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Business trends

Japan and South Korea lag rivals in fiber-optic speeds as 5G nears

Weak investment for upgrades risks national competitiveness in new technologies

As homes and workplaces typically use optical lines via wireless local area networks, these optical line networks need to be improved to make the best use of 5G. (Nikkei montage/AP)

TOKYO/SEOUL -- Communications networks in Japan and South Korea are being overtaken by faster rivals around the world, and the lack of public and private incentives to invest in upgrades threatens the industrial competitiveness of Japan as fifth-generation wireless technology approaches commercialization.

Japan slipped to 23rd place last year in terms of fiber-optic and other high-speed fixed-line communications among the 36 countries of the Organization for Economic Cooperation and Development, after ranking seventh in 2015. South Korea also remains low, in 25th place last year.

In 2015, Japan's average daytime speed peaked around 14 megabits per second, a speed at which a two-hour, high-definition movie loads in about 50 minutes.

Back then, Japan was close to the top five countries in communications speed, including Denmark and the Netherlands. But Tokyo's growth stopped, limited to 12.6 Mbps in January-April 2018. Sweden and Denmark speeds are now around 40 Mbps, while the U.S. and U.K. have overtaken Japan in communications speeds.

Nikkei extracted and analyzed data from 199 countries and regions, aided by the University of Tokyo's Koshizuka Laboratory. The analysis was conducted using data released by M-Lab, a communications speed measurement project involving U.S. tech company Google and Princeton University.

Japan's communications speed varies significantly between day and night, when more videos are watched. The country's typical speed of 5 Mbps at 10 p.m. is just one-fourth of its morning figure. The average nighttime speed is comparable to that of Russia's.

Japan's evening communication speeds are slower than those of Thailand and Malaysia which shored up their optical communication lines. Taiwan and Singapore have surpassed Japan for average daytime speed.

A specific business investment strategy contributes to Japan trailing other nations.

The use of internet services is offered under contracts with internet service providers, while data is transmitted through the facilities of ISPs and telecom carriers such as Nippon Telegraph & Telephone's regional East and West subsidiaries. In principle, carriers invest in splicing equipment between them.

NTT East and NTT West combine to maintain a nearly 70% share of Japan's optical fiber networks, but they are slow to invest because they reinforce their equipment based on an increase in the number of users under a flat-fee system. At present, communication volumes are soaring while the number of contracts has hit a growth ceiling.

"If the volume of communication continues to increase at the current pace, I am afraid our business will reach its limit at some point in the future," said Tadayuki Yamaguchi, head of equipment and planning at NTT East.

Neither NTT East nor NTT West discloses its capital spending on fiber-optic network infrastructure specifically, but the combined total of their overall spending dropped 30% from fiscal 2012 to 509.4 billion yen ($4.59 billion) in fiscal 2017. An NTT East spokesperson said the lower spending at the company resulted from efforts to improve investment efficiency, and that it has not reduced necessary investments.

The Japan Internet Providers Association wants NTT East and NTT West to judge their investment needs based on communications volume instead. Telecom carrier KDDI reinforces its splicing equipment along with an increase in communications volume.

Practical use of 5G wireless will start this year or soon afterward, and 5G is 100 times faster than today's wireless transmission. But wireless networks will face considerable strain when technologies such as the "internet of things" -- which extends internet connectivity to many physical devices -- and self-driving cars come into widespread use.

As homes and workplaces typically use optical lines via wireless local area networks, these optical line networks need to be improved to make the best use of 5G.

"Unless telecom infrastructure is effectively improved, innovation will not be achieved, and a country's competitiveness will weaken," said Harumasa Sato, a professor at Konan University who studies communications policy.

South Korea ranked lower than Japan, despite once being called a "broadband empire." "It is because Google and Apple in the U.S. do not own their network servers in South Korea," said a person close to the Korea Internet and Security Agency, which operates under the science ministry.

South Koreans stream video and music through servers in Hong Kong when they use Google and Apple. "Speeds are slow because the data is read by servers in a remote location," the person said. He stressed that it is much faster to use the services of companies that have servers in South Korea, including Naver.

National competitiveness in this area is illustrated by the creation of Netflix and other large content companies in the U.S. as well as the increase in e-government services throughout Northern Europe. Though China ranks below 150th worldwide due to the scarcity of data for measurement, internet-related businesses flourish in the coastal areas and enjoy advanced telecom networks.

An expert panel established by Japan's communications ministry has started deliberations on how to facilitate investment in high-speed telecom networks. But the impending onset of the 5G era leaves little time to determine how to propel investment for optical broadband.

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