Consolidation leads to major fixed and mobile broadband players

Moving towards 2016 Japan continues to show it possesses one of the most advanced telecommunications markets in the world. Operators are planning to shut down DSL networks as FttH makes up an increasing proportion of the fixed broadband market at the expense of DSL. Tough competition and technology convergence trends has resulted in consolidation and the emergence of large multi-service operators offering fixed-line telephony, fixed broadband Internet access, mobile voice telephony, mobile broadband Internet access and pay TV services. Widespread fixed broadband penetration has not foreshadowed success of new major pay TV platforms such as Hulu due to challenges posed by Japan’s vertically integrated broadcasting industry.

There were approximately 160 million mobile subscribers in Japan with the majority expected to be accessing services through LTE networks. NTT DoCoMo still has a dominant market share in terms of subscribers, benefitting from its ex-monopoly status and the significant conservative customer base associated with ex-monopoly telecom operators, particularly in Japan due to its aging population. However Softbank has emerged as the largest mobile operator when measured by revenue following its takeover of North American mobile operator Sprint.

Data makes up the majority of mobile ARPU with voice increasingly losing its importance as an application, albeit still an important one. Overall ARPU is declining due to competition as well as Over-The-Top (OTT) product substitution for messaging and voice. The need to maintain data ARPU by offering superior data products is driving investment in LTE and LTE-Advance as well as alternative wireless infrastructure such as WiFi and WiMAX.

Operators are increasing focus on higher value mobile content and applications to improve customer retention and diversify revenue sources away from commoditised access services. NTT DoCoMo, once the content leader with its i-mode platform, has changed its content and application strategy by disaggregating its mobile and content platform from the underlying network platform, essentially mirroring the OTT delivery model of content players such as Yahoo, Google and Facebook.

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