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Ministry of Public Management, Home Affairs, Posts and Telecommunications, Japan

Information and Communications in JapanWhite Paper 2002

Stirring of the

IT-prevalent Society

Contents

Chapter 1

FEATURE: STIRRING OF THEIT–PREVALENT SOCIETY

Introduction . . . 4

1. Current Status of the Development of theWorld’s Most Advanced Information andCommunications Network

Rapid Popularization of the Internet in Japan . . . 5

Internet Penetration Around the World . . . 6

Dramatic Growth of Broadband . . . 7

World-leading Mobile Internet. . . 9

Launch of the Third-Generation Cell Phone. . . 9

Promotion of the Digitization of Broadcasting . . . 10

2. Creation of Competitive BusinessIT Investment and the Macroeconomy . . . 12

IT Investment and Business Activity . . . 13

Growth of Internet Businesses. . . 14

Entrepreneurial Environment for Information andCommunications Venture Businesses . . . 16

3. Realization of Efficient, Simplified, Transparent,and Convenient Public Administration

Promotion of an E-Government and E-Municipalities . . . 18

The Current Status of E-Municipalities . . . 19

Necessary Conditions for the Realization of E-Municipalities . . . 20

Towards the Realization of User-Friendly E-Municipalities . . . 22

Trends Overseas . . . 24

4. Realization of a National Life That EvokesFeelings of Comfort and Affluence

Utilization of Information and Communications in Everyday Life . . . 25

Improvement in Information Literacy . . . 27

Seizing Digital Opportunities . . . 29

5. Distributing Attractive ContentCurrent Status of Network Content . . . 31

Users´ Needs for Network Content . . . 32

Protecting Intellectual Property Rights and Users´ Awareness . . . 33

Network Content Trends Outside of Japan . . . 33

Improving Copyright Protection and Enhancing User Convenience . . . 33

6. Guaranteeing Information SecurityThe Importance of Guaranteeing InformationSecurity . . . 35

Current State of Information Security Infringement. . . 35

Users´ Needs for Security and Privacy . . . 36

Tasks and Issues Related to Guaranteeing a Sound Network Environment . . . 37

Establishing the Systems for a Sound Network Society. . . 38

7. New Services and TechnologicalDevelopments on the Horizon

Changes in Network Services and Trends inTechnological Development . . . 39

Communication Services and Technologies for theNetwork Society. . . 39

Information Appliances Running IPv6 . . . 40

Developing New Services for Network Management ofDistributed Data . . . 40

Technology Development Strategies in the UnitedStates, Europe, and Japan. . . 41

Chapter 2

CURRENT STATUS OFINFORMATION ANDCOMMUNICATIONS

1. Trends in the Information andCommunications Industry

Market Size. . . 44

Value Added . . . 44

Economic Analysis of Information and Communications. . . 44

Employment. . . 44

Productivity . . . 45

Capital Investment . . . 45

Sector Reorganization . . . 45

2. Telecommunications BusinessTelecommunications Carrier . . . 46

Telecommunications Services . . . 46

Telecommunications Charges . . . 47

Status of the Usage of Telecommunications Media . . . 47

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3. Broadcasting BusinessBroadcasters . . . 49

Broadcasting Services . . . 49

Broadcasting Fees . . . 50

Status of the Usage of Broadcasting Media . . . 50

4. Postal ServiceOverview . . . 51

Mail volume . . . 51

Services . . . 51

Postage rates . . . 51

5. Information and Communications NetworkHigh-Speed and Ultra High-Speed Networks . . . 52

Radio Stations . . . 52

Postal Network . . . 52

6. Information FlowInformation Flow in Japan . . . 54

Regional Information Flows . . . 54

7. Trends AbroadThe United States . . . 55

EU . . . 55

Asia . . . 55

Chapter 3

TRENDS IN INFORMATION AND COMMUNICATIONS POLICY

1. Realization of an Advanced Information andCommunications Network Society

Promotion of a National IT Strategy . . . 58

e-Japan-related Budget . . . 58

2. Development of Policies for the NewInformation and Communications Era

Competition Policy of the Telecommunications Industry for the Promotion of the IT Revolution . . . 59

Provision of Asymmetrical Regulations . . . 59

Creation of a Telecommunications Business Dispute Settlement Commission . . . 59

Implementation of a Universal Service Fund . . . 59

Development of a Competitive Environment in the Telecommunications Sector . . . 60

Review of the Long Run Incremental Cost Model . . . 60

Approach to the Development of Broadcasting . . . 60

Promotion of Policies for the Effective Utilization of Radio Waves . . . 60

3. Advances in NetworksDevelopment and Promotion of Network Infrastructure . . . 61

Promotion of Advances in Broadcasting . . . 61

Convergence of Communications and Broadcasting . . . 61

4. Promotion of Content and Applications, andDevelopment of Human Resources

Formation of a New Content Distribution MarketToward the Broadband Network Era . . . 62

Promotion of Telework and SOHO . . . 62

Promotion of New Information and Communications Businesses . . . 62

Development of Human Resources . . . 62

5. Promoting the Digitization of Public AreasPromotion of Local Digitization . . . 63

Online Administrative Procedures and Laying theGroundwork for Public Certifications . . . 63

Development of Public Systems . . . 63

Local Government Wide Area Network . . . 63

Digitization of Processing Applications and Notices at Local Governments . . . 63

Measures Toward the Design of a GeographicInformation System (GIS) . . . 64

Promotion of the Digital Museum Concept . . . 64

Local Development Through IT . . . 64

6. Promotion of Advanced Information andCommunications

Development of the Telecommunications UsageEnvironment . . . 65

Improvement of Safety and Reliability and Promotion of Crisis Management Measures . . . 65

Development of a Barrier-Free InformationEnvironment . . . 65

Development of the Radio Wave Usage Environment . . . 65

Improvement of Media Literacy . . . 66

7. Promotion of Research and DevelopmentDevelopment of Promotional Strategies in theInformation and Communications Field by the Council for Science and Technology Policy . . . 67

Support for R&D through Competitive Funds . . . 67

System of R&D and Evaluation of R&D . . . 67

Development of Broadband DSL Network . . . 67

R&D on the Next-Generation Internet . . . 67

R&D on the Gigabit Network Technology . . . 68

Development of a Terabit-Class Super Network . . . 68

R&D on Ultra-High-Speed Photonic NetworkTechnologies . . . 68

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Next-Generation Information and CommunicationsTechnologies Utilizing New Principles and Technologies Such as Quantum Engineering and Nano Technology . . . 68

Measures Towards the Realization of Super Internet . . . 68

Outlook for Ubiquitous Network Technologies . . . 68

Development of the Groundwork for Network SecurityTechnologies . . . 69

R&D on Stratospheric Platforms . . . 69

R&D for the Realization of a Maritime TransportationSystem (Maritime ITS) . . . 69

Advances in Space Communications . . . 69

R&D on Information and Communications Technologiesfor the Design of GIS . . . 69

Standard Time Delivery and Time Authentication Services . . . 70

R&D on Moving Picture Natural Vision . . . 70

R&D Activities of the Communications ResearchLaboratory . . . 70

8. Measures for GlobalizationPromotion of International Policies . . . 71

Promotion of International Cooperation . . . 71

Promotion of Activities Towards International

Standardization . . . 71

Response to Development of the InternationalDistribution of Telecommunication Devices . . . 71

9. Utilization of the Post Office NetworkPartial Privatization of the Postal Services and theEntry into Postal Operations by the Private Sector . . . 72

Promotion of One-Stop Service at Post Offices . . . 72

Liberalization of the Postal Network . . . 72

Enhancement of Postal Savings Network Services . . . 72


Chapter 1

FEATURE: STIRRING OF THE IT-PREVALENT SOCIETY

Ministry of Public Management, Home Affairs, Posts andTelecommunications, Japan

1

INTRODUCTION

4

Various strategic measures introduced by theJapanese government to facilitate the informa-tion and communications technology (IT) revolu-tion such as its e-Japan Strategy, which waslaunched by the Strategic Headquarters for thePromotion of an Advanced Information andTelecommunications Network Society in fiscal2001, have resulted in the rapid penetration ofinformation and communications services intoall classes of the Japanese people and the for-mation of information and communicationsinfrastructures such as that of broadband.

On the other hand, some people haveblamed the sluggishness in the IT field, whichwas triggered by the burst of what had beenknown as the “net bubble” as the main causefor the current economic recession, and someothers have even looked down upon the mea-sures undertaken towards the IT revolution aspassé. In addition, even those who have aggres-sively promoted these measures have come topursue IT itself for their own aims.

Under the circumstances, it is necessarythat we go back to the basics and revisit what ITreally is and what we are trying to achievethrough it. While it is true that IT has a signifi-cant impact on our lives, society, and even ourways of thinking, IT itself is merely technology. Itgoes without saying that technology per se willnot become the goal of IT, and we should notallow technology to determine how humanbeings and society ought to behave. It is impor-tant that we take the initiative in determining thegoals of IT and in achieving these goals throughthe employment of IT, which we call the “utiliza-tion” of IT.

What are the goals of the utilization of IT? Inaccordance with the Basic Law on theFormation of an Advanced Information andTelecommunications Network Society (2000, lawnumber 144. Hereinafter referred to as the “ITBasic Law”), these goals are defined as “thepromotion of economic structural reform andthe enhancement of the international competi-tiveness of industry” (Article 4) from an eco-nomic perspective, “the realization of a nationallife that evokes feelings of comfort and afflu-ence” (Article 5) in terms of people’s lives, and

“the enhancement of convenience for the peo-ple” and “the simplification and improvement inthe efficiency and transparency of administra-tive management” (Article 20). In other words, itcan be said that the utilization of IT is aimed atthe full achievement of the above goals throughthe use of IT.

Can we say that we are fully utilizing IT,which will be “one of the most potent forces inshaping the twenty-first century” (“OkinawaCharter on the Global Information Society” fromthe Kyushu-Okinawa Summit held in July 2001),in order to achieve the above mentioned goals?It seems that we are in fact far from the stagewhere we can say that IT is passé, and in realitywe have only just reached the stage where weare beginning to utilize IT in earnest.

It is from an awareness of the issues dis-cussed above that the feature section of thisInformation and Communications in Japan WhitePaper takes its theme, the “Stirring of the IT-prevalent Society.” We will analyze the following;the status of the progress of the utilization of ITin each of the areas of business, public adminis-tration, and everyday life; the distribution ofappealing Web content, the maintenance ofinformation security, and the promotion of newservices and technological development, whichare cross-sectional themes in the developmentof IT utilization.

1 CURRENT STATUS OF THE DEVELOPMENT OF THE WORLD’S MOSTADVANCED INFORMATION AND COMMUNICATIONS NETWORK

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Rapid Popularization of the Internet in Japan The number of Internet users in Japan has beenrapidly on the rise over the past few years.According to the Communications Usage TrendSurvey released by the Ministry of PublicManagement, Home Affairs, Posts andTelecommunications (hereinafter referred to as“MPHPT”), the number of Internet users at theend of 2001 was 55.93 million (an 18.8% increaseover the previous year), and the penetration rate inthe population as a whole was 44.0% (a 6.9 pointincrease over the previous year) (Exhibit 1-1). In

addition, the penetration rate for householdsexceeded 60% of the total number of householdsfor the first time at 60.5% (a 26.5 point increaseover the previous year), indicating the rapid per-meation of Internet usage in homes.Furthermore, the steady penetration of theInternet can be witnessed in the increases in thepenetration rate in establishments, which was68.0% (a 23.2 point increase over the previousyear), and the penetration rate in enterprises,which was 97.6% (a 1.8 point increase over theprevious year) (Exhibit 1-2).

Source: Communications Usage Trend Survey, MPHPT

Penetration rate in households Penetration rate in enterprises (over 300 employees) Penetration rate in establishments

0

20

40

60

80

100

20012000199919981997

%

• “Establishment” is defined as a single physical location (excluding postal services and communications business) with five employees or more where the economic activity is conducted. That is usually called a store, a factory, an office, or the like.

• “Enterprise” refers to business (excluding agriculture, forestry, fisheries, and mining industries) with 300 employees or more.

68.2

12.319.2

31.8

44.8

68.0

60.5

34.0

19.111.06.4

80.088.6

95.8 97.6

Exhibit 1-2 Internet Penetration Rates in Households, Enterprises, and Establishments

Note: The estimated figures for 2005 are based on the Information and Communications in Japan White Paper 2001. Source: Communications Usage Trend Survey, MPHPT

Number of Internet users Penetration rate

0

20

40

60

80

100

200520012000199919981997

Millions

68.3%

11.5516.94

27.06

47.0855.93

87.20

9.2% 13.4%21.4%

37.1%44.0%

Exhibit 1-1 Trends in Internet Penetration in Japan

6

In terms of the status of personal Internetusage according to the type of terminal used,48.90 million people accessed the Internet viaPCs, while 25.04 million people accessed theInternet via cell phones, PHS, and hand-heldterminals. A further breakdown of the number ofInternet users via PCs by the location of accessshows that 36.81 million people accessed theInternet from their home and other similarplaces, followed by workplace with 27.16 millionpeople and school with 11.30 million people.

Internet Penetration Around the WorldWith the respect to the Internet penetrationrates around the world by country and region, astudy by Nua.com indicates that Internet pene-tration is higher than 35% in 21 countries andregions (Exhibit 1-3). Among these countriesand regions, the Internet penetration rateexceeds 60% in the top three countries, namelySweden, Iceland, and Denmark, which suggestsa higher usage of the Internet in northernEurope. Japan’s Internet penetration rate of44.0% ranked 16th in the world.

Source: Communications Usage Trend Survey, MPHPT, Survey by Nua.com (as of March 2002)

0 20 40 60 80 100 120 140 160 180

U.S.A.

Japan

China

U.K.

Germany

Republic of Korea

Italy

Canada

France

Brazil

166.14 55.93

33.7033.00

30.2022.23

19.2516.99

15.65 11.94

Millions of people

Exhibit 1-4 Top 10 Countries in Terms of Number of Internet Users

0 10 20 30 40 50 60 70

Source: Communications Usage Trend Survey, MPHPT, Survey by Nua.com (as of March 2002)

%

Sweden Iceland

Denmark U.S.A.

Hong Kong The Netherlands

U.K. Norway

Australia Canada Taiwan

Singapore New Zealand

Switzerland Republic of Korea

Japan Finland Austria

Bermuda Germany Andorra

64.760.8 60.4

59.8 59.0

58.155.3

54.454.4

53.351.9

50.849.9

46.846.4

44.043.943.5

39.736.436.3

Exhibit 1-3 Countries and Regions with an Internet Penetration Rate of 35% or More

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As in the case of Japan, the number ofInternet users around the world has beenincreasing at a remarkable pace. Statisticscompiled by Nua.com shows that the number ofInternet users in the world was 544.2 million asof February 2002. A breakdown of this figures byregion indicates that there were 181.23 millionusers in North America (33.3% of total users),followed by 171.35 million users in Europe(31.5% of total users) and 157.49 million usersin the Asia-Pacific region (28.9% of total users).In addition, trends in Internet users by regionshow that the share to the world total has beendeclining in North America while Europe andthe Asia-Pacific region have both seen anincrease in their share, which suggests thatInternet usage centered mainly in the UnitedStates has spread into other regions where therate of growth has exceeded that of the UnitedStates. Furthermore, in terms of the number ofInternet users by country and region, Japanranked right behind the United States with 55.93million users (Exhibit 1-4).

Dramatic Growth of BroadbandSince the “First Year of Broadband” wasdeclared in the Information and Communicationsin Japan White Paper 2001, there has been a dra-matic growth in the usage of broadband. Thenumber of subscriptions to broadband circuitsas of March 2002 amounted to 3.87 million,which shows a dramatic increase of nearly 4.5

times over the figure of the previous year(Exhibit 1-5). In particular, the number of sub-scriptions to DSL reached 2.38 million, increas-ing by an explosive 34 times over the figure ofthe previous year, thus playing the role as theengine of development of broadband in Japan.In addition, there were 1.46 million subscrip-tions to Internet connection services that utilizecable TV networks (hereinafter referred to asthe “Cable Internet”), and 8,000 subscriptions tohigh-speed fixed wireless access to Internet.Furthermore, Japan has begun offering FTTH(fiber to the home) services utilizing fiber opticnetworks designed for general users, the firstof its kind in the world. The development of thistype of service, which had 26,400 subscriptionsat the end of March 2002, can be witnessed inthe launch of usen Corp. in March 2001 and thecommencement of FTTH services by both NTTEast and NTT West in August 2001. Also, com-petition has intensified in the FTTH field as anumber of newcomers have made their entryinto the FTTH market, including the TokyoElectric Power Co., Inc. in March 2002.

According to the National BroadbandInitiative set forth by the MPHPT, by the end offiscal 2005 there will be approximately 20.0 mil-lion households in Japan which will be usingbroadband circuits, in aspect of estimatedInternet penetration rate and user charges. Inaddition, it is projected that while DSL willaccount for the majority of broadband access for

Broadband total

Cable Internet

DSL

FTTH

0

1,000

2,000

3,000

4,000

Thousands of subscribers

Mar. 2002

Dec. 2001

Sept. 2001

June 2001

Mar. 2001

Dec. 2000

Sept. 2000

June 2000

Mar. 2000

Note: “Broadband Total” includes the number of subscriptions to high-speed Internet access services that utilize wireless networks, in addition to Cable Internet, DSL, and FTTH.

3,869

2,841

1,808

1,261856 635

466330216

1,456

1,3031,151

967784625 463 329216

2,379

1,525

651291

71 10 31026

9 410

Exhibit 1-5 Trends in the Number of Subscribers to Broadband Access Networks

8

0

1,000

2,000

3,000

4,000

5,000

Notes: • The number of contracts has been compiled on the basis of official data released by a research institution in each country, and as such the timing of the survey varies from one country to another. For this reason, the above comparison should be used strictly for reference purposes only. Sources for the data and the timing of each survey is as follows:

United States: FCC Report, June 30, 2001; Korea: KRNIC, March 31, 2002; Japan: MPHPT, March 31, 2002; Germany: Reg TP, December 31, 2001; United Kingdom: OFTEL, DSL (April 30, 2002), Cable Internet (February 28, 2002); France: OECD Report, June 30, 2001; Singapore, IDA, DSL (December 31, 2000), Cable Internet (June 30, 2001); Malaysia: the Ministry of Domestic Trade and Consumer Affairs, August 31, 2001.

• Others include satellite and FWA. • “-“ indicates that the data was not obtainable. It does not necessarily mean that the applicable service is not

offered. • The number of total households is as of 2000 according to the Year Book of Statistics Telecommunication

Services 1991—2000, ITU.

Thou

sand

s of

sub

scri

bers

U.S.A. Republic of Korea Japan Germany U.K. France Singa-

pore Malaysia

Fiber optics 0 0 26 0 0 0 0 0 DSL 2,694 5,394 2,379 2,070 211 177 37 0.3 Cable Internet 5,184 3,222 1,456 30 328 174 56 – Others 1,283 173 8 – – – – –

Total 9,161 8,789 3,869 2,100 539 351 93 0.3 Total number of households (thousands of households)

106,500 15,512 47,031 38,124 25,085 23,900 964 5,280

Penetration rate in households (%) 8.60 56.66 8.23 5.51 2.15 1.47 9.65 0.01

Exhibit 1-7 Broadband Access Penetration in Various Countries

Internet access charges

Communications charges

0

2,000

4,000

6,000

8,000

Notes: • On the assumption that the Internet connection is for 24 hours a day and there are 30 days in a month.

• Charges in foreign countries were as of February 2002, and have been converted by using the TTS rate as of February 1, 2002.

¥

1.5 Mbps/ 256 kbps

1.5 Mbps/ 512 kbps

8 Mbps/ 1 Mbps

8 Mbps/ 900 kbps

768 kbps/ 128 kbps

1.5 Mbps/ 128 kbps

500 kbps/ 250 kbps

500 kbps/ 128 kbps

768 kbps/ 128 kbps

NTT East Japan Yahoo! Verizon (U.S.A.) BT (U.K.) FT (France)

DT (Germany)

KT (Republic of Korea)

1,950 NTT-C

1,950 NTT-C

2,900 3,100 2,453

2,533 DT

2,019

FT

6,778

8,135

6,605

2,960 3,585 3,141

Total ¥4,850

Total ¥5,050

Total ¥2,453

Total ¥6,778

Total ¥8,135

Total ¥6,605

Total ¥4,979

Total ¥6,118

Total ¥3,141

Exhibit 1-6 International Comparison of Broadband Charges (DSL Charges)

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a while longer, starting in fiscal 2003 there willbe a rapid permeation of services that utilizefiber optic networks and this should surpassDSL in fiscal 2005.

