Japan is widely considered to have among the best digital infrastructure in the world measured in terms of access to high-speed fixed and mobile broadband. Firms such as Sony and Panasonic are respected for their commitment to innovation and Japanese companies are top-ranked each year for their global ICT patent filings.
Yet, the paradox of Japan is that the benefits of Japan’s public and private ICT infrastructure have not necessarily translated into greater domestic economic growth, international competitiveness or world-leading innovation. Why has the impact of the Internet in Japan not matched the gains seen elsewhere?
Twenty-five years ago the Japanese economy was riding high and Japanese companies topped the rankings of globally recognized ICT firms. This is no longer the case. Growth has been stagnant for nearly two decades and the place of Japanese companies has been taken over by companies such as Microsoft, Apple, Google, Amazon and now Facebook – many of which only got their start in the late 1980s and 1990s.
The 2012 ranking by the World Economic Forum (WEF) of the most competitive ICT economies found Japan in the 18th position. Singapore was tops; the US ranked 8th; the UK was 10th and Korea was 12th.
What these countries have in common is a clear government vision and commitment to promoting an Internet Economy based on “cloud services” and a record of undertaking the necessary regulatory reforms to support this development.
Japan has not always lagged this badly. Indeed, it set the pace for the development and promotion of the Internet in the period 2001-2006. The reason was strong leadership from then Prime Minister Junichiro Koizumi.
Under the PM’s leadership, the government laid out a 10 year plan to revitalize the Japanese economy through ICT in three stages.
This included high-speed broadband deployment; support for greater utilization of the Internet in key sectors, such as e-government, healthcare and eduction; and a revamping of the legal framework governing telecommunications and broadcasting (to include reorganization and privatization of the dominant carrier, NTT).
The first part of the plan was hugely successful. By the end of 2009, over 90 percent of Japanese households had Internet access and some 40 percent had an FTTH connection, second only to Korea with a population less than 20 percent of Japan.
The reason is a restrictive web of government regulations in Japan that have not been updated to reflect the new opportunities for the delivery of services through the “cloud”. This has slowed growth and innovation in the ICT sector to the detriment of Japanese and foreign companies alike.
An example is the slow deployment of IPv6 in Japan. Just five years ago, Japan led in the introduction of IPv6 services over the NTT NGN (New Generation Network) just as it had earlier set the pace for the provision of wireless mobile telephony with NTT’s hugely innovative “iMode” service. But both technologies were based on a closed service model since the major service provider, NTT, was not permitted to offer Internet services based on a decades-old telecommunications law that did not mention the word Internet.
The problem has now come to the fore since major global Internet service providers switched permanently to IPv6 service based on the global standard.
Similarly, the development of IPTV services (and other related converged services) in Japan has been seriously delayed by an outmoded broadcast law (that regulates service on a prefectural basis), an antiquated copyright law that does not provide a framework for sharing as well as protecting content, and the failure to enforce antitrust provisions against the reluctance by the television and music industry in many cases to license their content for Internet use to outside (largely foreign) content aggregators.
The list goes on. There is no provision for spectrum auction in Japan so valuable frequency bands are sometimes underutilized and not available at any price. There is as yet no formal legal framework for privacy protection online and the uncertainty has slowed business innovation and leaves citizens unclear as to their rights. Most fundamentally, there is no transparent and consistent regulation of the Internet since an independent regulatory agency (like in the US, the UK, Korea, Singapore and every other advanced ICT country) does not exist. Power and responsibility is dispersed across a number of ministries with a resulting lack of accountability and policy direction.
The current Abe administration was elected on a promise to restore economic growth to Japan. To succeed, the new administration needs to go beyond monetary and fiscal measures and to develop and implement a national ICT plan building on the efforts of the Koizumi administration in the first half of the last decade. There is great potential growth in Japan for Internet-related services, but Japan is falling far short of this and absent a more focused and forward-looking policy risks falling ever further behind.