Ten Years of Japan's Net Neutrality Policy: A Review of the Past and Recommendations for the Future

Abstract

Because broadband is widely believed to be a precondition for economic prosperity and social progress, many governments are working hard for the speedy realization of a broadband society. However, increasing penetration of broadband Internet and higher resolution digital content have resulted in network capacity constraints to become readily apparent; hence, network congestion is now an everyday problem for ordinary users in developed as well as developing nations. Since this situation allows dominant Internet service providers (ISPs) to behave anti-competitively in the market, it cannot be assumed that the market dynamism can always come up with strategies for mitigating the capacity constraints efficiently and fairly, or “neutrally,” without proper governmental interventions.For nearly a decade, the above situation has been widely discussed by telecom regulators under the name of “net neutrality,” which (in its most basic form) requires “equal” treatment for all Internet traffic. Due to the differences in the broadband ecosystem and existing regulatory framework of each country, there is no one-size-fits-all solution. Indeed, the policy treatments that are actually adopted vary among nations. For example, in the United States, the Federal Communications Commission (FCC) has to micromanage the behavior of ISPs due to a lack of competitiveness in the market. On the contrary, in Japan, the telecom authority, the Ministry of Internal Affairs and Communications (MIC), concluded in 2007 that no special policy treatments are needed because the fixed ISP market seems to be sufficiently competitive.Since then, almost ten years have passed. In a broadband ecosystem with a timeline measured by dog years, a period of 10 years is too long for the same policy treatments to remain efficient. The MIC’s data show that ordinary users mostly use their mobile phones to access the Internet, in which case the market is virtually oligopolized by three big career ISPs. In addition, since NTT East and NTT West started providing wholesale fiber-optic services in 2015, these mobile giants have accelerated bundling their services with fixed broadband in order to control the overall Internet experience of end users. One of them is even bundling its mobile broadband services with selected content/applications. These changes require the MIC to reconsider its approach to net neutrality.In this study, the author reviews the changing market conditions in Japan since 2006 and evaluates two possible policy sets for the MIC: one is a structural set that aims to restore the competitive market, and the other is a behavioral one to control the behavior of the big players. Considering its unsuccessful track record of promoting mobile broadband competition, the author believes that the MIC should swiftly adopt a United States-like behavioral approach coupled with a European Union-like minimum quality of service (QoS) requirement in order to deal with the broadband ecosystem of 2016.