33 million households) (50.83 million households) (51.59 million households) eliminated

Ultra high-speed 79.7% 86.5% 89.5% 90% broadband (40.15 million households) (44.71 million households) (46.82 million households)

Current status of mobile phone service areas Source: Survey by the Ministry of Internal Affairs and Communications

End of FY 2005 End of FY 2006 End of FY 2007 Out-of-service-area population (Percentage) 580,000 (0.5%) 416,000 (0.3%) 297,000 (0.2%)

Development status of digital terrestrial broadcasting Source: Survey by the Ministry of Internal Affairs and Communications

Household penetration of Rate of awareness of the termination Household coverage receivers date of analog broadcasting About 97% (March 2009) 60.7% 89.6%

2. Overview of Broadband Transition in the Number of Japan’s Broadband Subscribers

【Number of Telecommunication 【Number of Broadband Service Users】 Service Users】（Unit: 10 thousand） (Unit: 10 thousand)

12,000 1,600 10,942 Fixed Communic at ions (t elephony) CATV ＤＳＬ 1,376 Mobile Communication (telephony） 1,400 10,000 Broadband Servic e FWA FTTH IP Telephony 1,200 1,197 8,000 FTTH exceeded 1,000 DSL （June 2008）

6,000 800 4,936 600 4,000

2.976 400 402

2,000 1,905 200

0 0 1

Source : Ministry of Internal Affairs and Communications Source : Ministry of Internal Affairs and Communications

Japanese Broadband Service in Global Comparison

Broadband prices (100kbit/s) Speed of DSL (US dollar) （Mbit/s） Japan 0.06 Korea 0.08 Netherlands 0.14 JapanJ apan 51.2 Taiwan,China 0.18 Korea 51.2 Sweden 0.24 Singpor e 30.72 S i ngapore 0.25 Sweden 24 Malta 0.30 Finland 24 Italy 0.31 Netherlands 20.48 F i n land 0.36 Taiwan,China 12.288 France 0.37 Italy 12.288

United States 0.49 France 10.24

Ge rman 0.52 Kazakhst an 8.192

UK 0.63 The U.K. 8.128

Lithuania 0.70 Portugal 8.128

Hong Kong, China 0.83 Brazil 8

Bosnia 0.91 Iceland 6.144

P o rt ugal 0.94 Hong Kong,China 6.144 Poland 6.144 Macau(China) 1.07 Ger many 6.016 Canada 1.08 Philippines 5.12 Brazil 1.20

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 0 102030405060 Source ITU Internet Reports 2006 ”digital.life” December 2006 Source : ITU ”World Information Society Report 2007」” (June 2007) ：（） Japanese Broadband Service in Global Comparison

Percentage of FTTH Subscribers per Broadband Subscribers （June 2008）

45 45 40 39 35 30 25 20 19 18 15 10 9 9 8 5 4 3 3 0 J K S R O D N R U I apan o w epubS E en o epub SA t C r eden l CD r a z ea o m w l e v a a y c li a r y li h k k c c

Source ：OECD Broadband Statistics http://www.oecd.org/dataoecd/21/58/39574845.xls

Current Status of Broadband Services in Various Countries

About 57.71 About 4.65 About 4.85 millionAbout 5.10 About 10.17 million million million About 4.09 million About 3.13 About 3.22 million million million About 0.15 million FTTH DSL CATV About 17.60 DSL Others CATV million DSL CATV [South Korea] [Canada] [UK] (September 2007) About 9.73 million (2006) (March 2007) About 0.90 About 37.28 million About 6.00 About 34.41 million million million DSL CATV About 27.84 million [Germany] About 13.08 About 12.29 (September 2007) FTTH DSL Others million million [China] April 2008, About 3.96 About 15.48 million million About 2.59 About 0.34 About 0.20 FTTH: Dec. 2007) million million million FTTH DSL CATV About 0.02 million About 0.73 Others million DSL CATV [Japan] About 1.40 million [India] (June 2008) FTTH DSL Others (December 2007) FTTH DSL CATV Others [France] (Including [USA] (Including mobile wirelessAbout 1.17 About 0.36 About 0.2 About 3.00 million mobile wireless (March 2008, access) About 0.20 million (June 2007) million million million access) FTTH: Sept. 2007) About 0.50 About 0.40 About 2.75 million million million DSL Wireless Others DSL 3G mobile access phones Notes: DSL CATV Wireless access [Indonesia] 1. The penetration status of any broadband service is [Malaysia] shown by the number of subscription contracts. [Singapore] (2007) 2. “CATV” services are super‐high‐speed Internet services (June 2008) (March 2008) utilizing CATV networks. 3. Sources: USA (FCC), UK (Ofcom), Germany (BNetzA), France (ARCEP etc.), Canada (CRTC), China (Ministry of Information Industry), South Korea (Ministry of Information Communications), India (TRAI), Indonesia (Ministry of Communications Information) Singapore (Information Communications Development Authority), Malaysia(MCMC), Japan (Ministry of Internal Affairs and Communications), Tribune, Fuji Chimera Research Institute , Inc , etc. Broadband Service Fee

