A Panel Data Analysis of Diffusion of Japanese FTTH

Japan has taken a worldwide lead in FTTH, with 15 million subscribers at the end of 2008. Japan has been the first country to experience this transformation. This paper analyzes the factors facilitating Japanese FTTH. Factors promoting Japanese broadband can be summarized as follows: (1) deregulations by the government; (2) competition among carriers; and (3) technical development. In the previous research, we already analyzed how these factors effected Japanese ADSL promotion, with the panel data of subscribers on four major carriers (Tsuji and Tomizuka [2006], Akematsu [2008]). Different from the case of ADSL, however, FTTH has its own scopes and issues. A big difference is regarding competition in the FTTH market, that is, basically carriers have to deploy optical fiber to single houses or condominiums by themselves, since there was no line sharing like ADSL. Therefore, NTT locals, which have own networks and facilities of FTTH, have competitive advantages and are gradually increasing their shares. Due to the number of related data, this paper adopt the prefectural panel data of subscribers, and analyzes the factors facilitating Japanese FTTH development, especially focuses on how subscribers migrate from ADSL to FTTH. By utilizing the prefectural panel data of broadband subscribers, we found some interesting results. The charges and GDP satisfies the sign condition significantly. FTTH and CATV were competitive with each other, and FTTH has been diffused more in the prefecture in which the number of FTTH carriers is large and the intensity of the market competition indicated by Herfindahl-Hirschman Index is low. The number of ADSL subscribers is strongly significant to FTTH diffusion, which shows that the effect of migration is large. These results are important for policy for the broadband diffusion and in particular for competitive assessment with respect to the comparison between facility-based and service-based competitions