Updated as of November 2005

Deregulation Sparks Fierce Competition.

The number of telecommunications service providers in Japan has been increasing in recent years, comprising some 13,482 enterprises as of September 2005, including all types of operators. Although there were 2 types of operators at the beginning of the initial law, Type l providers with their own lines and Type 2 using borrowed lines or other media, the law was changed in 2003 and 2005, eventually abolishing all type distinctions. They reported combined sales of 19,567 billion yen in FY2004, a slight decrease from the total sales of 19,639 billion yen in the previous year due primarily to the drastic lowering of fees that resulted from fierce competition.

The services provided by telecommunications companies have become increasingly diversified with the acquisition of high-speed, large-capacity data communications capabilities, primarily DSL, ISDN, cable Internet and IMT-2000. For instance, about 65 percent of telecommunications providers now offer Internet connection service and, after deregulation of the telecommunications industry, the number of "New Common Carriers" (NCCs) other than NTT (Nippon Telegraph and Telephone Corporation) dramatically increased from only 111 in 1995 to 413 in 2003, mostly due to the increase in local carriers from 16 to 318. In contrast, the number of mobile carriers decreased from 28 in 1995 to only 10 in 2003 and that of satellite carriers increased slightly from 2 to 6 in the same period.

The number of conventional telephone subscribers at the end of March 2005 was 51.63 million with 8 million ISDN subscribers, a slight increase from 51.59 million as of the end of March 2004. Subscribers of ISDN decreased form 8.63 million due primarily to a change over to DSL among dial ups using conventional telephone lines. The number of Internet users in Japan was 79.5 million as of the end of December 2004, an increase of 2.8 percent from 77.3 million at the end of December 2003. The number of DSL subscribers was 14 million as of the end of June 2005, an impressive gain of 16 percent from 12 million as of the end of June 2004.

Meanwhile, equipment investment by the telecommunications industry as a whole was 2,603.4 billion yen in FY 2004, a decrease of 4.5 percent from 2,726.3 billion yen in FY 2003. According to the old category of Type 1 provider, NTT accounted for approximately 28 percent of total combined investments in FY 2002.

On the demand side, the current number of mobile telephone users totaled about 89 million at the end of August 2005, and is projected to keep increasing at a rate of from 0.5 to1 percent a month. Major companies providing mobile phone service are NTT DoCoMo, au (KDDI Group), Tu-ka Group, and Vodaphone. In addition, subscribers to PHS (Personal Handy-phone System, whose major carriers are WILLCOM, Astel and NTT DoCoMo) drastically decreased to 4.5 million as of June 2005, down about 13 percent from last June. Today, 67 percent of the Japanese population uses mobile phones and PHS. Nearly 57 percent of the mobile phone subscribers use NTT DoCoMo Group and au (KDDI Group) and Vodafone share the rest.