Voice over Internet Protocol regulation in Japan

1. Voice over Internet Protocol regulation in Japan Michiko Fukahori United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)

2. 2 VoIP regulation in Japan What is VoIP? Overview of the Japanese market VoIP regulation in Japan VoIP number (050) Fixed telephone number Others Perspective

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4. 4 What is VoIP? (1) Voice communication realized on IP network

5. 5 What is VoIP? (2) Difference from PSTN Quality of Service (QoS) IP technology is packet-based & best-effort (not always good for real-time communication) Constant band width, latency and packet loss within certain range, packets arriving at the same interval, etc. Methods to measure and evaluate quality: R value based on E-model (ITU-T Rec.G.107) End-to-end quality (simple network & intelligent terminal)

6. 6 What is VoIP? (3) Call routing PSTN: telephone number on signaling network (SS7) VoIP: IP address on IP network (SIP, H.323) Terminal location and emergency call PSTN: bound to the subscriber�s line VoIP: could exist anywhere on the network (nomadic) > could impede realization of emergency call

7. 7 What is VoIP? (4) Interoperability Not always guaranteed (standardization) Interconnection Telephone number is essential to receive call from PSTN Others Power supply Congestion control Security and lawful intercept Various services (toll-free, directory service, etc.)

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9. 9 Overview of the Japanese market (1) Competition was introduced in 1985 (privatization of NTT) Competition policy Market size has increased Price has lowered largely Current major trends: �Fixed to mobile� �Telephony to IP�

10. 10 Overview of the Japanese market (2) Telephony to IP The number of ISPs: 9,111 The number of Internet user: 79 million (62% of population) Broadband ADSL has become common in many areas (high-speed at low price) Recently FTTH is growing in urban area

11. 11 Overview of the Japanese market (3) Transition of the legacy networks KDDI Replace all the networks to IP by the end of 2007 NTT Replace 30 million metal subscriber�s lines (half of all the subscriber�s lines) by FTTH by 2010 >> Total cost would decrease by providing both data and voice on the same IP network

12. 12 Overview of the Japanese market (4) Reform of the Telecommunications Business Law From ex-ante to ex-post Relaxation of market entry/withdrawal (from approval to registration/notification) Abolishment of the classification of telecommunications carriers by facilities Strengthening of rules for user protection

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14. 14 VoIP regulation in Japan (1) Rapidly increasing VoIP Telephone number used for VoIP : 10.6 million (December 2005) VoIP number (050): 97.5 million Fixed phone number: 8.5 million Light-touch regulation Mainly regulated by numbering

15. 15 VoIP regulation in Japan (2) Classification of VoIP service 1. Telecommunications service Fixed telephone number VoIP number (050) Without telephone number 2. Non�telecommunications service P-to-P application on the Internet

16. 16 VoIP regulation in Japan (3) VoIP number (050-XXXX-XXXX) Since September 2002 Receiving call from PSTN was realized Minimum QoS R value>50, latency <400ms, controlled network Minimum facilities installation Installation of facility and network being controlled by service provider Interconnection with PSTN dominant carriers (NTT regional) No constraint on terminal location No duty to provide emergency call

17. 17 VoIP regulation in Japan (4) 050 VoIP market Provided as adjunct service of ADSL Mainly used as secondary telephone service (not as a substitute for PSTN) 29 carriers (March 2006) Some providers offer free call service among users However, impact on PSTN is limited Incomplete interconnectivity Lack of emergency call

18. 18 VoIP regulation in Japan (5) 050 VoIP market Light touch regulation > smaller investment to start business Increased competition in ADSL market World fastest and cheapest ADSL service for users Less profit for carriers (some carriers move to FTTH market for profit) New innovative service using nomadic nature is expected

19. 19 VoIP regulation in Japan (6) VoIP with fixed phone number Since September 2004 Service equivalent to PSTN PSTN equivalent QoS (R value>80, latency<150ms) Installation of facility and network being controlled by service provider Interconnection with PSTN dominant carriers (NTT regional) Location-fixed Emergency call Facsimile sending and receiving, etc.

20. 20 VoIP regulation in Japan (7) Fixed phone number VoIP market Provided as adjunct service of FTTH Used as primary telephone (as a substitute for PSTN) 13 carriers (March 2006) Becoming popular lately as FTTH expands So-called �triple play� service Primary telephone service High-speed Internet connection Video streaming (television program)

21. 21 VoIP regulation in Japan (8) Major difference from 050 VoIP PSTN equivalent telephone service (including emergency call, facsimile sending and receiving) Number portability (allows users to change service provider while retaining number) >> Enable users to switch from PSTN plus ADSL to FTTH

22. 22 VoIP regulation in Japan (9) Users PSTN equivalent telephone service (without changing number) Higher speed Internet connection (than ADSL) Reasonable cost by canceling existing PSTN (price of FTTH is decreasing gradually through competition) Operators Seek profit in FTTH market by integrating plural services (ADSL market becomes competitive)

23. 23 VoIP regulation in Japan (10) VoIP service without number 1. Telecommunications Business PC-to-phone or PC-to-PC service without number >> Common duties of telecommunication service are applied 2. Non-telecommunications Business P-to-P application on the Internet (Skype) >> Announcement (to caller) in case of forwarding call from public network to P-to-P

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25. 25 Perspective (1) VoIP VoIP could provide voice communication at a much lower cost than PSTN VoIP could largely enhance socio-economic development VoIP has a potential to give a large impact on the current telecom market and to change the market structure drastically However, transition of the existing network to IP is a global trend and would be required in future eventually

26. 26 Perspective (2) Light-touch regulation It took many years to develop PSTN with various different features Technical nature (location-fixed) Social requirement (universal service provision, congestion control, intercept, etc.) VoIP is not mature technology compared to PSTN (under development) >> Light touch regulation seems reasonable to enhance the development of VoIP technology and market

27. 27 Perspective (3) Importance of regulation On the other hand, certain level of regulation is essential for orderly development of market and customer protection Especially regulation for primary telephone service would require careful consideration In case of Japan, regulation of VoIP with fixed number is based on technological neutrality as substitute for PSTN

28. 28 Perspective (4) From legacy network to IP Transition is challenge for many countries VoIP might take on important position Infrastructure deployment and maintenance of legacy network during transition is required Various financing options including public private partnership Financial capacity of PSTN carriers or assistance from Universal Service Fund

29. 29 Perspective (5) ICT market trend Competition is useful to increase productivity However, considerable amount of investment is required for network transition ICT is a network industry with the characteristics of network externality and economy of scale Consolidation of telecom carriers is taking place in the world

30. 30 Perspective (6) ICT: socio-economic infrastructure Reliable, affordable and universal ICT access is important for balanced socio-economic development Adequate balance between market economy and government policy would be necessary Effective national dialogues Cooperation among stakeholders (government, private sector, civil society, etc.)

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