The drive toward such a rapid growth ofbroadband is spurred on by the declining trendin charges which reflects the intensifying com-petition among telecommunications carriers. Itused to be that communications charges relatedto Internet connection in Japan were relativelyexpensive in comparison to countries in Europeand the United States. They are now consideredthe lowest in the world (Exhibit 1-6).

The movement towards broadbanding hasbeen progressing in full swing in a number ofother countries. In the United States, anadvanced country in the Internet field, the num-ber of broadband contracts has exceeded 9.0million, with cable Internet playing the key rolein the development of broadband. In Asia, par-ticularly in Korea, the development of broad-band has been remarkable, with the number ofcontracts at 8.79 million, which is closing in onthe United States. Even though the number ofDSL contracts has surpassed 2.0 million inGermany, Europe as a whole has seen a relativelyslow growth in the number of broadband con-tracts, with, for example, 539,000 in the UnitedKingdom and 351,000 in France. At present, thenumber of contracts in Japan, where a dramaticgrowth has been observed, ranks third behindthe United States and Korea (Exhibit 1-7).

World-leading Mobile Internet Japan is by far the largest provider in the worldof Internet connection services via cell phones(hereinafter referred to as the “MobileInternet”). It has been a mere three years sincethe launch of the mobile Internet in February1999, and the number of subscribers has sur-passed 50 million reaching 51.93 million as ofthe end of March 2002 (Exhibit 1-8). In addition,Mobile Internet subscribers account for 75.1%of the total number of subscribers to cellphones, which is fairly high in comparison withthe other major countries and regions (Exhibit1-9). Furthermore, the Mobile Internet allowsusers to access diversified content, and thepurposes for using the Mobile Internet includeobtaining information services such as newsand entertainment information, purchasingtickets, engaging in commercial transactionssuch as bank transactions, and downloadingmusic for signaling an incoming call andstand-by screens. Designed to enhance theability to express such content, advanced mov-ing image services and navigation serviceshave been offered.

Launch of the Third-Generation Cell PhoneIn October 2001 full-scale service for 2GHz-band third-generation mobile communications(hereinafter referred to as “IMT-2000”) com-menced in Japan, which was the first of its kindin the world. IMT-2000 (International Mobile

Dec. 1999

0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

48.475 51.139 53.608 55.738 58.006 60.942 63.365 65.356 67.101 69.121

(9.609) (9.803) (8.179)

(23.1%) (19.2%) (13.4%)

3.673 7.499 12.723 19.679 26.866 34.567 40.375 44.937 48.495 51.925

7.6% 14.7% 23.7% 35.3% 46.3% 56.7% 63.7% 68.8% 72.3% 75.1%

(–) (361.0%) (50.2%)

Dec. 1999

Mar. 2000

June 2000

Sept. 2000

Dec. 2000

Mar. 2001

June 2001

Sept. 2001

Dec. 2001

Mar. 2002

Number of subscriptions

(Increase from the previous fiscal year)

(% increase from the previous fiscal year)

(Of which) Number of subscriptions to Mobile Internet

Number of subscriptions to Mobile Internet/ Total subscriptions to cell phones

(% increase from the previous fiscal year)

Mill

ions

of s

ubsc

riber

s

Exhibit 1-8 Trends in the Number of Subscriptions to Cell Phones and the Mobile Internet

10

Telecommunications-2000) is a high-quality,digital new-generation mobile communicationsservice which enables high-speed data commu-nications on a global basis.

In October 2001 NTT DoCoMo began offer-ing a full-scale IMT-2000 service, which hadapproximately 90,000 subscribers as of the endof March 2002. In addition, the KDDI Grouplaunched its IMT-2000 service in April 2002,followed by J-Phone, which expects to begin itsservice in December 2002, leading to thebeginning of competition among these threecompanies by the end of the year.

With respect to the desired functions andservices for the third-generation cell phone,more than half the people surveyed would like tosee a fast communication speed, and one-third

would like to see a videophone function. Also,with cell phones most people would like to havea high-speed, large-capacity and easy to utilizecommunication usage environment, suggestingthat there are high expectations for the furtherdevelopment of cell phones (Exhibit 1-10).

Promotion of the Digitization of BroadcastingDigital broadcasting has advantages over ana-log broadcasting in that it: 1) provides high-quality visual and sound services and diversifiedchannels; 2) enables advanced broadcastingservices and services in partnership with com-munications networks; 3) provides a stablemobile reception and 4) an extensive lineup ofservices that are easy for the challenged andelderly to use such as the conversion of speeds

0 10 20 30 40 50 60 70 80 %

Japan Republic of Korea

Finland Canada

Singapore U.S.A.

Germany Italy U.K.

Taiwan France

72.3 59.1

16.513.8

9.47.97.9

7.06.96.6

5.6

Exhibit 1-9 Cell Phone Internet Compatibility Rate (Ratio of the Number ofSubscribers to the Mobile Internet to the Number of Subscribers to CellPhones) in the Major Countries and Regions (as of 2001)

Fast communication speed

Videophone function

Clear speech quality

High quality service for delivery of graphics, etc.

Able to use the same service overseas

Function allowing for simultaneous use of the telephone and Internet

Image clipping service

Source: Survey and Analyses of IT and National Life

0 10 20 30 40 50 %

5.6

46.4

30.9

26.3

18.8

18.2

16.3

Exhibit 1-10 Desired Functions and Services in Third-Generation Cell Phone

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of speech. In addition, digital broadcastingmakes possible a server-type broadcasting, anew form of broadcasting which utilizes areceiver intended for digital broadcastingequipped with a communications network con-nectivity function and a large-capacity storagefunction (server-type receiver).

In the area of satellite broadcasting, a CSdigital broadcasting service which uses a com-munication satellite (CS) was launched in June1996 as the first digital broadcasting undertakenin Japan. In addition, commercial services werecommenced for BS digital broadcasting using abroadcasting satellite (BS) in December 2000.As of the end of March 2002, the total volume ofshipments of BS digital tuners and BS digitaltelevisions reached about 1.14 million. When thenumber of receptions via cable TV (approx. 1.52million households) is added to this figure,approximately 2.66 million households wereable to receive satellite broadcasting.Furthermore, in March 2002 110 degrees longi-tude east CS digital broadcasting commencedservices.

In the area of terrestrial television broad-casting, which is the basic form of broadcastingwidely prevalent among the Japanese people,digital broadcasting is scheduled to be launchedin three major regions, namely, Kanto, Kinki,and Chukyo, by the end of 2003, and in otherregions by the end of 2006. By 2011 it is antici-pated that broadcasting via analog waves will beterminated. The digitization of terrestrial broad-casting is aimed at replacing televisionreceivers, which are disseminated in almost allhouseholds in Japan, with a simple advancedinformation and communications terminal thatcan be used at home, and as such it will play animportant role as a gateway to an advancedinformation and communications network soci-ety. At the present time, in order to prepare forthe facilitation of digital terrestrial broadcasting,NHK, commercial broadcasters, and the MPHPThave joined forces in setting up the AdvisoryCommittee on Digital Terrestrial Broadcastingin each region across Japan.

In the area of cable television, digital broad-casting was launched in July 1998 in selectedregions of Japan. With progress being made inthe digitization of all broadcasting media includ-ing terrestrial broadcasting and BS and CSbroadcasting, the goal has been set for the fulldigitization of practically all broadcasting mediaby 2010. In addition, with the penetration of

cable televisions in households presentlyexceeding 20%, the digitization of cable televi-sion is expected to provide all of its anticipatedmerits to these viewers who currently receivetelevision broadcasting via cable television.

2 CREATION OF COMPETITIVE BUSINESS

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IT Investment and the MacroeconomyIT investment in Japan’s private sector during2000 increased significantly to ¥20.8 trillion (a21.7% increase over the previous year), with thelevel of IT investment nearly doubling over thepreceding 10 years. In addition, IT investmentaccount for about a quarter of capital invest-ment in the private sector at 23.5% (a 2.2 pointincrease over the previous year), suggesting theelevated position that information and commu-nications capital has in corporations. Theincrease in IT investment can not only con-tribute to the revitalization of the informationand communications industry but it also has asignificant economic impact on other industries.An estimation of the ripple effect of IT invest-ment on Japan’s economy shows that IT invest-ment has resulted in ¥38,615.9 billion of outputstimulation and in employment creation ofapproximately 1.49 million people, which indi-cates that IT investment is able to contribute togrowth in the output levels of various industriesand employment (Exhibit 1-11).

Japan’s information and communicationscapital stock in the private sector during 2000rose to ¥44.0 trillion (a 13.3% increase over the

previous year), increasing almost twice as muchas the level seen 10 years earlier. In addition,the percentage of information and communica-tions capital stock in the total private sectorcapital stock was 4.0% (a 0.3 point increase overthe previous year), which indicates an increaseof more than 1.0 point over the five year period1995 to 2000. Such an increase in informationand communications capital stock can con-tribute to efficient corporate management. Itcan also contribute to economic growth byallowing the offering of high value-added ser-vices. Furthermore, the extent to which each ofthe three main output factors, namely, informa-tion and communications capital, general capi-tal (excluding information and communicationscapital), and labor, has contributed to Japan’seconomic growth has been estimated, thesemore generally known as each output’s contri-bution ratio. For example, it has been estimatedthat information and communications capitalcontributed 1.1% to an overall economic growthrate of 1.4% over the period 1995 to 2000, whichindicates that information and communicationscapital plays a key role in Japan’s economicgrowth (Exhibit 1-12).

Source: Survey of IT Economic Analyses

Software (for computers)

Computers and accessory devices

Wired telecommunications devices

Wireless telecommunications devices

Total

5,296,171

9,180,141

2,383,906

3,956,066

20,816,285

Investment Area Investment Amount (¥ million)

Output stimulation (¥ million)

GDP stimulation (¥ million)

Employment creation (persons)

17,538,688

1,486,636

38,615,946

IT Investment Amount in 2000 Ripple Effects on Japanese Economy

Exhibit 1-11 Ripple Effects of IT Investment on the Economy

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IT Investment and Business Activity The most common form of IT that has beenimplemented by listed companies in Japan isan infrastructure IT, which is aimed at layingthe groundwork for an information and commu-nications infrastructure within a company suchas the installation of a PC for every employee.The next most common form of IT is a costreduction IT, which is aimed at improving oper-ating efficiencies in key operations such asfinance and human resources. The third mostcommon form of IT investment is a value-addedcreation IT, which is intended to explore newmarkets and to improve customer service andcustomer satisfaction.

In addition, it has been pointed out that, inorder to ensure that the development of ITinvestment be reflected in improved operatingefficiencies in information sharing and admin-istrative and maintenance tasks and to benefitfrom such improvements, companies musttake the initiative in reviewing their organiza-tional structures and in enhancing theirhuman resources. Factors that are consideredcritical by the companies surveyed in theirattempt to fully achieve the effects of IT invest-ment include the review of contents and flowof operation (83.7%), and a firm commitmentof top management (61.5%) (Exhibit 1-13).Furthermore, with respect to making progressin the implementation of initiatives to improveoperating efficiencies, over half of the listedcompanies have aggressively undertaken

internal measures such as the elimination ofpaper work within their company (52.9%) andthe promotion of information sharing (45.7%).However, fewer companies have undertakenmeasures to review operations related toexternal transactions, such as the eliminationof paper work in external transactions (15.3%)and the reviewing of the manner in whichtransactions are conducted. In addition, morethan 40% of the companies provide IT educa-tion to their employees through internal IT-related educational and seminar programs(42.1%) and participation in external IT-relatededucational and seminar programs (41.1%).

With respect to the awareness of theeffects of IT among listed companies, nearly60% of the companies acknowledge that IT hasbeen effective in terms of the related costs(58.6%), suggesting that most companies havea positive view of the effects of IT. In addition,in a breakdown of the effects of IT by the formof IT investment, the companies surveyed aremost aware of the effects of infrastructure IT,followed by cost reduction IT and value-addedcreation IT (Exhibit 1-14). Going forward, inorder to further pursue IT, it is important thatcompanies implement restructuring measuresthat would be applied not only within the com-pany but also to relations existing outside ofthe company, and create an environment inwhich the company can fully benefit from theeffects of IT.

Economic growth rate (overall)

Labor

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1995–20001990–19951985–1990


%Information and communications capital

General capital (excluding information and communications capital)

Other

1.43

4.91

1.40

-0.22

-0.23

-0.41

2.42

2.210.04

1.09-0.41

1.13

0.93

0.68

0.51

Exhibit 1-12 Contribution Ratios of Various Factors to Japan’s Economic Growth

14

Growth of Internet BusinessesNew types of businesses that utilize theInternet can be classified according to threelayers, namely, a network infrastructurelayer, a platform layer, and a content andapplication layer. Business in the networkinfrastructure layer, which forms the founda-tion among these three layers of businesses,has been rapidly growing as evidenced by thegrowing penetration of broadband services,and has had a significant impact on thedevelopment of businesses in the content andapplication layer and the platform layer. Inthis sub-section, we will provide an overviewof the markets for electronic authentication

and PKI, data centers, ASP, e-learning, ande-commerce, all of which are viewed as pos-sessing the potential to grow substantially inthe future in the businesses in the platformlayer and the content and application layer.

The electronic authentication business,which has emerged in recent years, is con-cerned with the operation of electronic signa-ture and authentication services through theuse of cryptographs as an effective method inverifying the identity of a counter-party on theInternet and dealing with information leakageand interpolation of information, in order tosecure the authentication of documents con-taining information on certain business

Source: Survey on IT and Business Activity

0 10 20 30 40 50 60 70 80 90%

Review of contents and flow of operation

Firm commitment of top management

Employee education and training

Organizational and systematic restructuring

Resource concentration in core operations

Appointment of CIO (Chief Information Officer)

Budget priority

Outsourcing of non-core operations

Relocation of employees

Other

83.761.5

51.9

48.07.7

7.05.24.6

2.4

0.8

Exhibit 1-13 Necessary Conditions for Achieving the Effects of IT Investment(multiple answers)

Source: Survey on IT and Business Activity

Very little effect or no effect

0 20 40 60 80 100 %

Significant effect

Undetermined

Marketing and sales support system

Sales operation system

Management and control operation system

Key operation system

Software infrastructure development

Hardware infrastructure development

Infrastructure

41.9

72.2

36.9 21.3

20.231.348.5

46.6 36.0 17.5

65.9 17.1 17.0

10.9

11.516.2

16.073.0

Value-added creation

Cost reduction

Exhibit 1-14 The Effects of IT Among Businesses (by purpose)

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transactions. At present, the market size of theelectronic authentication business based on themost commonly used public key infrastructure(PKI) was estimated at approximately ¥6.34 bil-lion in 2001 and this is projected to grow tonearly ¥41.95 billion by fiscal 2006.

Data centers provide a service that offersthe following: 1) a facility (server room)equipped with a physical durability and security;2) stable maintenance and operation of theserver; and 3) a high-speed and secure Internetaccess directly to the stable and large-capacitybackbone circuits. The market size for data cen-ters in 2001 was estimated at ¥137.14 billion,and this is projected to nearly triple by 2006 to¥431.72 billion.

An application service provider (ASP)offers a service which enables users to useapplications such as packaged softwareoffered by the ASP via the Internet withouthaving to own the application itself. It is mainlyused by businesses as part of their outsourc-ing of system operations and management.The market size for ASP in fiscal 2001 wasestimated at ¥6.03 billion, and this is projectedto reach ¥107.65 billion by fiscal 2006, growingalmost 18 times over.

E-learning is a distance education servicethat utilizes networks. The market size for e-learning in fiscal 2001 was estimated at ¥29.0

billion, and this is projected to increase by asmuch as seven times in fiscal 2006 to ¥198.46billion. A breakdown of the figure for fiscal2001 shows that the market for school educa-tion was ¥2.06 billion, education within thecompany, ¥8.29 billion, and continuing educa-tion, ¥18.65 billion. (Exhibit 1-15)

E-commerce is used by about a quarter ofJapanese companies in either their sales oper-ations or their procurement operations, orboth. E-commerce can be classified accordingto two distinct markets, namely, the final con-sumption goods market and the intermediategoods market. The final consumption goodsmarket provides services for transactions deal-ing with final consumption goods, such as PCsand household appliances, and services suchas fee-based network content. The intermedi-ate goods market is engaged in transactionsamong corporations dealing with raw materi-als. The market size for e-commerce involvingfinal consumption goods has been steadilyexpanding and reached at ¥1,221.8 billion in2001 (a 96.0% increase over the previous year).A similar steady growth has been experiencedin the market for e-commerce related to inter-mediate goods, which was estimated at¥53,900 billion in 2001 (a 41.5% increase overthe previous year).

Source: Survey of IT and Business Activity

2006200520042002 2003FY 20010

50

100

150

200

250¥ billion

29.00

53.73

82.30

115.14

154.07

198.46

18.65 30.88 43.33 56.00 68.89 82.00 8.29 14.08 18.78 22.62 27.25 31.84 2.06 8.77 20.19 36.52 57.93 84.62 29.00 53.73 82.30 115.14 154.07 198.46

Continuing education market Business education market School education market Total

Exhibit 1-15 Projection of Market Size for E-Learning

16

Entrepreneurial Environment for Informationand Communications Venture Businesses Amidst concerns over suppressed personal con-sumption and corporate capital investment aswell as slumping industrial viability driven bycontinued corporate restructuring, there arehigh expectations for entrepreneurial opportuni-ties, which are the source of dynamism in eco-nomic society and the driving force behindeconomic growth and employment creation. Inparticular, venture businesses that are based onunique technologies and business models haveattracted much attention as possessing a strongpotential to contribute to the revitalization of theeconomy.

The largest issue in the start-up phase of aventure business in both information and com-munications and non-information and commu-nications is the raising of funds, followed bythe securing of human resources and salesand marketing. The biggest challenge after thestart-up of a venture business in both informa-tion and communications and non-informationand communications is sales and marketing.The second biggest challenge for an informa-tion and communications venture businessafter the start-up period, however, is thesecuring of human resources followed by theraising of funds, while for a non-information

and communications venture business it istechnological development and production,followed by the securing of human resources,as such the securing of human resources isone of the biggest issues in information andcommunications businesses. With regard tothe sources for raising funds, which is thebiggest challenge during the start-up phase,information and communications venturebusinesses tend to raise funds through publicagencies, angels, and venture capital slightlymore often than non-information and commu-nications venture capital. In addition, in orderto deal with sales and marketing, which is thebiggest challenge after the start-up phase,information and communications venturebusinesses often rely on external networkssuch as alliances with other businesses.Furthermore, in response to the challenge ofsecuring human resources, the majority ofboth information and communications andnon-information and communications venturebusinesses adopt their own human resourcestraining programs. Notwithstanding this, infor-mation and communications ventures have atendency to respond to the human resourcesissue by utilizing management connectionsand employment seminars such as venturebusiness job fairs, and outsourcing personnel

Information and communications venture business Non-information and communications venture business

0

20

40

60

80

100

Source: Survey of IT and Business Activity

%

No res

ponse

Further

enhan

ce-

men

t of t

he

com

pany’s

stre

ngth

Form

ation

of pa

rtner

ships

with

other

com

panies

in wea

ker a

reas

Resea

rch an

d

deve

lopm

ent

Inform

ation

gath

ering

Divers

ificati

on

of bu

sines

s

Other

83.080.3

38.3

22.7

63.8 64.5

20.6 26.4

19.128.8

2.8 3.2

2.1 1.5

Exhibit 1-16 Measures to Strengthen Competitiveness of Venture Businesses

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through temporary contracts and specializedagencies. In other words, they have a tendencyto secure human resources by integratingexternal staff.

Once an information and communicationsventure business has overcome such issues asfund raising and sales and marketing, it willbe crucial for it to strengthen its competitiveedge by developing its own unique technologyand business model in order to achieve a fur-ther expansion of its business. According tothe Survey of IT and Business Activity, informa-tion and communications venture businessestend to strengthen their competitivenessthrough partnerships with other companiesand through utilizing networks among variousother companies more frequently than do non-information and communications venturebusinesses (Exhibit 1-16). In reality, concen-trations of venture businesses composedmainly of information and communicationsventure businesses are found across thenation. Many of these businesses are growingthrough their utilization of an incubation facil-ity as their base, which provides them a net-work function.