(JPY: tax included) Phone rate Internet fee

NTT West K-Opti.com KDDI NTT East USEN NTT East Softbank BB e- Access Jcom iTSCOM

FTTH ( Detached Home ) FTTH (Apartment)(Apartment ) ADSL CATV ( internet )

Source: Each company’s website

Promotion Schemes for Nationwide Broadband Deployment

Measures for Local Governments Measures for Telecommunications Operators

Interest Aid Grants/SubsidiesGrants/Subsidies Interest Aid National Institute of Information and Communications 1. Local Information and Communications Technology (NICT) will grant a subsidy of interest aid Infrastructure Development Grants (ICT Grant) with the maximum interest of 2% for a loan made by a •Grants equivalent to one third of total project cost will be telecommunications operator from a fund for building provided to local governments that will build broadband broadband facilities such as optical fiber and DSL for facilities to address the digital divides. providing telecommunications service. •Budget: 6.2 billion yen (FY2008―April 2008 to March 2009) DebtDebt GuaranteeGuarantee NICT will guarantee 80% of a loan made by a private 2. Local Intranet Infrastructure Facility Development telecommunications operator from a fund for building Promotion Grants broadband facilities such as optical fiber and ADSL for providing telecommunications service. •Grants equivalent to one third of total project cost will be provided to local governments that will build broadband or TaxTax BreaksBreaks ultra-high-speed local public networks connecting public facilities such as schools, libraries, and municipal offices. 1. Accelerated Tax Depreciation (National Tax) Accelerated tax depreciation is allowed for •Budget: 3.4 billion yen (FY2008―April 2008 to March 2009) telecommunications operators building broadband facilities such as optical fiber and ADSL for providing telecommunications service. LocalLocal GovernmentGovernment FinancialFinancial MeasuresMeasures 2. Reduction of Tax Bases for Fixed Asset Taxes Local Governments are allowed to use Special Local (Local Tax) Allocation Tax and to issue local government Bonds such Partial reduction of the tax base for fixed asset taxes is as Depopulated Area Development Bonds for a variety of allowed for telecommunications operators building their policy needs, and they may utilize these schemes for broadband facilities such as optical fiber and ADSL for building broadband facilities such as optical fiber and ADSL. providing telecommunications service. Investment Trend for Optical Fiber of NTT East and West

【Total【NTT東西の設備投資総額とアクセス網の光化投資額の推移】 investment and trend of investment for fiber local loop】 (unit: hundred 12,000 million yen) 10,977 Total investment Investment for fiber local loops 10,000 8,851 8,483 8,235 7,969 8,000 7,662 7,754 6,966

6,000

4,000 3,490 3,560 3,330 3,280 2,830 2,370

2,000 1,490 1,640

0 2000 2001 2002 2003 2004 2005 2006 2007

※The rate of coverage is the average of NTT East and West. The opticalization of access network means the ratipo of opticalized feeder points of the all the feeder points.

