Japanese bandwidth prices in comparative perspective

In an infoworld article entitled “Government policies add to Japan’s broadband success,” Grant Gross led with this news:

A wide-ranging government policy on broadband and healthy competition among providers gives Japanese customers greater speeds at a much cheaper price than U.S. customers pay, a Japanese telecom executive said Wednesday.

Japanese customers pay about US$0.70 for each megabit per second of bandwidth, compared to $4.90 per megabit on average in the U.S., said Takashi Ebihara, senior director of the corporate strategy department at NTT East Corp. and a visiting fellow at the Center for Strategic and International Studies, a Washington, D.C., think tank.

In an article in Silicon Valley Watcher, Richard Koman had a similar article headlined, “Why broadband is 5x cheaper in Japan.” Government policy is undoubtedly extremely important for the communications industry (and government bureaucrats deserve much more credit than they usually receive). A comparison between U.S. and Japanese bandwidth prices can be easily used to support conventional views about government policy and competition. Such a comparison can also be ignored if more convenient for a particular point of view.

Ebihara’s presentation was much more interesting than these news reports indicate. Ebihara actually compared bandwidth prices across twelve countries. Moreover, he cited a source for the data quoted above. His source was ITU Internet Reports 2005.[1] The table below includes all the relevant data given in that source. Thinking about policy and competition with respect to this set of countries and the range of prices that exists suggests that bandwidth prices are not strongly correlated with objective industry structures.

NTT’s current broadband service prices do not have a consistent bandwidth price level. ADSL has a price per megabit about three times higher than the price per megabit for Fiber To The Building (FTTB — used for multi-tenant buildings). Fiber to the Home (FTTH) is about two-thirds more expensive than FTTB. NTT’s ISDN, on a per megabit basis, is about two thousand times more expensive than its FTTB.

Bandwidth is more meaningful as a technical characteristic of a widely available service than as a good that users individually purchase. Most communications service users have little understanding of the concept of bandwidth. Most communication service providers do not guarantee the bandwidth of services purchased, nor define clearly what the nominal bandwidth of the service means. Moreover, the bandwidth of a “connection to the Internet” is no more meaningful than the bandwidth of a “connection to connections”.

A communications service business can be insightfully divided into two important activities. Building more capable communications networks and migrating users to them is one important activity for a communications business. In Japan, that is what NTT has done in shifting subscribers from ISDN to ADSL and then to fiber. Acquiring funds is another important activity for a communications business. Prices per megabit do not provide a good connection between these two aspects of a communications business.

OPLANs provides a useful alternative perspective on bandwidth prices. OPLANs emphasizes charging for access, not bandwidth. Thus an OPLAN is meant to be:

a network of truly ‘broadband’ capacity – i.e. where the bandwidth capacity is dictated by nothing other than physical characteristics of the deployed technologies [2]

With an OPLAN, users get to use as much bandwidth as they can. With modern fiber optics, that’s very high speed without any price. Moreover, that doesn’t depend on any particular national government policy, nor depend on competition.

Notes:

[1] See Taka Ebihara, Understanding the Japanese Broadband Miracle, p. 6, citing ITU Internet Reports 2005, p. 15.

[2] Malcolm Matson, “So What is an OPLAN?“