3 REALIZATION OF EFFICIENT, SIMPLIFIED, TRANSPARENT, AND CONVENIENT PUBLIC ADMINISTRATION

18

Promotion of an E-Government and E-MunicipalitiesAgainst the backdrop of technological advance-ment in the globally expanding field of informa-tion and communications, Japan is beginning toimplement structural reforms that will have animpact on all socioeconomic aspects. Under thecircumstances, the government has been pro-moting various efforts in the field of publicadministration in order to realize an electronicgovernment (e-government) and electronicmunicipalities (e-municipalities), which willenable people to obtain information related topublic administration from homes and offices,and will allow administrative procedures, suchas address and family registrations, filing for taxreturns, and paying taxes, to be processed overthe Internet (Exhibit 1-17).

A survey conducted with respect to theprogress being made in the government’s

efforts to develop an e-government shows thatthe Cabinet Office and all 12 governmentalministries (including affiliated agencies of theministries) now have their own Web sites. At theend of fiscal 2001 there were 1,310 homepagessponsored by public entities at all levels of thenational government. In terms of electronicadministrative procedures for processing appli-cations and notices, there were 590 on-lineapplications and notices (a 5.3% digitizationrate) at the end of fiscal 2001, and it is antici-pated that by the end of fiscal 2002 there will be3,895 on-line applications and notices (a 35.0%digitization rate), and by the end of fiscal 2003,10,868 on-line applications and notices (a 97.7%digitization rate), completing the digitization ofall administrative procedures. In addition, therewas one PC available to each 1.2 employees inall national government agencies (excludingnational universities under the Ministry of

Exhibit 1-17 Schematic Overview of E-Government—Creation of New AdministrativeServices

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Education, Culture, Sports, Science andTechnology), reflecting the government’s effortto make one PC available for every employee.With respect to access to networks from PCs,nearly 80% of PCs were connected to networks,with 77.7% via LAN and 2.2% via hosts otherthan LAN.

In tandem with the development of an e-government at the national level, local govern-ments and agencies have also implementedvarious measures by maximizing the advantagesof advanced information and communicationstechnologies in order to rationalize and advanceadministrative procedures, to improve servicesfor residents, to develop local regions, and torectify information differentials among regions.During fiscal 2001 a total of 2,751 public entitiesset up their own Web sites (a 25.5% increaseover the previous year). In addition, there were319,915 PCs available in prefectural govern-ments (a 21.3% increase over the previous year)and 561,721 PCs in municipal (city, town, andvillages) governments (a 45.0% increase overthe previous year). The installation of LAN hasbeen undertaken steadily. 100% of prefecturalgovernments and 88.6% of municipal govern-ments have now installed LAN. Furthermore, aspart of the development of an environment fordigitizing the processing of applications andnotices in municipal governments and agencies,there were 55 on-line applications and notices(a 1.0% digitization rate) available in fiscal 2001.It is anticipated that by the end of fiscal 2002there will be 3,055 on-line applications andnotices (a 59.3% digitization rate), and by the

end of fiscal 2004, 4,914 on-line applicationsand notices (a 95.4% digitization rate), practi-cally completing the digitization of all adminis-trative procedures.

The Current Status of E-Municipalities Local governments and agencies have beenmaximizing the benefits of advanced informa-tion and communications technologies whilekeeping in mind the actual situation of theirrespective localities such as the circumstancesof the local residents and the structure of localindustries. Given the foregoing, a number ofmeasures have been implemented such as theoffering of high-quality public administrativeservices that can properly meet the increasinglysophisticated and diversified needs of local resi-dents and businesses, the revitalization ofsocioeconomic activities by laying the ground-work for an information and communicationsinfrastructure, and the creation of a publicadministration that is simplified, rationalized,and transparent by reviewing overall adminis-trative procedures.

A survey has shown that one of the benefitsof having an e-municipality most desired bylocal residents and businesses is the speedingup of administrative procedures, followed by theenhanced convenience of public administrationservices and the reduced cost of public admin-istration services. In addition, the survey hasshown that local residents and businessesaccess the Web sites of municipalities and pub-lic agencies largely because they are accessible24 hours a day, there is no need to visit

IT w

ithin

the

ad

min

istr

atio

n

Source: Survey of Administrative Information Intensification in Local Government, MPHPT (2002)

0 10 20 30 40 50 60 70 80 90 100

Don't knowSatisfactory Somewhat dissatisfied DissatisfiedFully satisfactory

%

IT fo

r th

e p

opul

ous

14.0 45.1 18.6 21.6 0.7

8.9 44.4 27.2 19.1 0.4

4.3 43.0 30.1 21.1 1.5

2.1 35.6 34.1 23.3 4.9

3.2 36.2 35.0 24.0 1.6 0.2

3.9 11.6 73.5 10.8

8.00.12.910.2 78.9

0.1 20.4 43.5 34.2 1.7

Development of networks within the administration

Development of IT-related equipment within the administration

Systems for internal office work sharing

Individual work systems

Overall evaluation

Electronization of applications, requests, reports, etc.

Exchange of information with the populous using electronic conferences, etc.

Publication of information using Web site

Exhibit 1-18 Local Governments’ Self-Evaluation of Their E-Government Services

20

government offices, they have user-friendlysearch functions, and they are able to provideup-to-date information. These results suggestthat e-municipalities are being credited for theirhighly convenient features such as the ability ofusers to access their Web sites anytime andfrom anywhere, and their convenient searchfunctions and very timely nature all of which aredistinctive characteristics of the Internet.

In addition, in a self-assessment survey ofthe current status of the digitization of munici-palities, a number of municipalities and publicagencies felt that IT within public administrativeagencies was either fully satisfactory or satis-factory. Only 0.1% of the respondents felt that ITwithin public administrative agencies and thedigitization of the links between local publicagencies, residents, and businesses were as awhole very satisfactory, while 20.4% feel thatthese were satisfactory (Exhibit 1-18).

With respect to the status of the measuresrelated to the digitization of local public agen-cies such as the review of systems, organiza-tions, and operation processes, the top twomeasures undertaken were the promotion ofinformation disclosure (39.8%) and the promo-tion of information sharing (33.6%).

Furthermore, a self-assessment survey ofthe current status of e-municipalities (overallassessment) indicates that most local publicagencies, which have undertaken the aforemen-tioned two measure, tend to give themselveshigh marks, as most respondents feel that theirpresent e-municipality is either very satisfactoryor reasonably satisfactory.

In addition, in connection with how the digi-tization of municipalities has changed work formunicipal employees, more than 40% of theseemployees felt that it has had either a veryfavorable impact or a favorable impact on theirwork in all areas including workload, quality ofwork, and speed of work. In particular, withrespect to quality of work and speed of work,about 60% to 80% of the employees felt that dig-itization has had either a very favorable impactor a favorable impact. Given the foregoing, wecan see that the promotion of the e-municipalityhas a positive effect on improving the quality ofwork and speeding up the work of municipalemployees (Exhibit 1-19).

Necessary Conditions for the Realization of E-MunicipalitiesAccording to a survey, the conditions that areconsidered necessary by local public agenciesfor the digitization of municipalities includesecuring agency-wide financial resources,securing human resources with specializedknowledge, and improvements in the informa-tion literacy of employees (Exhibit 1-20). Inorder to secure agency-wide financial sources,which is considered the most necessary condi-tion, local public agencies have been makingefforts to improve the efficiency of electronicpublic administration. In particular, the utiliza-tion of off-the-shelf packages is the most com-monly used measure (34.0%) for creating aninfrastructure and design for public administra-tion, followed by joint development in partner-ship with other agencies (13.2%), agency-wide

0 10 20 30 40 50 60 70 80 90 100 %

Speed of work

17.4

Very unfavorable impactFavorable impact

Unchanged

Unfavorable impact

Very favorable impact

Source: Survey of Administrative Information Intensification in Local Government, MPHPT

Quality of work

Volume of work

13.4 64.1 19.1 3.0 0.3

6.0 57.4 33.2 3.0 0.3

2.33.4 36.9 39.9

Exhibit 1-19 How the Promotion of E-Municipalities Has Changed the Work ofMunicipal Employees

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planning and development (13.1%), and integra-tion and development of similar systems(11.8%). On the other hand, in terms of opera-tions and control, the most common measure isthe utilization of outsourcing to private sectorbusinesses (33.4%), followed by the sharing ofthe use of systems with other agencies (13.7%)and the utilization of ASP (6.6%). In addition,with respect to the development of humanresources with IT specialization, which is thesecond necessary condition after the securingof agency-wide financial sources, local publicagencies have engaged in staff training in orderto foster specialized knowledge by sending

employees to external seminars and conductinginternal IT seminars (Exhibit 1-21).Furthermore, in tandem with the digitization ofmunicipalities, the survey suggests that themain issue in medium- to long-term humanresource development concerns the abilitiesdemanded of municipal employees will likelyshift from a document-writing ability and awork-execution ability to a project-managementability and an agenda-setting and hypothesis-formulating ability. As a result, there will be aneed for new staff training programs.

The conditions that are considered neces-sary by local residents and businesses in order

0 10 20 30 40 50 60 70 %

Sending employees to external seminars

58.7

33.2

9.9

Source: Survey of Administrative Information Intensification in Local Government

Conducting internal IT seminars

Hiring staff with specialized education

Exhibit 1-21 Measures Undertaken by Local Governments for Human ResourceDevelopment Concerning IT Promotion


Review

ing reg

ulation

s

in a

varie

ty of

laws

Securin

g age

ncy-w

ide

finan

cial r

esou

rces

Securin

g hum

an re

source

s

with

spec

ialize

d know

ledge

Impr

ovem

ent in

infor

mati

on

liter

acy o

f em

ploye

es

Develo

pmen

t of lo

cal

gove

rnm

ent n

etwor

ks

Prom

otion

of st

anda

rdiza

tion

by nati

onal

gove

rnm

ent

Increa

sing b

udget

alloc

ation

Facil

itatio

n of

internal

align

men

t

0

20

40

60

80

%

7.3

71.6

57.7

34.3

23.9 21.1

13.38.3

Exhibit 1-20 Necessary Conditions for the Digitization of Local Governments

22

to promote the usage of electronic publicadministration services include promoting thepenetration of the Internet into householdsand businesses, understanding the needs ofresidents and businesses, creating a securityinfrastructure, and creating the infrastructurefor a broadband network. With respect to thetype of Internet connection terminals for usingthe electronic public administration services,residents in the age group 20 to 40 would likethe creation of an environment that wouldallow them to effectively utilize existingInternet connection terminals such as PCs athome, PCs in schools and offices, cell phones,and PHS. On the other hand, in the age group50 and over, particularly 60 and over, there isan increasing expectation for new types ofInternet connection terminals such as kioskterminals and easy-to-use information termi-nals. Furthermore, in the age group 60 andover there is a strong desire for the use ofkiosk terminals in public facilities such as cityhalls and government offices. Also, withrespect to how local governments keep them-selves posted concerning the needs of resi-dents and businesses related to the design ofelectronic municipalities, some local publicagencies are conducting surveys in the form ofquestionnaires and are holding study groupsand discussions. Going forward, it is desirablethat other local organizations and groups like-wise actively implement similar measures,which would contribute to the realization of

highly convenient electronic municipalitiesbased on the local needs of residents andbusinesses.

Towards the Realization of User-Friendly E-MunicipalitiesAccording to a survey, the most desired area ofpublic administration for which the earlier digi-tization of public services is anticipated bylocal residents is medical and health care(71.0%), which is intimately related to the dailylives of people, followed by welfare for theelderly and challenged, and pensions (60.2%),and resident personal data (60.8%) whichaffects every resident in some way. Further-more, the area in which the highest priorityshould be placed is resident personal data(48.3%), which has garnered more than twiceas much interest as other areas and as a resultthe earliest development in this area is antici-pated. On the other hand, in contrast to thecase of residents, differentials in the ranking ofthe areas of public administration by localbusinesses are relatively narrow, which sug-gests that they would prefer to see the promo-tion of electronic public administrative servicesin a wide variety of areas. In addition, in a sur-vey on how residents and local businesseswould like to receive public administrative ser-vices as a result of the realization of electronicmunicipalities, a number of residents wouldlike to electronically receive public administra-tion information in the areas of cultural assets,


0 10 20 30 40 50 60 70 80 90 100

Digitization of information exchange between residents and businessesDigitization of administrative procedures

Electronic offering of public administration information

%

Cultural assets, tourism and recreation

Lifelong learning, arts and sports

Urban planning, infrastructure, and transportation

Waste, industrial pollution, and the environment

Child care assistance and education

Medical and health care

Welfare for the elderly and challenged, and pensions

Resident personal data

68.9 28.1 3.0

3.831.964.3

55.5 40.2 4.3

42.4 51.9 5.6 34.4 60.3 5.3

31.2 60.7 8.1 25.6 62.3 12.1

7.4 12.1 80.5

Exhibit 1-22 Methods of Electronically Offering Desired Public Services by Areasof Public Administration (Respondents: Residents)

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tourism and recreation, lifelong learning, artsand sports, urban planning, infrastructure, andtransportation. In the areas of waste, industrialpollution, and the environment, child careassistance and education, medical and healthcare, and pensions, an electronic exchange ofinformation between residents and businessesis most desired, and in the area of residentpersonal data, the digitization of administrativeprocedures involving applications, notices andsuch is hoped for (Exhibit 1-22). On the otherhand, as in the case of the ranking of thedesired areas of public administration, differ-entials in the ranking of the most desiredmethods of receiving public information bylocal businesses are also relatively small.

In an analysis of the evaluations by resi-dents and businesses of the Web sites ofmunicipalities, which is an example of theelectronic offering of public administrationinformation, in terms of design, search-friend-liness, updating frequency, and informationvolume, both residents and businesses are rel-atively highly satisfied with the design of theWeb sites, while there is a low degree of satis-faction concerning search-friendliness, infor-mation volume, and updating frequency.Furthermore, with respect to the areas of theWeb sites of municipalities which residents andbusinesses feel need to be improved, there is astrong need for more information related toadministrative procedures and daily life andbusiness. In addition, in terms of the desiredupdating frequency, more than 40% of the resi-dents and businesses surveyed requested thathomepages be updated about once a week(residents: 41.3%, businesses: 40.9%). Withrespect to the desired method for searchinginformation, both residents and businesseswould like to see a menu format which is com-prised of different areas such as resident per-sonal data and medial and health care(residents: 70.1%, businesses: 64.8%), and afree keyword search which would allow usersto carry out a search by entering any word (res-idents: 55.1%, businesses: 59.3%). In addition,more than 50% of residents would also like tosee a menu format comprised of various lifescenarios, such as everyday living, business,and leisure. These results suggest that resi-dents and businesses expect to see Web sitesthat would have a menu format comprised of avariety of areas. The Web sites would allowusers to search for information under various

life scenarios on the first page and possess asupplementary search method whereby theuser could search for information by typing inany key word. Furthermore, going forward bothresidents and businesses expressed theirintention to make extensive use of the Websites for downloading applications and otherdocuments.

The survey also classified the electronicexchange of information between the residentsand businesses into two categories, namely, thedigitization of inquiries and answers via e-mail,and the digitization of opinion exchanges viaelectronic conference rooms, and analyzedwhich areas are of most importance to residentsand businesses. The results of the survey haveshown that residents have high expectations forthe digitization of inquiries and answers inareas that are closely related to everyday lifesuch as resident personal data, medical andhealth care, welfare for the elderly and chal-lenged, and pensions. On the other hand, theyare very much interested in the digitization ofopinion exchanges in areas that are related toleisure and community building such as cul-tural assets, tourism and recreation, urbanplanning, infrastructure, and transportation,lifelong learning, and arts and sports. In addi-tion, businesses carry high expectationsregarding the digitization of inquiries andanswers in the areas of support for industriesand business activities, urban planning, infra-structure, and transportation, and with respectto the digitization of opinion exchanges theirinterests lie in the areas of employment assis-tance and unemployment policies, and busi-ness loans and subsidies.

With respect to the willingness to use elec-tronic administrative procedures for processingapplications and notices, the majority of theresidents expressed a strong intention to usesuch services for all types of administrativeprocedure and therefore they have high expec-tations with regard to this. In addition, busi-nesses have shown a similar intention to usesuch electronic services. In particular, morethan 70% of the businesses surveyedexpressed an intention to utilize electronic pro-cedures related to internal administrative taskssuch as social security, including pension andhealth insurance, and taxes, including busi-ness taxes. Furthermore, the majority of resi-dents and businesses believed that in orderthat electronic administrative procedures for

24

processing applications and notices be real-ized it was important to ensure that the con-tents of applications will not be divulged andthat the identity of applicants can be verified(Exhibit 1-23).

Trends Overseas As in the case of Japan, other countries havebeen promoting measures towards the realiza-tion of electronic municipalities. For example, inSeattle, Washington, a public hearing via tele-phone, which is called Public Access Network(PAN), was held in December 1994, and inDecember 1995 “City of Seattle”(http://www.cityofseattle.net/), a Web site for thecity operated by its IT department, waslaunched. The Web site makes available a citydirectory which allows the user to search for thee-mail addresses, names, and departments ofall employees of the city, and it receives almost100,000 e-mails from its residents in a month.In addition, the Web site not only allows itsusers to engage in various administrative proce-dures such as change of address and to makepayments for fines for traffic violations, but italso makes available a live webcast of city coun-cil meetings and allows city residents to express

their opinions via e-mail during the meetings. Inthe area of services intended for businesses,Maryland has launched eMaryland M@rketplace(http://www.emarylandmarketplace.com/emm/index.cfm), which supports electronic deliveryand cooperation between businesses.

Residents


80 60 40 20 0 0 20 40 60 80

Businesses

No leaking of the contents of applications Verification of the identity of applicants

Proper acceptance of applications

Easy-to-use functions

Correction of mistakes

Simplified procedures and attachments

%%

73.7

72.3

47.9

38.4

32.1

26.6

71.7

50.9

61.8

43.0

24.9

39.9

Exhibit 1-23 Keys to the Realization of Electronic Administrative Procedures

4 REALIZATION OF A NATIONAL LIFE THAT EVOKES FEELINGS OFCOMFORT AND AFFLUENCE

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Utilization of Information andCommunications in Everyday LifeIn a survey on the need for the Internet ineveryday life two out of three Internet users feltthat the Internet was absolute must in everydaylife, suggesting that the Internet has become abasic necessity of life (Exhibit 1-24).Furthermore, with respect to the frequency ofuse of the Internet, the survey found that morethan 30% of users access the Internet at leastonce a day.

In terms of how the Internet is used, theuse of e-mail ranks as number one, which wasthe same as two years earlier. In addition, e-mail magazines and the gathering and search-ing for information have also become popularreasons for making use of the Internet.Furthermore, compared to two years earlier arelatively substantial growth has been seen inconsumption related to the use of the Internetsuch as on-line shopping (a 37.8 pointincrease) and on-line auctions (a 25.6 pointincrease). Other than the above, the use of theInternet for the purpose of on-line games,

receiving and downloading moving images, ande-learning, all of which are compatible withbroadband, has also increased, showing signsof the full-fledged penetration of these ser-vices. Also, it is clear from the increase in thenumber of purposes and uses for which theInternet is being engaged compared to twoyears earlier that Internet usage has becomediversified (Exhibit 1-25).

It is believed that the use of the Internet canbenefit users in many ways. With regard to theevaluation by users of the Internet on “improv-ing convenience in national life,” “promoting thediversification of lifestyles,” and “expandingopportunities for consumers to make indepen-dent, rational selections,” as stated in Article 5of the Basic Law on the Formation of anAdvanced Information and TelecommunicationsNetwork Society, approximately 90% of Internetusers surveyed gave a positive evaluation of theInternet with regard to how it has enhanced theconvenience of their lives. In addition, 70% ofthose users felt that the Internet has enabledthem to select a suitable lifestyle, while only


66.5%

32.7%

Not sure 0.6%

Not necessary 0.2%

Beneficial

Indispensable

Exhibit 1-24 How the Internet is Perceived by Users in Everyday Life

26

slightly over 50% of users felt that the Internethas allowed them to better consume goods andservices.