Opticalization of NTT East and West

【The trend of Opticalization of access network】

※The ratio of coverage is the average of NTT East and West. The ratio of opticalized access network means that of opticalized feeder point DSL Market Share of NTT East and West

Others 3.3%

Acca Networks 7.3%

E-access 15.1%

NTT West 17.5%

NTT East 18.8%

Softbank BB 38.0%

（From MIC data）

FTTH Market Share of NTT East and West

Others 6.7%

Electric company 10.3%

NTT West 31.9%

NTT East 41.5% 3. Present ICT Policy

i-Japan Strategy 2015 -- for a “secure and vibrant digital society” with the people at its center -- Japan’s vision for 2015 Turning the vision into reality ● Create a strategy to bring about a digital society where easy-to-use human-centric digital ● Digital technology, like “air” or “water”, is accepted as a normal part of the surrounding technology is readily embraced by the people to become as normal a part of everyday life environment. It encompasses the whole economic system (Digital Inclusion), enabling a as air or water high standard of living and giving people the sense of being connected with one ● A digital strategy based on four new approaches another. - Easy-to-use digital technology ● Digital technology and information transforms the whole economic system to generate new vitality (Digital Innovation) enabling us as individuals or as members of society and - Break down the barriers preventing the utilization of digital technology participants in the economy take the initiative to create new or transform old values in a - Ensure a sense of security about using digital technology dynamic way. - Create a new Japan by the infusion of digital technology/information throughout the economic system Pillars of i-Japan Strategy Three Priority Areas e-Government (National/Local) Medicine/Health Care Education/Human Resources ● Promote the use of digital technology in classrooms to ● Respond to the shortage of doctors in regional communities motivate students and to improve academic ability and the ● Establish a framework to promote e-government (such as setting - Utilize telemedicine technologies capacity to utilize information effectively up a government CIO) , follow-up past plans, and establish the - Help doctors to maintain and update their skills - Improve the ability of teachers to utilize digital technology in PDCA cycle as an institutional system. - Encourage collaboration among regional health care the classroom ● The “national electronic private mail box” *) (tentative name) system services etc. - Use digital equipment, such as e-blackboards, in the should be implemented widely to provide convenient one-stop ● Implement Japan’s version of EHR*) (tentative name) classroom for effective teaching etc. government services and promote government transparency. - Reduce medical malpractice, provide consistent ●Provide ongoing training to develop individuals with high- health care throughout a person’s life *)The “national electronic private mail box” system is to be level digital technology skills - Digitize information regarding prescriptions and implemented by 2013. The basic outline, including the social - Widespread deployment and enhancement of practical security number/card (tentative name), is to be developed by the preparation instructions - Use anonymous health information for training/education sites end of this fiscal year, with an eye to basing it on the existing epidemiological purposes etc. - Through collaboration among industry, academia and system. *) Electronic Health Records government, develop a system that functions like a national center etc.

Revitalizing industries & regional communities/fostering new industries Establishing digital infrastructure Carry out structural reforms in all industries and revitalize regional communities by utilizing digital Support progress in utilization of digital technology in all fields to promote growth technology/information, to strengthen the international competitiveness of Japan ●Develop business infrastructure for small and mid- ●Increase the number of teleworkers ●Establish broadband infrastructure (over 100Mbps for mobile, 1Gbps for fixed） sized enterprises (to double the number of teleworkers working ●Establish information security measures ●Promote green IT/ITS from home) ●Promote development of digital infrastructure technology ●Develop new types of business within regional ●Create a new creative market ●Improve infrastructure for the distribution/utilization of digital information industries Matters requiring further consideration ● Thorough examination of regulations, institutional systems, practices: Identify regulations, institutional systems and practices that are hampering the utilization of digital technology/information by carrying out the first thorough examination in 2009. Measures will be taken based on the findings, with further examinations to be conducted in the years following. ● Develop the “Digital Global Vision” (tentative name): A vision for the enhancement of Japan’s digital technologies and the strengthening of the international competitiveness of related industries to be developed by the end of fiscal 2009. National target : Steps taken in Japan on ICT Strategies

e-Japan e-Japan Strategy II New IT Reform New IT Reform Strategy e-Japan Strategy Acceleration IT Policy package Strategy Strategy Policy package (January 2001) Ⅱ Package (February 2005) (July 2003) (February 2004) (January 2006) (April 2007)

◆IT Basic Law ◆Establishment of IT Strategy Headquarters (Director General: Prime Minister) Realization of a self-sustaining ICT Society

Priority Policy Network Ubiquitous Program - 2007 （July 2007） Priority Policy Realizing a

