Broadband Diffusion and Public Policy: A Panel Data Analysis

Abstract

Broadband service showed a remarkable increase in Japan after 2000, with ADSL representing more than 14.5 million subscribers in 2006. Recently, Japan has taken a worldwide lead in FTTH, with 11.3 million subscribers at the end of December 2007. Japan has been the first country to experience this transformation, which is referred to as migration, from ADSL to FTTH. However, the environment of the Japanese ADSL market was not initially favorable; ADSL service in Japan was introduced later than in Korea, the U.S., and other countries, causing Japanese ADSL penetration to lag behind. This was considered a symbol of Japan’s delay in embracing the so-called IT Revolution. Since then, a lot of effort has been made in both the public and private sectors to catch up.

The purpose of this paper is to estimate the effect of deregulation as such on ADSL carriers, and specify the factors promoting Japanese ADSL which is the major technology of Japanese broadband. Tsuji and Tomizuka [2006], for instance, analyzed factors promoting ADSL by the AHP analysis, but there are no other analyses which focus on the market and subscribers data of ADSL rigorously. This paper utilizes the panel data analysis and this is the first attempt in this field so far. One result we obtain is that the revision and enforcement of Telecommunications Business Law contributed greatly to the promotion of Japanese ADSL. This research can be applied to the analysis of FTTH, which shows rapid growth in the broadband market.