In terms of the specific effects of Internetusage on daily activities, many Internet users viaPCs are pleased with the effect of advancedinformation gathering, which enables them tocollect technical and hard-to-find information(94.1%) and to gather information quickly ascompared to magazines and books (93.8%). Inaddition, roughly three out of four users areaware of the effect of freedom from time andspatial constraints, as they are now able to con-duct their business without leaving home(77.3%) and to do so at anytime they choose(74.2%). Notwithstanding the foregoing, a rela-tively small number of users were impressedwith the effect on the revitalization of theirsocial activities, allowing them to send personalopinions to the public (63.1%) and create moreopportunities for them to make friends (42.8%).On the other hand, with respect to the use ofInternet via cell phones, most users werepleased with the freedom from time and spatialconstraints, which is a unique feature providedby the cell phone.

In a comparison of the status of Internet

usage in the United States, widely known as anadvanced IT country, the penetration of Internetusage in Japan has been lagging behind theUnited States by almost one year. In addition,Japan shows a lower ratio of users for any pur-pose of the Internet use than does the UnitedStates.

Two areas of Internet service which Internetusers would like to take advantage more of inthe future on PCs are consumption related ser-vices such as the sales of goods that are not inuse on on-line auctions and booking tickets fortransportation and rooms at accommodationfacilities, and leisure-related services such asdownloading movies and music, and gatheringinformation related to leisure. On the otherhand, concerning cell phone Internet services, anumber of users showed an interest in thoseservices focused on mobility such as transfer-ring information on transportation and mapinformation.

Other than the above services, new types ofservices which utilize the Internet have begun toemerge, such as consumer-oriented productdevelopment, e-learning, and on-line careerchange support.

0

20

40

60

80

100


%

E-lear

ning

E-mail

E-mail

mag

azines

On-line s

hoppin

g

News v

iewing

On-line a

uction

s

Inform

ation

gath

ering

and s

earc

hing

On-line g

ames

Bookin

g and p

urchas

ing

vario

us tick

ets

Downloa

ding i

mag

es

and m

usic

Internet

telep

hone

Receiv

ing and d

ownloa

ding

moti

on pi

cture

s

Present

Two years ago

87.896.4

40.4

76.3 70.0

52.2 48.8

36.6

21.4 21.426.1

33.0

4.9

3.6

42.1

14.4

27.8

11.0 8.3 6.0

6.2

12.1

1.8

0.9

Exhibit 1-25 Trends in Internet Usage by Purpose (multiple answers permitted, excerpts)

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Improvement in Information LiteracyIn a survey of Internet usage among studentsin elementary, middle, and high schools, itwas found that 70% to 80% of these groupsuse the Internet for less than an hour per day.In terms of the frequency of usage, 34% ofhigh school students surveyed use theInternet almost everyday. When this is com-bined with those who use it three or fourtimes a week, almost 50% of all high schoolstudents use the Internet regularly. On theother hand, over 40% of middle school stu-dents and less than 20% of elementary schoolstudents use the Internet almost daily or threeor four times a week. Even though this indi-cates that the younger the user the less fre-quently he or she uses the Internet, it isapparent that the Internet is beginning to pen-etrate into the everyday lives of children inelementary and middle schools. Furthermore,the Internet is most commonly used forgames among all three age groups. In addi-tion, 40% to 50% of these young people accesshomepages, while around 30% of them use e-mail. Also, it has been found that the Internetis used differently according to the stage ofgrowth, such as coloring and drawing for ele-mentary school students and word processingfor high school students. Under the circum-stances, it is necessary for young students to

acquire the ability to properly utilize theInternet and other methods of information andcommunications and actively select, process,and send information. At the same time, it isimportant for them to acquire the ability tounderstand information media, develop infor-mation morale, and to think about the respon-sibility for information. In reflecting upon theforegoing, the government has expanded thearea of information education under the NewCourses of Study which were launched in fis-cal 2002. In addition, a study on worldwideWeb content according to language indicatesthat even though a variety of languages can befound, English content accounts for themajority at 68.4% of the worldwide Web con-tent (Exhibit 1-26). Going forward, it is essen-tial that efforts be focused on improvingforeign language ability including English inorder to take advantage of the Internet, whichis a global media, as a means of internationalinteraction. For this reason, an expanded cur-riculum for foreign languages in elementaryand middle education and beyond is desiredfor the future.

In order to effectively promote informationeducation in the Japanese school system, thegovernment has been developing the infra-structure for an environment that would enablecomputers and the Internet to be utilized in all

English 68.4%

Others 4.6%

Korean 1.3%

Portuguese 1.4%

Italian 1.6%

Russian 1.9%

Spanish 2.4%

French 3.0%

Chinese 3.9%

German 5.8%

Japanese 5.9%

Source: Global Research Institute Inc.

Exhibit 1-26 Ratio of Languages Used in Web Content

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classes in all grades by fiscal 2005. As ofMarch 2001 computers were installed for stu-dent use in practically all public middle andhigh schools. In addition, 75.8% of all publicschools have Internet connections (a 27.1 pointincrease over the previous fiscal year). Whilethere has been a significant increase in thenumber of schools which have launched theirown hompages, these schools accounted for33.9% of all public schools with Internet con-nections, which is virtually unchanged from theprevious fiscal year. Going forward, it is impor-tant for schools to utilize their homepages andpromote the transmission of information whichis a unique feature of the Internet.

With respect to Internet literacy concerningthe ability of users to navigate the Internet, theoverall average score has increased steadily to6.5 at the present time from 4.8 two years ago. Inaddition, an improvement has been made in theability to utilize the Internet in all aspects(Exhibit 1-27). Furthermore, in an analysis ofInternet literacy by gender, age, and occupation,a wide gap was found in Internet literacy accord-ing to occupation, with housewives scoring lowas compared to office workers and students.

This is perhaps explained by the fact thathousewives have fewer opportunities to accessthe Internet than office workers and students.With respect to the ability to properly utilize theInternet, it is important to be aware of informa-tion security on the Internet and to improveInternet usage manners to avoid causing otherusers trouble. In terms of the awareness ofinformation security, even though only a smallnumber of people surveyed change passwordson a regular basis, nearly 80% were aware ofthe security issue. Also, in regard to Internetusage manners, about 40% of respondents didnot attach a signature which would show theircontact address and other information whensending e-mail, and 30% were not aware ofcopyrights on information and who were therecipients of an e-mail which had been sentvia CC:.

In order to realize a society where everyJapanese citizen will be able to receive the ben-efits of IT, it is important that people acquire theability to utilize an advanced information andcommunications network in order to obtain,share, and transmit a wide variety of informa-tion and knowledge on a global scale. In fiscal


% of respondents who answered yes % of respondents who answered yes two years ago

100

80

60

40

20

0

Search for and gather information

Attach a file to e-mail

Set up PC

Change password

Receive e-mail

Reply to e-mail

Create own Web site

Compress and decompress file for sending and receiving

Exhibit 1-27 Changes in Internet Literacy

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2000, the Japanese government granted prefec-tures a subsidy (approx. ¥54.5 billion) to assistlocal municipalities and public agencies toteach their residents basic IT skills (basic oper-ation of a PC, creation of documents, how to usethe Internet, and how to send and receive e-mail) by sponsoring basic IT skills seminars. Asof the end of fiscal 2001, approximately 5.5 mil-lion citizens (adults only) had attended theseseminars.

In terms of the development of humanresources to utilize IT, in addition to the develop-ment of the information literacy which is neces-sary in everyday life, it is also crucial to foster ITtechnicians who can make an important contri-bution to businesses by fully utilizing informationand communications. A survey conducted onwhat kind of abilities businesses seek in peoplewith specialized IT knowledge indicates that inthe area of technology there has been anincrease in the number of businesses that arefocused on security-related abilities from threeyears earlier, while fewer businesses are nowfocused on abilities related to network, main-frame, and multi-purpose facilities. In addition, inthe area of skills, there has been a shift of focusfrom technical ability related to information and

communications to a designing and planningability in order to generate high value-added ser-vices by utilizing information and communica-tions and to stand out from competitors.

Seizing Digital Opportunities A survey on Internet usage shows thatteenagers has the largest rate of Internetusage of Internet users (72.8%), which is areflection of the increased use of the Internetat school. In addition, a comparison of Internetusage according to age group between Japanand the United States shows that in the agegroup 14 to 49 Internet usage is roughly thesame between the two countries, while in theage groups 10 to 13 and over 50 Internet usageis higher in the United States than in Japan.With respect to Internet usage by annualhousehold income, the higher the annualhousehold income, the higher Internet usagein both Japan and the United States.Furthermore, with respect to Internet usage bysize of municipality, Internet usage is highestin government-designated cities and Tokyo 23wards, and becomes lower as the size of themunicipality becomes smaller from cities totown and villages. This trend is also seen in the

Exhibit 1-28 How Internet Usage Is Perceived by Housewives and the Elderly

Non-Potential Internet User Group

Housewives The elderly

0

10

20

30

40

50

60%

Notes: 1. Strong Potential Internet User Group: People who feel a need to use the Internet and

would like to actually use the Internet 2. Potential Internet User Group: People who either feel a need to use the Internet or would

like to actually use the Internet. 3. Non-Potential Internet User Group: People who do not feel a need to use the Internet and

would not like to actually use the Internet. Source: Survey and Analyses on IT and National Life

Strong Potential Internet User Group

Potential Internet User Group

55.6

49.0

36.5

23.6

14.5

20.9

30

United States, even though differentialsbetween the different sizes of municipalitiesare smaller in the United States than in Japan.In terms of Internet usage by gender, malestend to use the Internet more often thanfemales. In the United States, however, there isno such gap between males and females inInternet usage.

With respect to the main reasons for notusing the Internet, more than 30% of peoplewho have never used the Internet respondedthat they have no need to use it, and that theycan not use a PC, suggesting that there is a lackof both initial motive for using the Internet andthe ability to use a computer. As a motive to usethe Internet, more than 30% of these non-userswould be interested in services that offer newsand other information and in e-mail services,while over 20% listed on-line banking servicesand on-line shopping.

In order to alleviate obstacles faced by theelderly and challenged in using the Internet, it ispossible to develop and put to practical use aspecially designed PC and other hardwaredevices, or specially designed software.Nonetheless, the most common method at thepresent time is to use a regular PC that is sup-plemented by the use of software designed forthe challenged. In addition, in response to thedifficulties experienced by the challenged suchas their inability to connect to the Internet andtheir difficulty in using a keyboard and mouse,measures have been undertaken across Japansuch as seminars for the challenged and ahome visit program to help them with using theInternet.

There is a tendency for housewives and theelderly to use the Internet less frequently thanstudents and office workers. Going forward, inorder to eliminate differentials in Internetusage in Japan, an important part of theagenda will be to promote Internet usageamong housewives and the elderly who havenever used it before. With respect to how theInternet is perceived by them, more than 50%of housewives and less than 40% of the elderly,who have never used the Internet before feel aneed to use the Internet and would like toactually use it, suggesting a strong potentialfor increased usage of Internet among thesepeople (Exhibit 1-28). In addition, among thesepotential Internet users, the most necessarycondition for housewives to start using theInternet is lower Internet usage charges

(27.2%), less than ¥2,000 per month to be morespecific, while the elderly would like someoneliving close by who could teach them how touse the Internet (18.5%), to be more specificthey would like to attend a free seminar. Theseresults show that economic conditions aremore important to housewives, while theelderly are more focused on the availability ofinstructors. Notwithstanding the foregoing,both groups desire, in addition to furtherreductions in the cost of PCs and Internetusage charges, free seminars and voice input,which suggests further the high demand formeasures such as IT seminars.

5 DISTRIBUTING ATTRACTIVE CONTENT

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Current Status of Network ContentThe total volume of content on Japan’s Internetdomain, the “.jp” domain, has grown sharply;in the three years starting August 1998, it grewby a factor of 6.7 (Exhibit 1-29). A look at thefiles by file type (HTML, still-image, video,sound, etc.) shows that the vast majority ofthese files are HTML and still-image files, withvideo and sound files making up just 0.1–0.2%of the total number. This proportion did notchange greatly during the three years ending inAugust 2001. In terms of volume per 10,000files, however, the proportion has changed dra-matically: During the three years ending inAugust 2001, the volume of video data grew bya factor of 2.1 and the volume of voice data byabout 200%. The volume of HTML data is now7.2 GB per 10,000 files and that of still-imagedata is 4.8 GB per 10,000 files, while the vol-ume of video data is 4,472.9 GB per 10,000 filesand that of sound data is 556.1 GB per 10,000files. While the increase in the unit volume of

video and sound files indicates growth in high-grade content, the fact that their share of thetotal number of files has remained constantsuggests that these file types are underuti-lized. It would be desirable for the spread ofbroadband technology to spur an increase inuse of this high-grade content, in turn leadingto even more use of the Internet.

The media software content distributionmarket is worth a total of about ¥10.9 trillion, ofwhich text software media has the largest shareat 48.9%, followed by image software media at41.9%. This market can be divided into the pri-mary-use and secondary-use markets, and bymedia type. While terrestrial TV programminghas the largest share of the primary-use marketat 28.9%, its share of the secondary-use marketis just 6.5%. As the spread of broadband gener-ates more demand for image software content,an expansion of the market for distribution ofimage content, particularly terrestrial TV pro-gramming, would be desirable.

0

200

400

600

800

Source: Research on a Statictical Technique for Internet Content, Institute for Posts and Telecommunications Policy, MPHPT.

Aug. 2001Aug. 2000Aug. 1999Aug. 1998

Total servers 54,000 85,000 120,000 177,000 Total pages 17.90 38.50 55.70 65.07 (millions) Total files 36.48 85.74 132.04 167.00 (millions) Total data volume 664 1,889 3,212 4,446 (GB)

Exhibit 1-29 Trends in Internet Content Volume (with August 1998 assigned a value of 100)

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The sharp rise of broadband penetrationrate has already led to the emergence of high-volume content distribution businesses; forexample, some image and music content is nowbeing distributed on a paid basis.

Users’ Needs for Network ContentA look at users’ needs regarding the servicesavailable via broadband reveals that theseusers intend to use all of these services to agreater extent in the future than they do now.Desire for entertainment-oriented servicesinvolving high-quality content is particularlystrong; over 70% of users say they intend touse “services for downloading music, videos,etc., to be enjoyed at the user’s convenience”and “services allowing users to enjoy, at theirconvenience, valuable content available onlyover the Internet.” Intent to use paid video andmusic content is also strong; the majority saythey would like to use such content if the priceis equal to or less than the cost of rentingvideos or CDs (Exhibit 1-30). This attitudeseems to reflect a perception of Internet con-tent as something to be rented rather thanpurchased and saved.

To pay for content over the Internet, users

say they prefer either the transaction meanscurrently most often used in the e-commerce,such as postal or bank money transfers andcredit cards, or methods such as Net Bankand proxy billing services provided by telecom-munications carriers, which make it relativelysimple to conduct small transactions. Themain sources of anxiety or dissatisfaction sur-rounding the use of content are first, thespeed of access lines, followed by “concernsthat personal information might be leaked out”and “concerns that payment procedures mightnot be correct.” About half of all users citedthe latter two concerns, which suggests thatthe security of personal information is a userconcern that-along with feelings of dissatis-faction about the time and effort required tomake purchases and about the shortage ofattractive content-merits attention. To pro-mote further distribution of content over net-works and make the network society moreappealing, it is necessary not only to increasethe amount of appealing content but also toestablish systems and rules for content distri-bution that create a favorable environment forInternet use.

Would not use even if available free

Image contentSound content

0 5 10 15 20 25 30 35 %

Source: Survey of Attitudes About Security and Illegal Activity on PCs and the Internet, Institute for Posts and Telecommunications Policy, MPHPT

Would like to use even if priced higher than content sold in stores

Would like to use if priced

the same as content sold in stores Would purchase even if more

expensive than content rented from stores but not if more

expensive than content sold in stores Would like to use if priced the

same as content rented from stores

Would like to use if priced lower than content rented from stores

Would like to use if available free

4.7

0.10.2

1.1 1.2

7.710.2

26.527.3

30.3 30.1

27.626.4

6.6

Exhibit 1-30 User Inclination to Pay for Image and Music Content Distributed over theInternet

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Protecting Intellectual Property Rights andUsers’ AwarenessBecause digital content can readily be dupli-cated, and furthermore, almost nothing is lostin the copying process, issues such as copyprotection have repeatedly come up for discus-sion. Increased Internet access and higher-per-formance computers, together withtechnologies allowing peer-to-peer (P to P) file-sharing and illegal copying of CDs, havebrought copyright infringement issues to theforefront. One well-known case was the copy-right infringement suit against Napster, opera-tor of a peer-to-peer music file sharing systemthat attracted many users. In July 2000, a U.S.federal district court issued a preliminaryinjunction ordering Napster to cease opera-tions. The company appealed the ruling, but inFebruary 2001 a U.S. Federal Court of Appealsupheld the initial ruling in favor of the recordcompanies and other plaintiffs that Napster’sconduct had constituted a copyright infringe-ment, and in March of the same year, a federaldistrict court issued a provisional injunctionordering the company to cease providing itspertinent services. Both the plaintiffs and thedefendant accepted this ruling.

While 40.3% of Internet users surveyedfeel that “protection of copyright holders’rights should take priority,” another 27.5% feelthat “the convenience of users should take pri-ority.” This finding highlights the importanceof deepening users’ awareness of copyrightissues, and of making rules that will allowcontent to be distributed in a manner that pro-tects the interests of both copyright holdersand users.

Network Content Trends Outside of JapanBroadband access has become more wide-spread in Japan in recent years. However, thisstarted happening in Korea and the UnitedStates before it did in Japan, and those coun-tries have also been ahead of Japan in startingto develop content businesses premised onbroadband technology.

Korea leads the world in terms of broad-band Internet access. As of February 2002,some 57.3% of Korean households connected tothe Internet had broadband connections—amuch higher rate than in any other country,even the other economically advanced nations.A commensurately wide variety of broadbandInternet services are available in Korea. One

popular service, which has been a major factorin promoting Internet use by that country’s citi-zens, is one that combines communication andentertainment elements, allowing users to chatwith friends while watching TV dramas viavideo-on-demand Web sites or to participate innetwork-based games that can simultaneouslyaccommodate thousands of players.

In the leading Internet nation, the UnitedStates, broadband access is sharply rising; asof September 2001, 19.1% of households con-nected to the Internet were using broadbandconnections. Two paid music distribution ser-vices, Pressplay and MusicNet, commencedservice in December 2001. Both of these ser-vices have mechanisms for copyright controland billing—two required elements for paidmusic distribution. Both companies are dis-tributing music under the proper procedures,such as obtaining licenses from the recordcompanies, and are billing users on a monthlybasis.

Improving Copyright Protection andEnhancing User ConvenienceTo promote content distribution in a networksociety, it is necessary to provide adequately forboth the protection of copyright holders and theconvenience of users. To maximize the interestsof both parties, maintaining balance betweenboth, and promote the distribution of content, itis necessary to have appropriate mechanismsfor managing rights between the holders andthe content providers that are the users of copy-rights, and to have secure, simple, and copy-right-safe content distribution and paymentcollection mechanisms between contentproviders and general users.

Because the creation of image contentinvolves multiple copyrighted items and multi-ple producers, issues related to rights arecomplicated. To distribute a broadcast programover the Internet, for example, various kinds ofrights must be secured from multiple parties.It is necessary not only to secure rights fromthe program copyright holder, but also fromthe original author and the script writer, aswell as the rights to use the melody and lyricsfor the music used in the program, and adjoin-ing rights from the performers and musicians.In response to the report of the Study Group onthe Formation of Network Distribution Marketof Digital Content, published in July 2001, theMPHPT investigated the concept of a rights

34

clearance system for the smooth handling ofthe necessary copyrights associated with on-line distribution of broadband content. InDecember 2001, the ministry published thefindings of this investigation and solicited opin-ions on this issue. In light with these trends,rights holders and rights users has begun dis-cussions pertaining to the desirable shape of asystem for the clearance of rights betweenrights holders and rights users for on-line dis-tribution of broadcast content. The ministryplans to use the conclusions reached in thesediscussions to develop a system that willsmooth the process of managing rights forbroadband content distribution on the network.The ministry plans to implement this rightsclearance system on a trial basis starting infiscal 2002.