Program - 2006 Society （July 2006）

e-Japan Priority Policy Program - 2004 e-Japan Priority (June 2004) e-Japan Priority Policy Policy Program Program - 2002 - 2003 (June 2002) (August 2003) uu-Japan-Japan Promotion Promotion Program Program ２００６２００６ e-Japan Priority （（SeptemberSeptember 2006 2006）） Policy Program (March 2001) e-Japan Strategy u-Japan policy of MIC

Concept of u-Japan Policy

u-Japan is a next generation ICT society which is equipped with properties as follows

Ubiquitous Connects everyone and everything

Universal Unique User-friendly Be something special

User-oriented From the user’s point of view

IT Strategic Headquarters “Three-Year Emergency Plan” (April 2009)

I. Promotion of Three Key Projects by Digital Special Zones, etc

e-Government Education/Human Medical Care e-Municipality Resources

◑ Digital archiving of useful information in the possession ◑ Study on the utilization of ASP/SaaS as a means of ◑ Development of digital educational infrastructure, such of administrative agencies, etc. reducing costs through the creation of electronic medical as intra-school LAN, electronic blackboards, and digital ◑ Comprehensive digitized administrative information, insurance receipts terrestrial TVs, across the country such as statistical information and topographical ◑ Development of high-speed broadband networks that ◑ Development of the environment through the information, made available to the public enable medical institutions across the country to enhancement of educational/cultural content, the ◑ Development of “Citizen’s Post Office Box” (tentative) instantaneously transmit image diagnosis information, delivery of content to classrooms through archiving, etc. patient referral documents, etc. ◑ Construction of “The Kasumigaseki Cloud” (tentative) ◑ Promotion of digitization of teaching-related tasks to ◑ Development of networks of medical institutions, etc. reduce burdens on teachers ◑ Promotion of e-municipality through utilization of cloud and the public system infrastructure based on the ◑ Promotion of public service activities and literacy- computing and/or based on the regional information autonomous settlement region concept platform development activities at home and in the community ◑ Promotion of the utilization of ubiquitous network ◑ Study on ID of individuals and enterprises ◑ Development of human assets to develop and utilize technology, etc. for safety and security without advanced digital technology (human assets for increasing burdens on health personnel advanced digitization)

II. Vitalization of Industries/Communities and Development of New Industries

● Development of infrastructure for existing industries, including small and medium enterprises Enhancement of safety and reliability of ASP/SaaS, development of infrastructure for e- commerce that enables joint material procurement, joint sales, and so forth, etc. ● Vitalization of agriculture, forests and fisheries Development of broadband using optical fibers in areas where conditions are disadvantageous, promotion of wider use of the information provision system at direct sales stores utilizing mobile phones, etc. ● Vitalization of regional communities Support for producing programs, for example, tourist guides for local areas, for broadcast; promotion of the “Hometown Mobile Project;” promotion of the ubiquitous town concept, etc. ● Creation of new industries utilizing digital technology Acceleration of research and development of the next generation wireless communications technology utilizing demolished sites of analog TV antenna sites and assigning new frequencies, etc.

● Measures, such as green IT, to address global warming Promotion of the development of eco-Internet, promotion of telework, promotion of visual display of household CO2 emissions in homes, etc. ● Acceleration of the practical use of ITS, etc. Acceleration of the practical and wider use of ITS, aiming to realize, for example, “no-crash vehicles,” etc. ● Reinforcement of international cooperation International joint research and development using a high-speed large-capacity network , mutually beneficial international expansion and cooperation in Asia, Latin America, and other regions, etc.

III. Development of Digital Infrastructure to Support Development Across All Fields (1) Development of broadband infrastructure (3) Research and development to create innovative digital technology (2) Smooth shift to digital terrestrial television broadcasting (4) Enhancement of topographical information Additional Appropriation Concerning “Measures to Deal with Economic Crisis”

1. Development of regional information and communications infrastructure (935) (100 millions of yen) * Spectrum users fee revenue (1) Elimination of digital divide (elimination of “zero broadband” areas) (433) resource (2) Acceleration of the development of mobile phone service areas (453) (Breakdown: 120* + 333) (3) Promotion of the development of information and communications infrastructure on remote islands (67)

