Japan’s Telecom Industry in the age of 5G: The Broadband Trends

The telecommunications industry in Japan is experiencing a growing level of competition due to the proliferation of carriers that have emerged nationwide in recent years. In light of the introduction of 5G amid the disruptive circumstances of the COVID-19 pandemic, coupled with significant changes instigated by generative AI-powered large language models (LLMs), how has the evolution of broadband subscriptions unfolded in the Land of the Rising Sun?

The Exponential Rise of Telecommunications Carriers

Since SoftBank entered the industry, the number of major MNOs has remained constant over the past decades, led by NTT DoCoMo and followed by KDDI in second place. However, from the fiscal year 2016, which ended on March 31, 2017, the combined number of registered and notified carriers has increased by 40%, reaching 25,534 in the fiscal year 2023.

Three predominant types of services are observed in the realm of data transmission (Exhibit 1). Mobile transmission leads the sector with a share of 43.9%, followed by mobile voice transmission at 20.1% and fixed data transmission at 18.6%.

Broadband Subscription Trends — Fixed Phone Segment

The fixed-line telephone segment is increasingly dominated by fixed-to-the-home (FTTH) technology, leading the market by increasing its share by nearly 12% compared to the fiscal year 2016-17. However, the CATV (Community Antenna Television or Cable Television) related line has shown stagnation yet remains resilient throughout the fiscal year 2018-19. Nevertheless, its subscription share has experienced a slight decline in recent years. Specifically, its share decreased by 23.5% in the fiscal year 2023-24 compared to the fiscal year 2018-19.

Furthermore, the most adversely affected fixed broadband segment is DSL, which is experiencing a substantial decline. Its subscription share has decreased by a staggering 83% over the past seven years, leading up to the fiscal year 2023-24, dwindling to a mere 1%. Indeed, the misplaced hope on DSL as an additional revenue stream within the fixed segment has nearly been laid to rest in the Land of the Rising Sun.

Broadband Subscription Trends — Mobile Segment

Between 2017 and the fiscal year 2023, the combined number of subscribers to LTE and BWA, enhanced by 5G since 2020, has reached 294,210,000. However, this growth has masked something significant. Since the introduction of 5G in Japan in 2020, the number of LTE subscribers has been on a downward trend. Specifically, between 2020 and 2023, LTE subscriptions have declined by more than 23%. This includes a loss of over 15 million subscribers between 2020 and 2021, a reduction of 12,850,000 subscribers within the following twelve months, and another decline of 9,170,000 subscribers from 2022 to 2023 (Exhibit 2).

In simple terms, the LTE era has ended, as the 5G era is now fully underway in the country, characterized by faster speeds and lower latency, alongside the hype generated by the technology in previous years, especially during the COVID-19 pandemic. Consequently, 5G subscriptions are growing rapidly, surpassing 86 million subscribers in just four years since their arrival in the Japanese telecom market—a remarkable adoption rate by any standard.

Voice Communications Landscape

As of the third quarter of 2023, Japan’s total voice communications subscription contracts reached 275,510,000. Mobile communications emerged as the leader, boasting over 218 million subscription contracts, followed by 0ABJ IP phone communications, which occupied a distant second place in this hierarchical structure of Japanese communications.

The growth of mobile communication subscriptions has been notably impressive. From 2014 to the third quarter of 2023, the number of contracts surged by 40%, while fixed communications services experienced a significant decline, losing 50% of the 2,773,000 subscribers reported in 2014. In contrast, the 0ABJ IP phone contracts have stagnated yet remain resilient.

Indeed, the telecommunications landscape in the 5G era will differ significantly from that of Long-Term Evolution (LTE), which emerged and instigated numerous notable changes in Japan and beyond. For instance, by 2012 in Japan, data transmission captured a larger share of sales, while mobile services surpassed fixed services by claiming the predominant share of the industry’s total revenues, with other services accounting for the remaining portion.