To promote more distribution of networkcontent, it will be necessary not only to ensurethe reliability of billing and other systems, butalso to make the process of obtaining contentmore convenient. Platforms for distributinghigh-quality content over the Internet—knownas Content Delivery Networks (CDN)—not onlydistribute content but also provide for paymentand user authentication and for copyright pro-tection. More providers of these solution ser-vices are emerging in Japan as well as othercountries, and are expected to promote furthergrowth in the content distribution business.

6 GUARANTEEING INFORMATION SECURITY

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The Importance of Guaranteeing InformationSecurityThe Internet has become an essential piece ofinfrastructure permeating every aspect of soci-ety. The presence of e-commerce, e-govern-ment and electronic local government is anexample of ways in which the Internet has madelife more convenient for citizens, boosted theirefficiency, and supported their creative endeav-ors. However, the availability of more and moreinformation in digital form also increases thedanger of this information’s being used inappro-priately. The recent rise of the Internet as socialinfrastructure has increased the likelihood ofserious problems across the corporate, govern-ment, and private realms. Awareness andappropriate attitudes on the part of each andevery Internet user will be instrumental in mini-mizing the potential for such damage-in keep-ing the network society operating safely.

Current State of Information SecurityInfringementThe sharp growth of the Internet and itsincreased use by private citizens has directlyexposed all Internet users to an array of prob-lems, including computer viruses, nuisance e-mail (spam), e-commerce fraud, andpornographic images and other undesirablecontent.

Computer viruses are a major securityissue; about 60% of companies listed in the firstand second sections of the Tokyo StockExchange reported having experienced infringe-ments on their information security last yearalone, with infection by computer viruses citedas the culprit in 96% of the cases (Exhibit 1-31).In 2001, a computer virus caused major dam-age by using e-mail attachments to replicateitself, and other viruses made use of securityholes in e-mail software and Web browsers. In2001, a computer virus targeting Web serversdisrupted Internet operations worldwide. Thevirus known as Code Red caused problems allover the world, infecting nearly 300,000 serversthroughout the United States alone in the spaceof 10 days.

Another security problem is unauthorizedaccess, of which 1,253 known instancesoccurred in 2001. This was about 12 times theprevious year’s figure. Most of this unauthrizedaccess was in the form of unauthorized over-writing of Web sites, of which 813 instancesoccurred. The second-largest source ofunathorized access was by means of self-repli-cating programs (computer viruses) of which 94instances occurred. The administrators con-trolling access to the computers affected byunauthorized access were companies otherthan Internet service providers in 429 cases;

Source: Survey On the Current State of Information Security Measures, MPHPT

No response 0.7%

No security infringements have occurred 39.0%

Security infringements have occurred 60.3%

Exhibit 1-31 Data Security Infringements at Private Companies

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this figure far surpasses the number of cases inwhich the administrators were Internet serviceproviders. This is believed to have happenedbecause the viruses were targeting non-ISPcompanies, which were late to remedy theirsecurity holes. In 2001 the number of arrestsrelated to Internet fraud grew sharply to 103—about double the previous year’s figure. Of thesearrests, about 60% were related to Internet auc-tions. In another problem area, spam (unwantede-mail) to cell phones, the total number of com-plaints reached 140,000 in June 2001, butthanks to e-mail address changes and blockingfeatures, this figure had dropped to about 60,000by November of that year. Meanwhile, on Web-based bulletin boards, distribution of informa-tion that infringes on other users’ rights (forexample, libel) has become a problem. In onerecent court case, a company applied for a pro-visional injunction to force a bulletin-boardadministrator to delete defamatory material thathad been published about the company on thebulletin board, and in August 2001 the TokyoDistrict Court issued a judgment ordering theadministrator to delete the material. Problemsexist in other areas too. For example, there hasbeen a succession of cases in which mistakes incompanies’ operations have resulted in leak-ages of client or employee data over theInternet. The situation calls for drastic remedialmeasures such as privacy policies.

Users’ Needs for Security and PrivacyThough increasingly widespread use of theInternet is viewed as something that will makepeople’s lives richer and more convenient, thisprogress could potentially be obstructed by citi-zens’ anxieties and dissatisfactions, as well astheir inadequate knowledge, about Internet use.The anxiety most often cited by Internet usersabout e-commerce is “Will my credit-card num-ber or personal information be leaked to thirdparties?”; this concern was cited by 77.7% ofusers surveyed. The next most common con-cerns are “Will the product design and outerappearance really be the same as representedon the screen?” and “Will the product I havepurchased arrive safely?”; the proportion ofusers citing these concerns added up to over50%. These findings suggest that Internet usersare still very anxious about sending personaldata over electronic networks and about thereliability of on-line transactions. Computerviruses are also a major concern. About 70% of

survey respondents who use the Internet 20hours a week or more said they had encoun-tered computer viruses during 2001, and thisproportion was about 50% even among peopleusing the Internet less than 20 hours a week.Although many users say they take counter-measures against computer viruses by usinguntivirus software and updating their patternfiles, 15.1% of survey respondents said they“don’t do anything special” to guard againstviruses; the Internet population is still believedto be at great risk for computer viruses. (Exhibit1-32). Another source of user dissatisfaction isnuisance e-mail, also known as spam. Threeout of four users report having received nui-sance e-mail of some kind. The most frequentlycited content of this mail is advertisements foron-line personal encounter sites.

Companies, having experienced the menaceof unauthorized access, are believed to beaddressing their security concerns in a variety ofways. Indeed, companies are more likely to addto the problems affecting Internet users than tobe affected by these problems themselves. Caremust be taken to ensure that company opera-tions such as conducting e-commerce, usingconsumers’ personal information, and advertis-ing via e-mail do not cause problems for societyat large. About 60% of companies engaged inon-line consumer business (including e-com-merce) are taking measures of some kind toprotect consumers’ personal information.Specifically, the measures most often cited are“devising privacy policies,” “designating employ-ees to be responsible for managing personalinformation,” “revamping systems and organiza-tions,” and “limiting personal data to the bareminimum needed.” But although theseaccounted for a relatively large share of stepsbeing taken by companies in this area, less than30% of the companies surveyed are actuallyimplementing them.

When companies and local governmentwere surveyed to determine what kinds ofcountermeasures they were implementing toprevent unauthorized access, it was found thatlocal public bodies lag behind companies interms of implementing such measures. Whileimplementation of anti-virus tools and firewallshas reached a high level, measures other thanthose are being implemented by only 30–40% ofcompanies and only 10–20% of local govern-ments. A particularly weak area for local gov-ernments is security policies; while 43.3% of

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companies surveyed report having imple-mented, or being in the process of implement-ing, such policies, only 7.3% of localgovernments report that they have done or aredoing so.

Tasks and Issues Related to Guaranteeing aSound Network EnvironmentTo foster a sound network environment thatoffers the guarantee of information security, it isurgent that technologies and services be devel-oped to address the aforementioned problems.A look at the current state of development ofsuch technologies reveals that two main kindsof technologies are currently being imple-mented: Technologies for foiling unauthorizedaccess; and technologies for guaranteeing asound network environment.

In the first category, technologies for pre-venting unauthorized access, one tool is fire-walls, which control access to private networks.In addition to gateway firewalls, the most com-mon type of firewall currently in use, a new kindof firewall known as a host-base firewall, whichis integrated into the server, is now catching on.Some network operators are combining thesetwo types of firewalls to boost effectiveness.Another means of preventing unauthorizedaccess is tools for detecting and destroyingcomputer viruses; services and technologies forintegrated management of this task are cur-rently being developed. Research concerningtools for the detection of unknown viruses isalso in progress. Yet another tool for preventing

unauthorized access is Intrusion DetectionSystem (IDS), which monitor host access andnetwork communication and issue warningswhen they detect unauthorized access. Stealthconnections protect a system by assigning it anIP address that is hidden from intruders;researchers are currently working on bringingstealth connections into practical use and devis-ing standards to evaluate their performance.R&D into IP address pack technology, whichmakes it possible to trace the origin of unathor-ized access by allowing designation of inter-packet transmission origins, is now under way.

The second category of technologies foraddressing Internet users’ concerns is tech-nologies for guaranteeing a sound network envi-ronment. Biometrics, a means of identifyingindividuals via biological data such as finger-prints, the brightness of the pupil of the eye,voiceprints, and handwriting, is coming intopractical use as a means of controlling accessto rooms and of authenticating network logins.Another technology for promoting a sound net-work environment is content filtering, whichinvolves creating a list of sites and other contentunsuitable for children and limiting access whenappropriate, based on the nature and extremityof the content. In this area, technologies forautomatically analyzing text and images andomitting unsuitable content are sparking highhopes.

Although a variety of technologies and ser-vices are being developed to provide a soundnetwork environment, what is ultimately most

0 10 20 30 40 50 60 70 %

Don't know

1.8

Use anti-virus software Update virus definition

files (pattern files) regularly

Back up files, etc.

Use virus check service Use mail software

with few security holes

Other

Don't do anything special

57.2 45.0

26.8 26.7 18.7

6.6 15.1

Source: Survey Concerning Safety and Future Technologies in the Field of Information and Communications

Exhibit 1-32 Computer Virus Countermeasures Currently Implemented (individual users)

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important is that users recognize their role inthis process and heighten their awarenessaccordingly. When information systems opera-tors at companies were asked what they consid-ered to be their task for the future, two out ofthree cited “catching up with increasinglyadvanced and complex security technologies.”When asked if they considered e-mail-basedadvertising a nuisance, 36.0% of companies sur-veyed said that they consider it either “anextreme nuisance” or “somewhat of a nui-sance.” However, the proportion of the generalInternet user population that feels this way isthree out of four. This finding highlights a per-ceptual gap between the senders and thereceivers of e-mail ads. Tasks for building asound network society include not only develop-ing the appropriate technologies and services,but also cultivating network technicians to oper-ate this network society effectively and devisingrules to remedy the sources of user anxiety anddissatisfaction.

Establishing the Systems for a Sound NetworkSocietyTo guarantee information security, it hasbecome necessary not only to implement tech-nological measures but also to establish newsystems and rules for the network society.Following are some of the main steps now beingtaken to put these systems in place.

To give electronic signatures the same legalauthority as handwritten signatures or theimpressions created by name seals, the govern-ment passed the Bill on Electronic Signatureand Electronic Certification Operation in April2001.

Another new law establishes standardsunder which users whose rights have beeninfringed by the electronic distribution of mater-ial can petition for the disclosure of informationthat designated telecommunication providershave about the originators of that material. Thelaw also sets limits on the responsibilities oftelecommunication providers to compensatewronged parties for damages in such situations.This law concerning the limitation on liability fordamages by the designated telecommunicationsservices providers and the disclosure of senderinformation went into effect in May 2002.

To protect personal information in the pos-session of public organizations and privatecompanies, provision of a certain law comes upfor discussion at the Diet. Telecommunication

carries are taking various steps to address theproblem of nuisance e-mail. However, no fun-damental solution to the problem of spam hasyet been reached. The 154th ordinary session ofthe Diet passed a proposal for a law on topics ofthe appropriateness of sending certain desig-nated e-mail.

To take a step toward the presence of elec-tronic government by 2003, in October 2001 theInformation Security CountermeasuresPromotion Council within IT StrategicHeadquarters devised an action plan for guar-anteeing information security of electronic gov-ernment, which sets forth detailed sevenconcrete measures and schedule for imple-menting extensive measures to guarantee thesecurity of such information; the plan also pro-vides for international cooperation and for coop-eration with local governments in this effort.

7 NEW SERVICES AND TECHNOLOGICAL DEVELOPMENTS ON THE HORIZON

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Changes in Network Services and Trends inTechnological DevelopmentWith the explosion in Internet users, the Internetenvironment is changing qualitatively, and newservices and technologies are coming into usethat will result in a “ubiquitous network society.”These changes in the Internet environment canbe seen in the communications network, which isgetting faster and being used in more differentways; the increasing diversity in Internet-accessdevices; and the increasing sophistication of datamanagement and access management. The mostobvious change in our network environment hasbeen the spread of fast or super-fast constant-connection, but in the future other kinds ofchanges can be expected: proliferating “hotspots”for wireless access, and the seamless integrationof networking into everyday objects, as withsmartcards that communicate wirelessly. Thehardware at the edge of the network—today,mostly personal computers and cell phones—willlikewise diversify to include devices that previ-ously had functions completely unrelated to thenetwork: televisions, telephones, householdappliances, and even cars. As these trendsprogress, the companies that are involved in infor-mation communications will develop new servicesto keep pace. This will not just take the shape oftoday’s data centers, which are an outsourcingservice for data management, with a client-servermodel; but rather, data will be shared on a peer-to-peer (P to P) basis, with bits of data and ser-vices residing on a variety of servers all being tiedtogether on a web-services model.

These changes in the Internet’s landscapecan be expected to bring about a network-ser-vices future, a ubiquitous network society,where the network is available anywhere, any-time; where personal and corporate users willboth be able to use it in ways that most suitthem, in any situation. Personal users can beexpected to want remote monitoring and opera-tion of appliances in their homes, but wirelessaccess via hotspots, communication with otherusers, etc, will all remain important uses.Corporate users will need access in a variety ofbusiness situations—during sales calls, whileperforming maintenance, and during

meetings—so the scope of the network can beexpected to be expanded to accommodate them.

Communication Services and Technologies forthe Network SocietyIn the past, most individual Internet users got on-line using analog phone lines or ISDN lines. Morerecently, though, the number of users withbroadband access has skyrocketed. The emer-gence of wireless communication protocols, suchas wireless LANs and BluetoothTM, and the wire-less access systems that support them, are aportent of the coming ubiquitous networkingenvironment ‘’usable anywhere, anytime, by any-one, with any terminal.’’ One reason wireless net-working is attracting attention as a technology forubiquitous networking is because of its potentialas a service: hotels, restaurants, shops, airports,train stations, etc. can install base stations forwireless networking to provide high-speedInternet access as a service. Locations with thesewireless base stations—often called “hotspots”—make it possible for a user to simply walk up witha properly equipped personal computer (PC),personal digital assistance (PDA), or the like, andinstantly start surfing the Internet at 10 Mbps orfaster. These types of service are now beingoffered on a commercial basis, and are a steptowards ubiquitous computing. In the future, itcan be expected that the number of hotspots willrise and information equipment with wirelessLAN cards will proliferate, fee-based systemsand business models will appear, and seamlessaccess-control technology will be developed.

There has also been a revolution in minia-turization for the IC chips used in wirelesssmartcards. This allows everyday objects to be“tagged,” making it possible to identify andacquire information about them, which in turnhas led some to look for ways to provide net-work services that tie in with tagged objects.These services could allow e-commerce thatwould work by acquiring information aboutproducts from their ID tags; that informationcould likewise be collected and centralized. IDtags attached to publicity material could providericher content (music, video, etc.), for an entirelynew type of service. In short, the future will not

0 10 20 30 40 50 60 70 %

Nothing in particular

5.4

PC Cell phone or PDA Remotely-operable

household applianceTelevision

Portable displays usable in the home

Audio-video equipment

Computers in cars, for navigation, etc.

Telephones and fax machines

63.849.2

44.2 42.0

29.6

26.0 20.9

13.6

Source: Survey Concerning Safety and Future Technologies in the Field of Information and Communications

Exhibit 1-33 Network Devices that Internet Users Would Like to Be Able to Use

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be limited by the past’s hardware: All objectswill be networkable, making the network aninvisible part of everyday life.

Information Appliances Running IPv6When one considers how people will want to usethe Internet—what kind of hardware they willwant to use, it can be imagined that people willwant appliances and televisions to join PCs, cellphones, and PDAs, as networked devices, sothat their appliances can be remotely operated(Exhibit 1-33). With the emergence of ubiqui-tous networking, it is possible to look forward toa society seamlessly connected through alltypes of devices, everywhere. One of the stum-bling blocks to achieving this, however, is thatthe current Internet Protocol version 4 (IPv4)has only 223 possible addresses (about 4.3 bil-lion). As many as this is, it is not enough to giveevery device a unique IP number for connectingto the Internet. This is one reason public andprivate organizations are promoting a transitionto the successor, Internet Protocol version 6(IPv6) solves the address-shortage problem andoffers enhanced security as well. This is why thee-Japan Strategy sets “to promote a transitionto IPv6 equipped Internet” as one of its objec-tives.

Japan is in the forefront of R&D related toIPv6 implementation, and is at the point of con-ducting extensive testing. In October 2000, theIPv6 Promotion Council was founded, and theMPHPT has taken part in it as an observer. TheCouncil set up an IPv6 Trial Network, built tocomprehensively test every aspect of an IPv6network, from terminal equipment using IPv6to the overall network structure, which

includes normal households. This is the firstsuch large-scale test of IPv6 in the world.

A communications protocol used for ubiqui-tous network in the home, such as this is, canbe expected to work with a variety of transmis-sion media—wireless LANs and BluetoothTM aswell as power lines. BluetoothTM is a very short-range wireless communication protocol, andpower-line transmission piggybacks a data sig-nal on the electrical wiring that already runsthrough homes. Both can be expected to bepopular options, as neither requires any newwiring in the home to hook up information appli-ances. Bluetooth is already being used in prod-ucts that network appliances in the home, infact, while similar products based on power-linetransmission are currently under considerationfor near-term commercialization.

Developing New Services for NetworkManagement of Distributed DataTo extract the full value from a ubiquitous net-work, the desired data must be instantly acces-sible anytime, anywhere. Corporations alreadycome to use data centers that permit data man-agement over the Internet. With the spread ofbroadband access, personal users as well willwant to be able to call up data from their homePCs, and indeed, Web services that providesophisticated services in a way that is readilyaccessible to the user, linking together variousservices that are available over the Internet,already provide an integrated interface to per-sonal information over the network, and thisnew development is gathering considerableattention. Communications protocols like SOAP,that tie together applications, UDDI, for regis-

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tering and discovering application capabilitiesas services, and WSDL, a language for describ-ing Web services, have all made some progresstowards implementing Web services.

But when personal Internet users wereasked their requirements for these ID-manage-ment type services, the main concerns citedwere privacy protection and low-cost networkfees; in addition, over half of users surveyedcited information security, indicating that safetyis going to be a key issue in the further spreadof these kinds of services.

Technology Development Strategies in theUnited States, Europe, and JapanAdvanced nations including the United Statesand Europe all aggressively pursue R&D in theIT sector. In the United States, a little under 50%of the budget for IT R&D was spent on advancedcomputing, enhancing the investment in long-term computing. In the European Union, withframework programs being implemented, 3.6billion euro was spent on the “User FriendlyInformation Society” (IST).

When researchers in the IT field were askedwhat country or region they expected would leadresearch in the future, more than 85% answeredU.S.A. for basic research, more than 70% for

applied research. When asked to compare thelevel of R&D in the United States and Japan, thetechnologies where Japan was cited as having alead were wireless handsets, information appli-ances, supercomputers, voice synthesis, lan-guage processing, and electronic and opticalmaterials (Exhibit 1-34). When comparing thenumber of patents issued to the U.S.A. andJapan, the United States had a vast lead interms of Internet-related patents, by a factor of4.6, although looking at the long-term trend, thedifference in the number of Internet-relatedpatents has been shrinking.

While the United States has been the leaderin Internet-related technology developments, thetrend towards ubiquitous network, which willbroaden the demographics of Internet users, is apromising one for Japan, which will be able tomake its mark in the world by leading in areasthat will grow more important: mobile communi-cations, information appliances, human interfacetechnology. Research and development on othertechnologies that will be important for creating aubiquitous network environment—service discov-ery and structuring, access control—are alsoareas where progress is being made, and whichwill be necessary to create an environment with arich level of services that is uniformly available.

Network Mobile communications Base stations, switches Poor Handsets Good Internet Poor Optical communications OK Intelligent appliances Good Computing Computer systems Poor Supercomputers Good Information management (massive databases) Poor Human factors Voice processing Speech recognition Poor Speech synthesis Good Language processing (machine translation, etc.) Good Image processing OK Intelligent systems (artificial intelligence) OK Components Electronic devices OK Electronic and optical materials Good Sensors OK Major components (displays, hard drives) OK Software Programming languages Poor Systems Poor

Technology

Japanese technical strength relative

to the U.S.