2. Strengthening measures for the total shift to digital terrestrial broadcasting (900)

(1) Digitization of community reception facilities to eliminate poor reception as well as common reception facilities for collective housing, measures to eliminate poor reception of digital broadcasting (150*) (2) Support measures to promote wider use of digital TVs (750)

3. Vitalization of local communities and economies through ICT (328)

(1) Promotion of the autonomous settlement region concept utilizing ICT (47) (2) Building secure and safe towns based on the ubiquitous town concept (195) (3) Strengthening the capacity to disseminate local information (Disseminating broadcast contents produced in local area, etc.) (60) and others

4. Acceleration of technological development, etc. to create new digital industries (489)

(1) Research and development of all optical communications technology to achieve ultra-high speed and electricity saving (100) (2) Research and development of secure cloud networking technology, etc. (121) (3) Development of testbed to promptly realize a new wireless broadband environment (198) (4) Research and development of 3D image technology that works without the need for glasses (9) (5) Demonstration experiment of automatic speech translation technology, which can also contribute to the promotion of local tourism (10) and others

5. Others (incl. duplications)

(1) Enhancement of international competitiveness of ICT industry in Japan (20) (2) Realization of low-carbon society utilizing ICT (119) Gross total 276.0 billion yen (3) Ensuring security and safety by ICT (21) (4) Promotion of the electronic administration cloud (202) (Duplications eliminated)

Strategy for Achieving a Smart Ubiquitous Network Society

Contributions of ICT to Issues Facing Japan

Promoting usage of ICT to overcome national issues against future development

ICT brings a rapid increase in productivity and efficiency in social and economic activities ICT brings together people, things, money, knowledge, and information across time and distance ICT is a substitute for the ICT is a “medium” that movement of people and things brings about the value and ICT allows social culture of new services and infrastructure, such as convenience transportation, electricity, and distribution, to be used efficiently As the importance of ICT as ICT contributes to lessening social infrastructure increases, the the environmental burden, seriousness of the “negative” such as reducing CO2 emissions aspects also increase Main Strategy (Outline)

１．Promote ICT Use Where Citizens Can Experience the True Value ２．Promote ICT Industry Growth

Realize User-Centric e-Government Accelerate R&D to Create New Digital Industries Achieve the “Kasumigaseki Cloud”(government cloud) and “Local Government Cloud” Advance creation of new wireless industries, such as “no-crash where government organization systems are made more efficient and advanced services are provided by linking systems. vehicles” and “comfortable cord-free environment” Apply IT to Medical, Education, and Farming, Forestry, Fishery Sectors Expand Contents Industry Promote remote medical treatment and more efficient school operations using ICT Establish special zones for comprehensively strengthening ability to Revitalize Regional Communities create content and supporting overseas expansion Widely expand the “Ubiquitous Town ”concept, which promotes the use of ICT Establish System in Preparation for Further Growth of ICT Industry to provide safety and security, such as nursing care support and the monitoring of children and the elderly Comprehensively revise the laws relating to telecommunications and broadcasting Restructure Social System to Promote ICT Use (Submit bill to the Diet in 2010, etc.) Focus inspections on social systems that inhibit ICT use Double Current Market Size (approx. \\100100 trillion) of ICT Industry by 2015-20202015-2020

３．Creation of ICT Foundation ４．Strengthen Global Strategy

Build Most Advanced Digital Network in the World Promote Globalization of ICT Industry Promote spread of wireless broadband at a speed on a par with fiber Support the “Ubiquitous Alliance Project” for international expansion optic lines of the “wireless,” “digital broadcasting,” and “next‐generation IP Build a Safe and Secure Foundation networks” that are Japan’s forte Promote the building of a “Secure Network” to counter illegal acts and Transform Japan into an “Advanced Country for Problem harmful information Solving” Build a Foundation for Advanced ICT Human Resource Development Build a Foundation for Advanced ICT Human Resource Development Advancement of environmentally friendly social infrastructure , such Support creation of a facility to annually develop 1,500 people with advanced as using ICT to optimize supply of electricity ICT skills (FY2009)

Thank You !

MIC

Ministry of Internal Affairs and Communications (“MIC”), Japan http://www.soumu.go.jp