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4G Weekly Digest May 13th, 2009 - Volume 4, Issue 13

4G Set to Gain Momentum in Japan
By Basharat Ashai, Market Analyst, APAC & MEA
Contact the author at basharat@maravedis-bwa.com

Japan is one of the world’s top 3G markets, with more than 100 million 3G subscribers. NTT DoCoMo leads with 54 million 3G subscribers, SoftBank Mobile has more than 20 million, while as KDDI has more than 30 million 3G subscribers. Each of these three mobile operators, along with EMOBILE, is now planning to deploy LTE. In contrast to the hectic 3G battles, the Japanese Ministry of Internal Affairs and Communications has ensured a smooth transition to 4G by increasing the number of licenses to four 1.5 GHz and 1.7 GHz, which coincides with the number of operators who have expressed interest to launch LTE. The ministry is currently conducting a public consultation and it expects to allocate LTE spectrum this summer to the aforementioned 3G operators. The four Japanese mobile phone networks are expected to collectively spend one trillion yen (US$10 billion) over the next five years on 4G. NTT DoCoMo, which aims to begin its service in 2010, has earmarked as much as 400 billion yen (US$4 billion) to build its infrastructure.

NTT DoCoMo is expected to launch commercial LTE services in 2010; many carriers across the world are looking at similar timing. China Mobile and Verizon Wireless, for example, are planning to launch LTE services in 2010. NTT DoCoMO has chosen Fujitsu and Ericsson as its LTE equipment vendors. KDDI is following a 4G migration path from CDMA2000 to LTE, much like Verizon Wireless in the US, and expects to have its LTE core and radio access network developed by the end of 2010. Nortel is partnering with Hitachi to deliver equipment to KDDI, who has yet confirmed when the service will be launched in Japan. SoftBank Mobile has selected Huawei Technologies Japan K.K. as a supplier of trial equipment for its LTE system, and started trialing in Mito City, Ibaraki Prefecture in early 2009. EMOBILE and eAccess are aiming to adopt LTE during the first half of 2011.

There is a lot of activity around LTE in Japan, but the fact remains that WiMAX has a first-mover advantage over LTE. WiMAX licenses were awarded in Japan to KDDI and Willcom in 2007. Four entities actually applied for the two nationwide 30 MHz spectrum licenses, and they all included one of the major Japanese mobile operators: NTT DoCoMo, KDDI and SoftBank Mobile. In addition a number of financial, trading and other companies – most notably Intel and Goldman Sachs – joined the bidding entities. Of the four entities, three proposed WiMAX deployment. The fourth entity (Willcom) proposed a data technology (PHS-Personal Handy-phone System) that is only used in Japan and China. PHS networks operate in the 1880-1930 MHz frequency band. Willcom plans to invest US$1.7 billion over the next five years on a next-generation PHS network at 2.5 GHz.

A large WiMAX trial was initiated by UQ Communications in Japan recently. It actually launched its WiMAX trial service, “UQ WiMAX,” on February 26th, 2009. UQ Communications is led by six independent Japanese companies: KDDI Corporation (32.26%), Intel Capital Corporation (17.65%), East Japan Railway Company (17.65%), KYOCERA Corporation (17.65%), Daiwa Securities Group Inc.(9.80%), and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (5.00%). The operator is set to dominate the Japanese WiMAX market, and has very ambitious rollout plans. It is planning to deploy 4,000 WiMAX base stations by the end of March 2010, and aims to have deployed 18,500 WiMAX base stations by March 2013. The CAPEX spending planned on a cumulative basis by March 2013 is 144 billion yen (US$1.56 billion), mostly to be spent on WiMAX base station deployments. By the end of March 2010 the company is planning to cover most major Japanese cities. It has also started to cover some airports and train stations with WiMAX. UQ is expecting to reach around 200,000 WiMAX subscribers by March 2010, and 5.6 million WiMAX subscribers by March 2013.

The future of WiMAX in Japan will rely heavily on UQ’s ability to deploy in time and strategize its offering vis-à-vis 3G+/LTE. Further, many WiMAX operator deployment plans have been marred by the economic downturn. It remains to be seen to what extent the current economic recession will affect Japanese WiMAX operators’ deployment plans. It is fair to assume that Japanese operators will be very interested in the WiMAX products from Japanese OEMs, but they will also tap into the open WiMAX ecosystem.

It is likely that in the future WiMAX operators in Japan will adopt a strategy that is similar to what Sprint-XOHM is doing in USA: focus on the mobile computing/mobile broadband marketplace as it is a differentiated product that complements their current 3G voice/messaging centric products – laptops, UMPCs, modem accessories, and later in 2009 a heavy focus on consumer electronics with embedded WiMAX capability.