Notes: “Good” indicates an advantage for Japan. “OK” indicates parity between Japan and the United States. “Poor” indicates an advantage for the United States. Source: State of Science and Technology in the Communications and Information Sector, Council for Science and Technology Policy (May 2001).

Exhibit 1-34 Network Devices that Internet Users Would Like to Be Able to Use


Chapter 2

CURRENT STATUS OF INFORMATION AND COMMUNICATIONS


2

1 TRENDS IN THE INFORMATION AND COMMUNICATIONS INDUSTRY

Market SizeThe market size for Japan’s information and com-munications industry in 2000 was an estimated¥113.8 trillion (a 6.5% increase over the previousyear). It has been consistently increasing since1995 and continues to grow steadily amid the slug-gish economic activity that continues to prevail inJapan (Exhibit 2-1). In addition, a comparison withthe other major industries has shown that in 1996the information and communications industry sur-passed the construction industry in terms of size tobecome the largest industry, accounting for 11.6%of the total market size for all industries (a 0.5point increase over the previous year).

Value AddedThe real gross domestic product (GDP) of Japan’sinformation and communications industry hascontinued to show growth, reaching ¥58.644 tril-lion in 2000, a 6.9% increase over the previousyear. In addition, while Japan’s real GDP hasgrown annually at an average rate of 1.43% overthe period 1995 to 2000, the information and com-munications industry has achieved remarkably

high growth in its real GDP with an average annualgrowth rate of 9.17% over the same period.

Economic Analysis of Information andCommunicationsAn estimation of the contribution made by theinformation and communications industry, whichmeasures how much of an impact the growth ofthe information and communications industry hashad on the overall rate of economic growth indi-cates that in 2000 the information and communi-cations industry contributed 0.7% to an overallrate of economic growth that was 2.36%. A furtherlook at this figure reveals that as far as the per-centage of the contribution made by the informa-tion and communications industry to the overallrate of economic growth is concerned the infor-mation and communications industry contributed30% to overall economic growth, which clearlyindicates that the industry has become the back-bone of Japan’s economic growth (Exhibit 2-2).

EmploymentThe number of people employed in Japan’s

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Share of total

Information and communications industry (year-over-year change in parentheses)


1995 1996 1997 2000199919980

20,000

40,000

60,000

80,000

100,000

120,000

8.6%

9.4%10.2%

11.0% 11.1%11.6%

113,832 (6.5%)106,842

(2.1%)104,643 (6.2%)

98,517 (10.0%)89,599

(13.1%)79,231 (–)

Exhibit 2-1. Market Size for the Information and Communications Industry in Comparisonwith All Industries

information and communications industry in2000 was 3,820,000 people, which accounted for7.1% of the total employment in all industries. Inaddition, when individual industries are exam-ined the information and communicationsindustry is shown to be the third largestemployer behind the 6,300,000 employees work-ing in the retail industry and the 5,300,000employees working in the construction industry.

ProductivityThe annual rate of increase in total factor pro-ductivity for the information and communica-tions industry over the period 1995 to 2000 was3.45%, which is the highest rate among allindustries. In addition, the average annual rateof increase in labor productivity for the informa-tion and communications industry over theperiod 1995 to 2000 was 8.34%, which is thesecond largest rate after the electrical machin-ery industry (not including the information andcommunications equipment sector).

Capital InvestmentThe amount of capital investment spent in fiscal2000 in the telecommunications and broadcastingindustry increased over the previous year, risingto ¥4,264.9 billion, a 4.3% increase over the previ-ous year. In addition, despite the general expecta-tion that capital investment will decline for all

industries, the telecommunications and broad-casting industry is anticipating an increase inplanned capital investment in fiscal 2001 to¥4,337.8 billion (a 1.7% increase over the previousyear), spurred on by an aggressive investment ofcapital by the mobile telecommunications carriersin response to the rising demand which followed agrowth in cell phone subscribers and the start ofthe IMT-2000 service.

Sector ReorganizationWith regard to sector reorganization in thefixed-line telecommunications market in Japan,in May 2001 KDDI, Japan Telecom, and NTTCommunications made a foray into the localtelecommunications market. In addition, theTokyo Electric Power Company commenced itsFTTH business in March 2002 after obtaining aType I telecommunications business permissionat the parent level in February 2002.

On the other hand, as far as sector reorganiza-tion on a global scale is concerned, in the interna-tional telecommunications market Concert, a jointventure between AT&T (U.S.A.) and BritishTelecommunications (BT, Britain), was dissolved inApril 2002. In addition, the recent activities oftelecommunications carriers in different countriesincludes the spinning-off into separate companiesof the cell phone businesses of both AT&T, in July2001, and subsequently BT in November 2001.

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1.9%

5.9%

27.3%

30.9%

-8.6%

-12.8%

2.2%

5.7%

Information and communicationsElectrical machineryIron and steelConstructionWholesaleTransportationCarrying machineryRetail

-15 -10 -5 0 5 10 15 20 25 30 35 (%)

Exhibit 2-2. Contribution to the Overall Rate of Economic Growth (2000)

2 TELECOMMUNICATIONS BUSINESS

Telecommunications CarrierAt the end of fiscal 2001 the number of telecom-munications carriers in Japan surpassed the10,000 mark, reaching 10,520 companies(Exhibit 2-3). In addition, among all thetelecommunications carriers the number of car-riers offering Internet connection services con-tinued to rise to 6,741 companies.

A breakdown of the total operating revenues ofthe telecommunications carriers in fiscal 2000indicates that the Type I telecommunications carri-ers earned ¥16,982.6 billion, a 9.0% increase overthe previous fiscal year while the Type II telecom-munications carriers earned ¥1,375.1 billion, a49.7% increase over the previous fiscal year.

Telecommunications ServicesTelecommunications services in Japan havebecome more and more diversified in terms ofservices offered, a fact which can be witnessedin the rapidly growing popularity in recent years

of those telecommunications services that areable to accommodate high-speed, large capacitydata communications. These services consistprimarily of DSL, cable Internet, IMT-2000. Anoverview of the number of contracts for themain telecommunications services at the end offiscal 2001 is as follows:

The number of fixed-line telephone contractswas 50,740,000 (an 2.6% decline over the previousfiscal year) in fiscal 2001, marking the fifth con-secutive decline. The current status of the tele-phone company advanced registration system(MYLINE), which was launched in May 2001, issuch that as of March 31, 2002 around 70% of alldomestic telephone users had already registeredfor MYLINE, and the total market share of NTThad surpassed that of new common carriers(NCCs) in each of the following areas: local com-munications, long-distance communications(within the same prefecture), and long-distancecommunications (outside of prefecture) (Exhibit

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Fiscal Year End 1995 1996 1997 1998 1999 2000 2001Year-over-

year change

Type I telecommunications carriers

126 138 153 178 249 344 383 +39

NTT 1 1 1 1 3 3 3 ±0 NTT DoCoMo and others 9 9 9 9 9 9 9 ±0

NCCs 116 128 143 168 237 332 371 +39 Long distance/Inter- national carriers 6 6 7 13 22 32 35 +3

Local carriers 16 28 47 77 159 275 318 +43 Satellite carriers 4 4 5 6 5 5 5 ±0 Mobile carriers 90 90 84 72 51 20 13 -7

Type II telecommunications carriers

3,134 4,588 5,871 6,602 7,651 9,006 10,137 +1,131

General 3,084 4,510 5,776 6,514 7,550 8,893 10,025 +1,132 Special (of which special Type II international)

50 (37) 78 (56) 95 (67) 88 (84) 101 (96) 113 (108) 112 (106) -1 (-2)

Total 3,260 4,726 6,024 6,780 7,900 9,350 10,520 +1,170

Note: Figures at the end of fiscal 2000 have been revised following the release of the preliminary figures in the Information and Communications in Japan White Paper 2001.

Exhibit 2-3. Trends in the Number of Telecommunications Carriers

2-4). The number of subscribers to ISDN in fiscal2001 exceeded the 10 million mark for the firsttime and reached 10,330,000 (an 6.5% increaseover the previous fiscal year) thanks to the rapidpenetration of the Internet. In addition, the rate ofincrease in the number of subscription contractsfor cell phones, which was 69,120,000 (an 13.4%increase over the previous fiscal year), sloweddown slightly in fiscal 2001.

Telecommunications ChargesWith respect to Japan’s telecommunicationscharges in 2001, the Corporate Service PriceIndex (using 1995 as the base year), which wasreleased by the Bank of Japan, indicates thatin the area of fixed communications thecharges for domestic telephone calls andISDN showed a substantial decline, which is areflection of an intensified competition drivenlargely by the launch of the telephone com-pany advanced registration system (MYLINE).A substantial decline can also be seen in thecharges for international leased circuits,which is a result of the lower pricing of thecharges for international leased circuits to theUnited States. This lower pricing was driven by

the increased number of companies that haveentered the market following the rush inrecent years in the industry to install underseacable networks across the Pacific Ocean.Meanwhile, there has been a similar consis-tent downward trend in the charges prevailingin the area of mobile communications as well.As compared with the rates charged in March1993 when the 800-MHz digital cell phone ser-vice was launched, basic rates and charges forcalls as of April 1, 2002 had fallen by up to75% and 73%, respectively (Exhibit 2-5).

In addition, a comparison of the communi-cations charges prevailing among the majorcities in different countries reveals that Japanhas shown either a substantial or an averagedecline in the level of rates charged for each ofdomestic calls, domestic leased circuits, andcell phones over the period fiscal 1996 throughfiscal 2000 .

Status of the Usage of TelecommunicationsMediaA breakdown of the volume of calls in fiscal2000 shows that the percentage of the volume ofcalls made between mobile communications

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Local calls

Long-distance calls (within the

same prefecture)

Long-distance calls (outside of prefecture)

Non-registeredNTT total NCCs

0 20 40 60 80 100

Note: Figures include both MYLINE and MYLINE PLUS registrations. The NTT total is comprised of NTT East, NTT West, and NTT Communications, Long-distance calls (outside of prefecture) excludes NTT East and NTT West.

Source: MYLINE Carriers Association

(%)

56.6

51.8 25.3 22.9

37.7 28.1 34.2

20.1 23.4

Exhibit 2-4. Market Share of MYLINE in Domestic Calls (as of March 31, 2002)

terminals rose to 22.4% (a 4.2 point increaseover the previous fiscal year), while the volumeof calls which was accounted for by communi-cations between fixed communications termi-nals declined to 59.5% (a 4.4 point decline overthe previous fiscal year), which is a reflection ofthe shift from fixed communications to mobilecommunications. The total volume of calls infiscal 2000 was 144.75 billion calls (a 7.7%increase over the previous fiscal year), and thetotal calling time was 7.03 billion hours (a 14.3%increase over the previous fiscal year). A furtherbreakdown of these figures according to thetype of communications terminal making theoutgoing call shows that the rate of increase inthe total calling time originating from fixedcommunications terminals and PHS was sub-stantially higher than the rate of change in thefrequency of calls made from these terminals,so that the calling time per single call has beenon the rise. All of this suggests that a shift inthe demand for communications is occurringrapidly from voice communications via the tele-phone to data communications via the Internetand other such media.

48

Basic rates (Monthly rate) Charges for calls*

¥260

¥70¥4,500

¥17,000

¥4,300 to

¥4,600¥80 to ¥100

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

0

50

100

150

200

250

300

* Between cell phone and fixed-line telephone for a 3 minute call within the same prefecture during a weekday

March 1993 NTT rate

As of April 1, 2002

As of April 1, 2002March 1993 NTT rate

Reduction by approx. 62% to 73%

Reduction by approx. 73% to 75%

NCC rate

NTT DoCoMo

rate

NCC rate

NTT DoCoMo

rate

Exhibit 2-5. Downward Trend in Cell Phone Charges

BroadcastersAt the end of fiscal 2001 there were 348 ordinaryterrestrial broadcasters (of which 152 were com-munity broadcasters), 146 ordinary satellitebroadcasters, and 669 cable TV companies offer-ing original programs (Exhibit 2-6) in Japan. Inaddition, following the implementation of the LawConcerning Broadcast on TelecommunicationsServices in January 2002, a new system has beenin place to regulate broadcasting on telecommu-nications circuits such as communications satel-lites and fiber optics.

Operating revenues for broadcasters for fis-cal 2000 rose over the previous year. Commercialterrestrial broadcasters earned ¥2,646.6 billion, a6.6% increase over the previous fiscal year, com-mercial satellite broadcasters ¥189.1 billion a17.7% increase over the previous fiscal year, andcable TV companies ¥246.3 billion, a 9.8%increase over the previous fiscal year.

In addition, NHK (Japan BroadcastingCorporation) was engaged in terrestrial broad-casting operations with its domestic broadcasting

which consisted of a total of five television andradio channels, and in satellite broadcastingoperations with its broadcasting satellite (BS)broadcasting with a total of six channels, includ-ing Television 1, Television 2, and High Vision.

Other than the above, the University of the Airwas established in order to respond to Japanesecitizens’ request for opportunity to study univer-sity courses and is also aimed at promoting anddeveloping broadcasting programs for universityeducation. At the present time, the programs ofthe University of the Air are aired through terres-trial TV broadcasting, super shortwave broad-casting, and CS digital broadcasting. Theprograms on terrestrial TV broadcasting and CSdigital broadcasting are repeated via cable TV.These programs can be seen across Japan.

Broadcasting ServicesThe number of commercial terrestrial televisionbroadcasting stations in operation at the end of fis-cal 2001 was 127, and approximately 90% ofhouseholds in Japan were able to obtain at least 4

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348 com-

panies (336)

2 com-

panies (3)

19 companies

(19)

1 company

(1)

Analog Broad- casting

Analog Broad- casting

Digital Broad- casting

Digital Broadcasting

1 company (1)

18 companies

(18)

113 companies (117)

2 companies (2)

CS Broadcasting

BS Broadcasting

669 com-

panies (646)

Terrestrial Broadcasters

Satellite Broadcasters Cable TV

Companies

Consignee (Lower box)

Consignor (Upper box)

110 degree CS Broad-

casting

Other CS Broad- casting

Notes: • Figures in parentheses represent numbers for fiscal 2000. • Figures do not include NHK and the University of the Air. • Cable TV operators are those offering original programs.

Exhibit 2-6. Number of Broadcasters at the End of Fiscal 2001

channels. With respect to satellite broadcasting,BS broadcasting commenced operations with ana-log broadcasting in June 1989 and digital broad-casting in December 2000, while CS broadcastingdebuted with analog broadcasting in April 1992 fol-lowed by digital broadcasting in June 1996. In addi-tion, consignor broadcasters for Plat-One and SKYPerfect Communications commenced broadcast-ing services in March 2002 and May 2002, respec-tively, using the N-SAT-110 satellite that waslaunched in October 2000 and is positioned at 110degrees longitude east, which is the same as thatfor BS broadcasting. Even though cable TV wasoriginally launched as a supplementary broadcast-ing media which was to be primarily focused onrepeating already aired programs because of thereception difficulties experienced by viewers of ter-restrial television broadcasting, its broadcastingprograms have become diversified in recent yearsdue to repeat broadcasts via satellite broadcastingand an increase in the number of original pro-grams. In addition, NHK has been engaged ininternational broadcasting which is aimed at over-seas reception, and both NHK and commercialbroadcasters have been airing programs that aredesigned for foreign viewers overseas.

Broadcasting FeesAn examination of the structure of the receptionfees and charges for both terrestrial and satellitebroadcasting services shows that reception fees

constitute the main source of revenue for NHK,while commercial broadcasters rely heavily onadvertising revenues and pay-TV charges as theirmain source. In the case of BS digital broadcast-ing, which commenced service in December 2000,NHK so far has not established a reception feeclassification specifically for this service, thusallowing its viewers with the existing satellitecolor contracts to receive this new service withoutany additional fee. In addition, fees for the BS digi-tal broadcasting service contracts provided bycommercial broadcasters have remained at aboutthe same level as those for the BS analog broad-casting service, a move aimed at promoting thefaster penetration of BS digital broadcasting.

Status of the Usage of Broadcasting MediaAccording to the Nationwide Survey on IndividualAudience Ratings (June 2001), which is releasedby the NHK Broadcasting Culture ResearchInstitute, television broadcasting viewing time inJapan is such that the average time of televisionbroadcasting viewing per day (weekly average) in2001 was 3 hours 51 minutes, which was thelongest average time seen in 10 years and 30minutes longer than the average time of viewingin 1992 (Exhibit 2-7). In addition, audience ratingson television broadcasting by time shows that thepeak viewing times occur between 7:00 and 8:00in the morning, between 12:00 and 13:00 in theafternoon, and after the early evening.

50

Source: The Nationwide Survey on Individual Audience Ratings, NHK Broadcasting Culture Research Institute (June 2001)

FY1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

0:00

1:00

2:00

3:00

4:00

0:54 1:02 0:52 1:04 1:00 1:04 1:02 1:00 1:04 1:062:27 2:30 2:35 2:41 2:34 2:30 2:40 2:35 2:41 2:45

3:21 3:32 3:27 3:45 3:34 3:34 3:42 3:35 3:45 3:51

Commercial broadcasters totalNHK total

TV total

Exhibit 2-7. Changes in the Average Time of Television Broadcasting Viewing per Day(weekly average)

OverviewThe postal service incurred a net loss of ¥10 bil-lion in fiscal 2000, which was a ¥45.3 billionimprovement from the net loss in fiscal 1999thanks to managerial efforts that included cut-ting back on the cost of personnel and suppliesin order to reflect dwindling postal service rev-enues. Cumulative profits at the end of fiscal2000 were ¥122.6 billion.

Mail VolumeAs in fiscal 2000, the postal service continued toprocess a record high total volume of mail (asum of the number of domestic mail volume andthe number of international mail processed) infiscal 2001, processing 26.7 billion items, a 0.7%increase over the previous fiscal year. In addition,a comparison of the total volume of mailprocessed by different countries in fiscal 2000shows that Japan ranked third in the world afterthe United States and France. In terms of theannual volume of mail per capita in fiscal 2000,however, Japan ranked 18th, accounting forapprox. 28.2% of the annual volume of mail percapita in the United States, which ranked first.

ServicesEfforts are made for the improvement of variouspostal services in order to cater to the changesoccurring in the social economy arising fromthe utilization of IT, the need for a total servicewhich can consolidate logistics, information,and payment settlement functions, and theincreasing and diversified needs of users forother diverse services. The Postal Service con-tinues to develop new services, such as a ser-vice that will consolidate logistics, information,and payment settlement functions.

Postage RatesDomestic postal rates, which are based on afinancially self-supporting system, are deter-mined in accordance with the principal of theequalization of income and expenditure. Postagerates for ordinary mail are based on a charac-teristic system of flat rates that are applicablenationwide. Inexpensive postage rates havebeen set for third-class mail and fourth-class

mail in view of specific social policies in Japan.On the other hand, postage rates for parcel postare determined according to the applicable zoneof destination and the weight of the parcel. Inaddition, as in the case of ordinary mail, postagerates for booklet parcel post for the mentallyand physically challenged and other similaritems have been set at a low level in light of cer-tain social policies.

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4 POSTAL SERVICE

5 INFORMATION AND COMMUNICATIONS NETWORK

High-Speed and Ultra High-Speed NetworksSubscription-based networks that connect sub-scribers to the reception stations of telecommu-nications carriers used to be largely based onfixed-line telephones via metallic cables orISDN. In recent years, however, they have rapidlybecome diversified through the advancing devel-opment of fiber optic cables, which reflects theincreasing needs demanded by high-speed andlarge capacity data communications. The devel-opment of fiber optic networks has been under-taken steadily so that by the end of fiscal 2000the coverage of the development of fiber opticcable networks in Japan was 43%, a 7.0 pointincrease over the previous fiscal year based onthe hub points of telecommunications carriers(Exhibit 2-8). In addition, the progress beingmade in the wide-banding of transmissioncapacities as well as in the conversion to fiberoptics within the backbone of the cable TV net-works has gone a long way in coping with thebroad-banding of the Internet, etc.

The development of domestic relay net-works has been enhanced by the installation offiber optics, and almost 100% of the relay net-works that link exchange stations have beenconverted into fiber optics. In terms of thelength of cables, 89% of the total length ofcables, which amounted to approximately270,000 km as at the end of fiscal 2000, havebeen converted into fiber optics. In addition,fiber optics has been used in the development ofinternational undersea cable networks, allowingfor high-speed and large capacity communica-tions.

Moreover, in the area of Internet exchange(IX) there has been a movement toward thedecentralization of IX into data centers in whichthe circuits for the Internet Service Providers(ISPs) are concentrated, and new IXs are beinginstalled in the major urban areas.

Radio StationsAt the end of fiscal 2001 there were 74,345,634radio stations, an 11.7% increase over the previ-ous fiscal year. A breakdown of this figure showsthat the increase in the total number of radiostations was primarily due to the significant

growth in the number of land mobile stationsincluding cell phone terminals, which stood at71,709,278, a 12.4% increase over the previousfiscal year, due to the rapid penetration of cellphones. In addition, despite the fact that thenumber of base stations continued to decline forthe second consecutive year to 793,860 stations(a 3.4% decline from the previous fiscal year),there was a dramatic growth in the number ofbase stations for IMT-2000, which stood at8,119, a 4,042.3% increase over the previous fis-cal year. This reflects the aggressive capitalinvestment being undertaken by mobiletelecommunications carriers in preparation forthe full-scale launch of the IMT-2000 service.

Postal NetworkIn Japan, post offices are found in every munici-pality and offer equitable service across thecountry. As of the end of fiscal 2001 there were24,773 post offices (no change from the previousfiscal year), 151,722 postage stamp retail agen-cies and revenue stamp retail agencies (prelimi-nary figure) (a 0.1% decrease over the previousfiscal year), 78,939 Yu-pack (parcel post) agen-cies (preliminary figure) (a 4.3% decrease overthe previous fiscal year), and approximately177,000 mail boxes (preliminary figure), a 0.1%increase over the previous fiscal year.

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Note: Figures are as of March 31. Main areas refer to those areas in which business customers account for more than 50% of the subscribers.

Coverage

1994 199519961997199819992000

16% 21% 28% 34% 44% 56% 61%

32% 47% 74% 89% 92% 93% 94% 8% 11% 11% 13% 22% 31% 40%

6% 23% 48% 59% 69% 72% 72%

2% 3% 5% 6% 8% 14% 22%

10% 13% 16% 19% 27% 36% 43%

Government designated cities and prefectural capital cities and equivalent

Cities with a population of more than 100,000 people

All areas

Main areas (Business areas)

All areas

Main areas (Business areas)

Other

National average

Classification

Fiscal year

Exhibit 2-8. Status of the Development of Fiber Optic Networks by Size of City

6 INFORMATION FLOW

Information Flow in JapanThe Ministry of Public Management, HomeAffairs, Posts and Telecommunications con-ducts the Census of Information Flow survey ona regular basis in order to get a comprehensiveand quantitative grasp on the wide variety ofinformation flows that form the informationenvironment. According to the said survey, thevolume for every category of information sur-veyed has consistently increased over the past10 years, with a more significant growth seen inrecent years (Exhibit 2-9). In addition, the sur-vey has shown that the rate of growth in the vol-ume of information flow in both “dedicatedservice (data transmission)” and “ISDN (datatransmission)” has increased at an acceleratingpace due to and in tandem with the digitalizationof information and the development of net-works, and that the volume of information foreach of the above categories has also increasedat an accelerating rate.

Regional Information FlowsA breakdown of the share of information trans-mitted in fiscal 2000 by prefecture shows thatTokyo had the largest share with 16.9%, leadingthe second largest share held by OsakaPrefecture (6.8%) and others by a large margin.As in the category of information transmitted,Tokyo had the largest share in selectable infor-mation with 12.6%, once again leading secondplace Osaka Prefecture (8.5%) but with a slightlynarrower margin than in the former category. Inaddition, in the category of information con-sumed the share of Tokyo (11.5%) continued tolead second place Osaka Prefecture (6.9%), withthe gap between the two being similar to themargin observed in the category of selectableinformation. All of the above suggests that eventhough the regional gap in information flows islarge as far as the transmitting of information isconcerned, such a regional gap has relativelynarrowed when it comes to the consumption ofinformation.

54

Source: Census of Information Flow

0

200

400

600

800

1,000

FY 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Average rate of increase (FY 2000/FY 1990)

Average rate of increase (FY 2000/FY 1995)

Rate of increase (FY 2000/FY 1999)

Information supplied 100 106 113 123 136 177 246 309 374 716 984 25.7% 41.0% 37.4% Information transmitted 100 106 110 116 125 154 202 245 289 519 700 21.5% 35.4% 24.8% Selectable information 100 107 112 118 124 133 142 171 192 221 237 9.0% 12.3% 7.5% Consumable information 100 105 110 114 116 125 135 144 155 189 215 8.0% 11.5% 14.0% Information consumed 100 103 105 110 114 132 154 176 200 314 406 15.0% 25.2% 29.4% Real gross domestic product 100 103 103 103 104 107 111 111 110 112 114 1.3% 1.3% 1.7% Total population 100 100 101 101 101 102 102 102 102 102 103 0.3% 0.2% 0.29%

Exhibit 2-9. Changes in the Volume of Information in Japan (1990 average = 100)

The United StatesThe United States has undertaken majornational projects in the IT-related field, whichthe government has been promoting from anationalistic perspective, projects such as theresearch and development concerning the infra-structure for the next generation of ultra-high-speed Internet (Information Technology for the21st Century (IT2), the design of an electronicgovernment (E-Government Project), the devel-opment of human resources (strategic proposalby the President’s Council on the 21st CenturyWorkforce in accordance with WorkforceInvestment Act), the strengthening of nationaland public security (the establishment of acouncil on cyber-security based on an executiveorder, Infrastructure Protection in theInformation Age).

In addition, the FCC has been studying theimplementation of various policies that wouldensure the growth of broadband and the cre-ation of appropriate investment incentives aswell as promote an increasingly active deploy-ment of broadband services.

EUIn June 2000, the Council of European Unionapproved the eEurope 2002 Action Plan with theaim of positioning the EU as the most dynamicknowledge economy in the world by 2010. Inaddition, the Council of European Unionreleased in February 2002 the eEuropeBenchmarking Report, which evaluated theprogress of eEurope-2002 based on data fromits member countries.

Furthermore, on April 24, 2002 a new regu-latory framework for electronic communicationsinfrastructure and associated services was pro-claimed and put into enforcement. This packageis aimed at reviewing the existing regulatoryframework in the telecommunications field andat further promoting competition in thetelecommunications industry, which plays animportant role in the European economy. As aresult, all EU member countries have beenobligated to legislate the above mentionedpackage under their respective laws by July24, 2003.

AsiaAfter officially joining the WTO in December 2001,China has been undertaking the enhancement ofits legal system while opening up its telecommu-nications market. In September 2000 the Chinesegovernment enacted the TelecommunicationsOrdinance, which defined the telecommunicationsbusiness as falling into two categories, namely,“basic telecommunications services” and “value-added telecommunications services.” The new laweffectively opened up the market to foreign capitalin that it allows an up to 49% foreign ownership inthe basic telecommunications services category,while there are no restrictions on foreign owner-ship in the value-added telecommunications ser-vices category. In May 2001, Hong Kongannounced its IT strategy, called Digital 21, whichis aimed at making Hong Kong a leading e-com-merce community and a digital city in the globallylinked cyber-world. Korea announced in January2000 its plan to accelerate its plan for national dig-itization, which is part of Cyber Korea 21, in orderto create an environment where by 2005 almost allhouseholds in Korea would be able to use adomestic high-speed Internet infrastructure. InIndia, the National Telecommunications Policy of1994 was announced in 1994 to accommodatereforms such as the deregulation of telecommuni-cations services and the privatization of stateowned businesses, and to date all areas oftelecommunications services, including interna-tional telecommunications which became deregu-lated in April 2002, have already been opened up tothe private sector. During 2000, Singaporeannounced its Information CommunicationsTechnology 21 (ICT 21) Masterplan, which is a 10-year national plan commencing in 2001 coveringthe IT field, with the view to making Singapore aworld-renown dynamic and vital information andcommunications center. With its Vision 2020 initia-tive, which was announced in 1991, Malaysia aimsto join the league of developed countries by 2020.Malaysia is driving forward with government-initi-ated efforts aimed at promoting IT as a key areafor national development with the objective of,among other things, enabling the country to thriveon the basis of an expertise in the fields of scienceand technology.

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7 TRENDS ABROAD


Chapter 3

TRENDS IN INFORMATION ANDCOMMUNICATIONS POLICY


3

1 REALIZATION OF AN ADVANCED INFORMATION ANDCOMMUNICATIONS NETWORK SOCIETY

58

Promotion of a National IT Strategy In an effort to properly adapt to the changes insocioeconomic structures that have been takingplace on a global basis as a result of the utiliza-tion of information and communications tech-nologies (IT), the Basic Law on the Formation ofan Advanced Information and CommunicationsNetwork Society (IT Basic Law) was submittedby the government at the 150th extraordinarysession of the Diet, passed in November 2000,and came into effect in January 2001. ITStrategic Headquarters, which has been set upwithin the government in accordance with theaforesaid law, has established an e-JapanStrategy, which is aimed at making Japan themost advanced IT nation in the world within thenext five years. In addition, the e-Japan PriorityPolicy Program was launched in March 2001with the aim of executing the aforementionedstrategy, followed by the e-Japan 2002 Program,an annual program which was created in June2001 and incorporated the preceding e-JapanPriority Policy Program into national policy forfiscal 2002.

In addition, in accordance with the BasicPolicies for Macroeconomic Management andStructural Reform of the Japanese Economy(the so-called “muscular policies”), which wereapproved at the Cabinet meeting in June 2001,the Reform Schedule and Advanced ReformProgram were created at the Council onEconomic and Fiscal Policy in September 2001and October 2001, respectively. Meanwhile, ITStrategy Headquarters has been studyingimportant and urgently needed IT-related poli-cies, and put together the Acceleration andAdvancement of e-Japan Priority PolicyProgram and e-Japan 2002 Program, which wasincorporated into the Reform Schedule as wellas the Advanced Reform Program.

Lastly, as we are about to enter the interimphase toward the goals set for the year 2005,the government plans to undertake an overallreview of the e-Japan Priority Policy Programand plot out a new program, the e-JapanPriority Policy Program 2002, in June 2002,which will include more than 300 measures.

e-Japan-related BudgetThe government prepared a budget for fiscal2002 in order to surely pursue the e-Japan 2002Program, which was submitted and approved atthe 154th session of the Diet. The total amountof the budget for fiscal 2002 related to the e-Japan Priority Policy Program was ¥1,954.5 bil-lion, which represented an increase of ¥34.1billion from the previous fiscal year. In addition,the government separately approved two sup-plementary budgets in fiscal 2001, the first ofwhich was for a total amount of ¥84.1 billion andthe second of which was for ¥390.8 billion, eachone representing budgets in connection with theformation of an advanced information and com-munications network society.

2 DVELOPMENT OF POLICIES FOR THE NEW INFOMATION AND COMMUNICATIONS ERA

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Competition Policy of the TelecommunicationsIndustry for the Promotion of the ITRevolutionIn July 2000, the Ministry of Posts andTelecommunications (MPT; now the Ministry ofPublic Management, Home Affairs, Posts andTelecommunications or MPHPT) consulted theTelecommunications Council with respect to theimplementation of a competition policy for thepromotion of the IT revolution aimed at, amongother things, the creation of conditions ensuringfair competition in the telecommunicationsindustry. In December 2000, the Telecommuni-cations Council compiled its first report on thissubject. Based on this report, the MPHPT sub-mitted to the 151st ordinary session of the Diet aproposal for the partial revision of theTelecommunications Business Law, which waspassed and issued in June 2001 and subse-quently came into effect in November 2001. Theprincipal revisions made to the aforesaid lawinclude the following: 1) the provision of asym-metrical regulations; 2) the development of asystem for wholesale telecommunications ser-vices; 3) the setting up of a telecommunicationsbusiness dispute settlement commission; 4) thedevelopment of a system for ensuring the offer-ing of universal services (basic telecommunica-tions services); and 5) the expansion of thescope of businesses in order to allow more free-dom in the management of NTT East and NTTWest.

Provision of Asymmetrical RegulationsIn view of the fact that the telecommunicationsbusiness is of a highly public nature and is thefoundation for people’s lives and socioeconomicactivities, the MPHPT submitted to the 151stsession of the Diet a proposal for the partialrevision of the Telecommunications BusinessLaw which was aimed at introducing, in additionto the existing regulations mainly focused onbottleneck facilities, minimal rules to ensure thecontinuous prevention and elimination of monop-oly abuse of the market. The proposed revisionwas passed on June 15, 2001 and came intoeffect on November 30, 2001. At the same time,the MPHPT created a mandatory ministerial

ordinance in order to, among other things, definea standard of dominant telecommunicationscarriers in the mobile telecommunications mar-ket as those possessing more than a 25% mar-ket share in terms of revenue in a certainoperating area.

Creation of a Telecommunications BusinessDispute Settlement CommissionIn the telecommunications sector 1) businessdisputes of an intricate nature involving networkconnections among telecommunications carri-ers have been on the rise, and as a result 2)there has emerged a need for strengthening theconflict resolution function to provide for thequick and efficient resolution of business dis-putes, which are becoming more complex innature and occurring more frequently. Under thecircumstances, the MPHPT submitted to the151st session of the Diet a proposal for the par-tial revision of the TelecommunicationsBusiness Law aimed at strengthening the sys-tem of resolving disputes in the telecommunica-tions industry. This law was passed in June 2001and came into effect in November 2001. As aconsequence, the Telecommunications BusinessDispute Settlement Commission was created.

Implementation of a Universal Service Fund In March 2002 the MPHPT submitted to theTelecommunications Council a ministerial ordi-nance related to the introduction of a system fora universal services fund. The scope of the basictelecommunications services that are applicableunder the ordinance include fixed-line tele-phones, public pay phones, and emergencymessages. Grants to be issued by the fund arecalculated by using the earning cost offsettingmethod whereby losses in unprofitable areasare offset by profits in profitable areas in orderto derive a true cost that is in effect the portionof losses that have not been offset by profits.The above mentioned partial revision and therelated ministerial ordinance are expected tocome into effect along with the fund systemwhich is to be implemented in June 2002.

60

Development of a Competitive Environment inthe Telecommunications SectorSince August 2001 the MPHPT has held a studygroup on the development of a competitive envi-ronment and business model in the new infor-mation and communications era for which aninterim report was prepared in January 2002.The study group plans to continue examiningthe development of a competitive environmentin a full IP era and to put together a final reportin June 2002.

Review of the Long Run Incremental CostModelIn September 2000 the MPT (now the MPHPT)once again held a study group on the long runincremental cost model. Items that had beenoutstanding from the previous study group anditems that were suggested by means of publicparticipation were discussed, and a report wassubsequently prepared in March 2002.

Approach to the Development of BroadcastingIn order to promote Japan’s IT revolution, it isimportant to properly pursue policies for thebroadcasting industry with insight into thedevelopments in technological reforms and thebroadbanding of networks. Under the circum-stances, the MPHPT has convened variousround table conferences such as the conferenceon the future outlook for broadcasting in thebroadband era, a study group on broadcastingpolicies, an investigative commission on the roleof cable TV in the broadband era, and an inves-tigative commission on the role of satellitebroadcasting.

Promotion of Policies for the EffectiveUtilization of Radio WavesIn order to meet the stringent conditions con-cerning radio waves, the MPHPT, in its efforts toensure further transparency in the administra-tion of radio waves, submitted to the 154th ses-sion of the Diet a proposal for the partialrevision of the Radio Law, which is aimed at theenhancement of a system for investigating, eval-uating, and publicly announcing the usage sta-tus of radio waves and a system for offeringinformation related to radio stations. The aboveproposal was unanimously approved andpassed, and publicly announced in May 2002. Inaddition, the MPHPT has held the Study Groupon Policies concerning the Effective RadioSpectrum Use since January 2002 in order to

study, among other things, measures tosmoothly execute the real location of radiowaves, promote technological reform, and effec-tively utilize radio waves.

3 ADVANCES IN NETWORKS

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Development and Promotion of NetworkInfrastructureIn October 2001 the MPHPT publicly releasedthe National Broadband Initiative, which isaimed at a nation-wide dissemination of high-speed and ultra-high-speed Internet throughclearly stating its schedule to realize its plan byfiscal 2005, the allocation of public and privatesector roles, the projected actual usage of thebroadband Internet access, and expectedchanges in social life.

In addition, the MPHPT consulted theTelecommunications Council in February 2001on the role of Internet policies in the twenty-firstcentury in order to develop early on a high-speed and low-cost yet safe Internet infrastruc-ture which would become the foundation for anadvanced information and communications net-work society. In July 2001 the MPHPT receivedan interim report in response to the above con-sultation with respect to both advances inInternet use and advances in the Internet base.Furthermore, the MPHPT hosted a study groupon IP network technology in light of the rapidshift from the existing network that is basedmainly on telephone lines to an IP network, andprepared a report in February 2002 on this sub-ject. The ministry has also aggressively pro-moted third- as well as fourth-generationmobile communications systems, and datacommunications via radio access networks. InFebruary 2002 the MPHPT revised the minister-ial ordinance concerning 2.4 GHz and 25 GHz inorder to introduce and upgrade wireless LAN. Inaddition, the MPHPT has promoted measures inconnection with Internet governance, the furtherspread of ITS, and the rectification of differen-tials among regions in cell phone services andthe broadcasting sector.

Promotion of Advances in Broadcasting The digitization of broadcasting leads to manymerits for audiences and allows for a drasticsaving in the number of frequencies used ascompared to analog broadcasting, making itpossible to respond to the need for new fre-quencies such as is required for mobile com-munications. A similar digitization of

broadcasting has been promoted in a numberof countries in the world including Japan,where digital broadcasting has already beenlaunched in CS broadcasting, BS broadcasting,and cable TV. Meanwhile, the MPHPT allocatednearly ¥12.3 billion in its budget for fiscal 2001followed by approx. ¥12.2 billion in its budget forfiscal 2002 to the necessary expenses that willbe required to modify the frequencies of existinganalog broadcasting (known as “analog-analogconversion”) as part of the shift towards the dig-itization of terrestrial television broadcasting. Inorder for the government to fund theseexpenses by means of radio utilization fees, theRadio Law was partially revised in July 2001.

Convergence of Communications andBroadcasting The need for new services that allow the con-vergence of communications and broadcastinghas been on the rise, as digital broadcastingpossesses a high affinity with the Internet, and ithas become more and more easy to distributethe contents of digital broadcasting to variousforms of media other than broadcasting by com-bining digital broadcasting with the Internetequipped with IPv6. The MPHPT submitted tothe 151st session of the Diet a proposed law,which came into effect in November 2001, deal-ing with promoting technological developmenttowards the convergence of communicationsand broadcasting, providing support for thedevelopers of technology related to convergingcommunications, and accommodating the pro-motion and acceleration of the development ofservices. In addition, in response to the progressbeing made in the convergence between trans-mission lines in communications and broad-casting, the MPHPT submitted to the 151stsession the Laws Concerning Broadcast onTelecommunications Services, which came intoeffect in January 2002 and are aimed at system-izing that broadcasting which employs telecom-munications services.

4 PROMOTION OF CONTENT AND APPLICATIONS, AND DEVELOPMENT OF HUMAN RESOURCES

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Formation of a New Content DistributionMarket Toward the Broadband Network Era In order to achieve the goal of the e-JapanStrategy, which is the realization of the mostadvanced IT nation in the world, it is essential toincrease network content of good quality andcreate an optimal cycle for the development ofinfrastructure and the enhancement of content.As a consequence, the MPHPT has been pro-moting a wide range of policies towards the for-mation of a new content distribution market thatwould be able to accommodate the broadbandnetwork era. For example, as part of theresearch and development for a creative infor-mation and communications system, the min-istry has consigned TelecommunicationsAdvancement Organizations of Japan (TAO) aresearch and development project over theperiod fiscal 1998 to 2001 concerning a contentdistribution system that would promote the useof highly functional broadband content by utiliz-ing such digital technologies as interactive func-tions and data storage functions.

Promotion of Telework and SOHO Telework and SOHO (small office/home office)are forms of remote work that utilize informationand communications technology. These forms ofwork offer a variety of benefits including the alle-viation of the burden of commuting, the promo-tion of a greater compatibility between work,childcare, and nursing care for the elderly, cre-ating more opportunities for women, the elderly,and the mentally or physically challenged towork, and the reduction of burdens on the globalenvironment. In order to promote the wide-spread adoption of Telework and SOHO, theMPHPT has been promoting the development oflocal facilities and designs and R&D for theinformation and communications system.

Promotion of New Information andCommunications BusinessesIn order to promote new businesses in the infor-mation and communications field, the MPHPThas implemented a number of measures includ-ing financial support through the TelecomVenture Investment Partnership Fund, support

for venturing upon new businesses based oninnovative technologies through the AdvancedTechnical Research and Development SubsidyFund System (telecom incubation), support fornew businesses through the Information andCommunications Venture Subsidy Fund System,and the establishment of the Information andCommunications Venture Support Center.

Development of Human ResourcesAn extremely important issue in school educa-tion today concerns the development of thequalifications and abilities of young students,who will be living in the advanced informationand communications society of the future, inorder that they be independently compatiblewith on-going digitization. In fiscal 2001, all pub-lic schools in Japan had an environment thatallowed for Internet connection, and in fiscal2002 a new curriculum has recently been addedto bolster information education. In addition,since the information and communications fieldhas been rapidly growing due to advanced tech-nologies, securing advanced IT technicians andresearchers is a must in order to maintain andstrengthen international competitiveness in theexisting industries by utilizing IT. Under thesecircumstances, the MPHPT implemented in fis-cal 2001 the Information and CommunicationsPersonnel Training Support System, which isexpected to help Japan become a leadingresource country for IT personnel by trainingpeople who possess technical knowledge aswell as skills in the rapidly advancing informa-tion and communications field.

5 PROMOTING THE DIGITIZATION OF PUBLIC AREAS

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Promotion of Local DigitizationThe MPHPT has been promoting comprehensivedigitization in local areas with the view toimproving education, welfare, and other servicesfor residents, improving the efficiency of publicadministration, and rectifying the digital divide.To be more specific, in order to promoteadvances in local education, public administra-tion, welfare, medical services, and disastercontrol with the goal of realizing a nation-widedevelopment of local shared networks by fiscal2005, the ministry as a whole has been support-ing local public bodies. For example, the min-istry has been focusing on supplementaryprojects such as a development project for localintranet infrastructure facilities, while utilizingindependent local projects. It has also imple-mented appropriate local financial measures forboth supplementary and independent projects.

Online Administrative Procedures and Layingthe Groundwork for Public CertificationsThe MPHPT plans to submit to the Diet a pro-posed law on the usage of information andcommunications technology related to admin-istrative procedures. The proposed law willstipulate clauses that are aimed at improvingconvenience for citizens, simplifying adminis-trative work, and increasing efficiency in publicadministration, by allowing applications,notices, and all other forms of administrativeprocedure to be processed online as a rule. Inaddition, in response to the need for a frame-work (certification system) that will verify thepersons (applicant or public agency) who pre-pared the information on applications, forms,permits, and approval notices or confirmwhether the information has been interpolatedor not, the MPHPT in fiscal 2001 launched theoperation of a Bridge Certificate Authority, togo along with the certificate authorities whichwere also launched by the MPHPT, the Ministryof Economy, Trade, and Industry (METI), andthe Ministry of Land, Infrastructure andTransport.

Furthermore, in order to enable applica-tions, report, and other procedures to localgovernments available on the Internet, the

MPHPT plans to develop a certification infra-structure for organizations that is compatiblewith the Government Public Key Infrastructure(GPKI), and is also conducting investigationsinto a systematic framework of the construc-tion of a public certification infrastructure forindividuals.

Development of Public SystemsThe TAO has been conducting research anddevelopment on a telecommunications systemthat would be used for public works (designatedJoint Operation Initiative dealing with NetworkTechnology) such as a model system for publicindividual certification infrastructure, combiningcommunications and broadcasting technologieswith the technologies in designated public areason commission by the MPHPT and other relatedministries in accordance with the LawsRegarding the Promotion of Research andDevelopment on Designated Joint OperationInitiatives Dealing with Network Technology.In addition, in order to enhance the convenienceto residents and to help rationalize publicadministration for national and local govern-ments, the MPHPT is constructing a ResidentsBasic Registers Network System, in accordancewith the Partial Revision to the Law of the BasicResident Registers which was issued in 1999, asa structure to process matters concerning basicresident registers that go beyond the region of acity or village and to provide personal identifica-tion information to public agencies (national andlocal governments).

Local Government Wide Area Network The Local Government Wide Area Network(LGWAN) is a network exclusively used for publicadministration that connects various local gov-ernments. The government has connected theLGWAN with the Kasumigaseki WAN in April2002 in accordance with the e-Japan PriorityPolicy Program.

Digitization of Processing Applications andNotices at Local GovernmentsWith respect to the general processing systemused by local public bodies, a 3-year Electronic

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Government Promotion Pilot Project waslaunched in 2001 in accordance with the e-Japan Priority Policy Program. In March 2002 abasic specification for the project was createdbased on the actual results of the project in fis-cal 2001 at a meeting of the national govern-ment’s Inter-Ministerial Council for Promotingthe Digitization of Public Administration. Goingforward, the council plans to investigate during2002 the project’s compatibility with the publicpersonal authentication service, the LGPKI, themulti-payment network (MPN), and other suchsystems as the documentation managementsystem and the system for processing individualwork from other ministries. In fiscal 2003 thecouncil will investigate the project’s compatibil-ity with the system for processing individualwork from other ministries.

Measures Toward the Design of a GeographicInformation System (GIS)In fiscal 2000 the MPHPT compiled theComprehensive GIS Shared Space DatabaseSpecification in order to promote the implemen-tation of a comprehensive geographic informa-tion system (GIS), which is equipped with adatabase that can be shared among the differ-ent departments of local governments. In fiscal2001 the ministry conducted a demonstrativetest to put this specification into actual use,probed suggested operating techniques anduses of the database, and has just completedpreparing a manual based on the test.

Promotion of the Digital Museum Concept The MPHPT is currently promoting the DigitalMuseum Concept, which will allow anyone toaccess via network digital information the cul-tural assets accumulated in local cultural facili-ties (such art galleries and museums). In fiscal2000 the MPHPT classified the development ofsystems for the Digital Museum Concept underthe Local Information and CommunicationsInfrastructure Development Project, and alsoimplemented financial measures in the form oftax allocated to local governments for the pro-duction of digital content whose main theme isculture in local public bodies.

Local Development Through IT In April 2002 the Okinawa DevelopmentSpecial Measures Law came into effect withthe aim of implementing the necessary mea-sures for promoting development in Okinawa.

This law positions the development of infor-mation and communications as the key to thedevelopment of Okinawa, and incorporatesmeasures such as the creation of an informa-tion and communications industry special dis-trict system as well as an information andcommunications industry development plan.

In addition, the MPHPT implemented in fis-cal 2001 an investigative analysis on the promo-tion of the Okinawa International InformationSpecial Section Concept, the development of aserver farm in Ginoza Village (collaborative workwith the METI), the promotion of a multimediafacility plan in Kadena Town, the development ofonline travel guide operation for the Yaeyamaarea, and research in relation to the design of anorthern wide-area network.

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Development of the TelecommunicationsUsage EnvironmentIn May 2002 a law concerning the limitation onliability for damages by the designated telecom-munications service providers and the disclo-sure of sender information came into effect.This law set forth the necessary provisionsarticulating the liability of such telecommunica-tion service providers as Internet serviceproviders, allowing them to respond quickly andappropriately to cases involving the violation ofrights of other parties in connection with infor-mation posted to Web pages and electronicmessage boards on the Internet. In addition, theMPHPT hosted a study group to address meth-ods of dealing with nuisance e-mail, on which areport was compiled in January 2002. The studygroup discussed technical and systematic mea-sures for controlling and preventing the distrib-ution of nuisance mail. Subsequently, aproposal for a law on topics including the appro-priateness of sending certain designated e-mailwas submitted to the 154th session of the Diet,which was then approved. Furthermore, thedevelopment of a necessary legal frameworkwith respect to individual information protection,and of electronic signatures and certificationbusinesses has been undertaken. The MPHPThas established the TelecommunicationConsumer Consultation Center, which dealswith complaints and concerns related totelecommunications services from its users. Ithas also set up the Telecommunications ServiceMonitoring Institution.

Improvement of Safety and Reliability andPromotion of Crisis Management MeasuresThe Bill to Prohibit and Take Measures againstUnauthorized Access (commonly known as theBill to Prohibit Unauthorized Access) came intoeffect in February 2000 (July 2000 for someparts of the bill) under the authority of theNational Police Agency, the MPT (now theMPHPT), and the Ministry of International Tradeand Industry (now the Ministry of Economy,Trade and Industry). In addition, in October 2001the government put together a communicationand cooperation system between public and

private sectors concerning measures againstcyber terrorism in accordance with SpecialAction Plan on Countermeasures to CyberTerrorism of Critical Infrastructure, which stip-ulates matters related to a communication sys-tem between the government and private sectorin the event of cyber-terrorism. The MPHPT hasadded new criterion to the Guidelines forInformation and Communications NetworkSafety and Reliability in order to improve thesafety and reliability of a third-generationmobile communications system. In addition, theMPHPT has developed in collaboration with anindependent public corporation CommunicationResearch Laboratory (CRL), the Safety andReliability Guidelines for Info-communicationsNetworks, which was utilized during the UnitedStated terrorist attack incidents that occurredin September 2001.

Development of a Barrier-Free InformationEnvironmentIn order to eliminate the digital divide in relationto the elderly and mentally or physically chal-lenged, the MPHPT has implemented a varietyof measures designed to create a communica-tions and broadcasting system that responds tothe range of obstacles confronting the elderlyand the mentally or physically challenged. In fis-cal 2001 the MPHPT granted subsidies to eightbusiness projects for research and developmentrelated to communications and broadcastingservices designed for the elderly and the men-tally or physically challenged. In addition, theministry is implementing programming produc-tion support measures in order to provideclosed captioning broadcasts for the visuallyand hearing impaired. In April Study Group onthe Next-Generation Closed Caption was heldand a report was prepared.

Development of the Radio Wave UsageEnvironmentIn order to maintain a sound radio wave usageenvironment, the MPHPT has been aggressivelypromoting the appropriate use of radio waves byimplementing measures such as that of impos-ing radio wave usage fees to prevent problems

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of unwanted radio waves and illegal and unau-thorized radio stations. In response to concernsthat radio waves used on wireless telecommuni-cations have a detrimental effect on humanhealth, the ministry has adopted radio wave pro-tection standards and is conducting on-goingresearch related to this matter. On June 1, 2002,a partial provision is expected to be appliedunder the Regulations Concerning RadioFacilities and Regulations Concerning TechnicalStandards Compliance of Designated RadioFacilities whereby a maximum allowable valuewill be defined for the rate of radio waves thatcan be absorbed by humans from the use of cellphones and similar devices which are beingplaced on the side of head, and will legallyrequire manufacturers of cell phones and wire-less devices to rigorously ensure that this maxi-mum allowable value not be exceeded.

Improvement of Media LiteracyMedia literacy is defined as the organic conver-gence of following three abilities: 1) the ability toindependently read and understand media; 2)the ability to access and utilize media; and 3) theability to engage in communication throughmedia, in particular, the interactive communica-tion ability with readers of the information. TheMPHPT has developed educational materials forthe improvement of media literacy and beganloaning it out to the public in July 2001 attelecommunications bureaus across Japan toimprove nation’s media literacy.

7 PROMOTION OF RESEARCH AND DEVELOPMENT

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Development of Promotional Strategies in theInformation and Communications Field by theCouncil for Science and Technology PolicyIn accordance with the Second Basic Plan forScience and Technology, which was approved bythe Cabinet in March 2001, four areas in thescience and technology field including informa-tion and communications were given priority inthe allocation of R&D resources due to theirsignificant contribution to intellectual assetsand their economic and social impact.Furthermore, in September 2001 promotionalstrategies for each of these four importantareas were mapped out to further R&D in eachfield. Based on the area-specific promotionalstrategies, the MPHPT will clearly identify thoseareas that should be given priority in the ensu-ing fiscal year and this will be the basis for cre-ating budgets and policies for allocatingresources such as budget and humanresources related to science and technology.The ministry will work together as called forwith the budgeting authority to ensure that thepolicies will be reflected in the budgets. Inaddition, the area-specific promotional strate-gies will be actively and flexibly reviewed everyyear.

Support for R&D through Competitive Funds In order to enhance the quality of R&D in thefield of information and communications tech-nology, as well as to further advance the capa-bilities of researchers by means of creating acompetitive research environment that wouldresult in the output of world-class intellectualassets, the MPHPT established in fiscal 2002the strategic information and communicationsR&D promotion system. This system will enablethe ministry to aggressively promote a creativeand innovative R&D that complements impor-tant strategic issues.

System of R&D and Evaluation of R&DWith the establishment of a committee on theR&D system within the InformationCommunications Technology Branch of theTelecommunications Council, in January 2001,the MPHPT has been studying the status of the

R&D system in the information and communica-tions field in Japan. The ministry has also beenstudying the evaluation of R&D in the informa-tion and communications field through theestablishment of a committee on the evaluationof R&D within the Special Interest Group onInformation and Communications Technology ofthe Telecommunications Council. After the min-istry received the report in March 2002 on theNature of Research Evaluation Pertaining toInformation and Communications Technology, itcreated the MPHPT Guidelines for EvaluatingResearch and Development on Information andCommunications. The ministry has started infiscal 2002 to conduct a full-scale evaluation ofresearch as part of its policy evaluation.

Development of Broadband DSL NetworkIn order to allow constant connection to a high-speed Internet network in areas where it is notpossible to install broadband lines into eachhome by wiring an additional line such as a fiberoptic line due to structural issues or oppositionfrom other residents in the area, a hybridmethod through the use of a broadband DSL(VDSL) has been gaining a lot of attention as apromising alternative. With this method, existingtelephone lines will be used within the house,which will then be connected via optic fibers tothe collective residential area. In response tothe growing popularity of this new method, theMPHPT since fiscal 2001 has been engaged inR&D on a broadband DSL through commis-sioned research undertaken by the TAO.

R&D on the Next-Generation InternetIn order to promote the sound permeation anddevelopment of business applications on theInternet, the MPHPT has been engaged inresearch, thorough the TAO, on technologiesrelated to the next-generation Internet, whichwill be highly secure and reliable and allow forultra-high-speed and large-capacity networks.Areas of R&D that have been focused upon upuntil fiscal 2001 include producing ultra-high-speed and large-capacity, digital watermark,and authenticity verification of homepages. Infiscal 2002, which is the final year of this R&D

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program, the ministry will continue to studyintelligent information agent and cyber space(3D images) communication methods.

R&D on the Gigabit Network TechnologyWith the goal of realizing an ultra-high-speednetwork at the beginning of this century, theTAO mapped out a gigabit network for R&Dpurposes (JGN: Japan Gigabit Network) as anopen test on a nation-wide basis. In fiscal 2001,by using the same facility, the organization con-ducted the expansion and strengthening of theaforesaid R&D gigabit network (adding compati-bility with IPv6, etc.), R&D on the utilization ofthe gigabit network, and R&D on gigabit net-work technologies.

Development of Terabit-Class Super Network The e-Japan Priority Policy Program includesthe realization of the Super Internet whichwould possess a processing speed that is 10,000times as fast and a connecting capacity that is30,000 times as large as the existing Internet.Starting in fiscal 2002 the MPHPT has been pro-moting the development of a terabit-class supernetwork. The ministry has been engaged in R&Don technologies for controlling and managing aterabit-class traffic via the securest and mostappropriate route, and for quickly processingconnections from various systems such as IPsand mobiles that have a variety of transmissionquality and speeds.

R&D on Ultra-High-Speed Photonic NetworkTechnologiesThe realization of an ultra-high-speed networkin an advanced information and communica-tions society requires not only a backbone andaccess networks but high quality and efficienttechnologies that will process the transmissionof information via optic signals on all nodes onthe Internet. A network system created withthese technologies is known as a photonic net-work. Since fiscal 2000 the MPHPT has con-ducted R&D through the TAO on such themes astechnologies related to a higher-speed andwider-band backbone network, optic switching,technologies related to the operation of an opti-cal network, and routing technologies withinoptic range. In addition, starting in fiscal 2001the ministry has been engaged in R&D on abackbone photonic network technology, anaccessline photonic network technology, and anInternet node full fiber optic technology.

Next-Generation Information andCommunications Technologies Utilizing NewPrinciples and Technologies Such as QuantumEngineering and Nano TechnologyQuantum information and communicationstechnologies, and technologies that apply nanotechnology and bio-technology to informationcommunications are a focus of attention as rev-olutionary technologies that have the potentialto make possible networks equipped with suchsuperior features as cipher communicationswith guaranteed high security, ultra-high-speedcommunications that surpass optical communi-cations, and the self-assembly and repair of aliving organism. In February 2000 the MPHPTreceived a report, the Information andCommunications Research and DevelopmentBasic Plan, from the TelecommunicationsTechnology Council, and since fiscal 2001 it hasbeen engaged in R&D, through the TAO of Japanin alliance with academic, business and gov-ernmental circles, on quantum cipher tech-nologies which are expected to becomeavailable for practical use in the relatively nearfuture. In addition, since fiscal 1998 the min-istry has been conducting Information andCommunications Breakthrough Basic Research21, which is a project for promoting basic andinterdisciplinary research that could result in abreakthrough, rather than an extension ofexisting technologies.

Measures Towards the Realization of Super Internet The MPHPT is working towards making possiblethe establishment of basic technology thatwould realize the smooth distribution of variousWeb contents through the utilization of homeinformation appliances and the Internet, andenabling every Japanese citizen to receive awide range of Internet services at “any time”and “any place” through the production of elec-tronic devices that will be equipped with Internetconnectivity. In order to achieve the above, theministry is currently engaged in R&D on homeinformation appliances Internet (a comprehen-sive R&D on converting home information appli-ances into IPv6) and R&D on a Super Internet.

Outlook for Ubiquitous Network TechnologiesAs the speed of networks will continue tobecome faster and faster, and as ways to accessnetworks will become further diversified, thearrival of a “ubiquitous network society” where

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one will be able to use large-capacity applica-tions is anticipated for the future. In order toclarify a future image for such ubiquitous net-work technology, and to study its social andeconomic impact, as well as R&D themes thatshould be undertaken, and the necessary pro-motion measures for the realization of such asociety, the MPHPT since November 2001 hasheld an investigative study group on the outlookfor ubiquitous network technologies, andexpects to put together the outcome of saidstudy in June 2002. Going forward, based on theoutcome of this investigative study, the ministryplans to promote R&D on technologies that willbe necessary for the realization of a ubiquitousnetwork society.

Development of the Groundwork for NetworkSecurity TechnologiesAt present a wide range of problems are occur-ring such as the invasion of computers by hack-ers and computer viruses, resulting in aheightened need for measures related to infor-mation security. In order to promote R&D onbasic technologies related to information secu-rity, the MPHPT has since fiscal 2001 engagedin R&D on basic technologies for network secu-rity focusing on four areas, namely: 1) networksecurity technology; 2) access security technol-ogy; 3) distributed information (contents) secu-rity technology; and 4) common securityelement technology, and evaluation and inspec-tion for such.

R&D on Stratospheric PlatformsStratosphere platforms enable the usage ofultra-high-speed and multimedia mobile com-munications anywhere in Japan with the help ofautomatically operated airships equipped withcommunications devices suspended in thestratosphere at an altitude of approx. 20 kmfrom the ground in relatively favorable weather.As a consequence, it has garnered a lot ofattention as the new communications infra-structure and use of it in the near future isanticipated. The MPHPT and the Ministry ofEducation, Culture, Sports, Science andTechnology have jointly conducted R&D sincefiscal 1998 in alliance with academic, businessand governmental circles, with the goal of arapid realization of such stratospheric plat-forms. To be more specific, the MPHPT hasbeen responsible for R&D on a communicationsand broadcasting mission and tracking control

system technology under the direct authority ofthe TAO.

R&D for the Realization of a MaritimeTransportation System (Maritime ITS)In order to further improve navigational safety,alleviate maritime traffic congestion, and reducemaritime transportation costs, a need has arisenfor R&D related to the implementation of anadvanced maritime information and communica-tions system which would utilize information andcommunications technologies. In response tothis need, since fiscal 2001 the MPHPT hasengaged in R&D on the digitalization of maritimecommunications, with the goal of designing anadvanced maritime transportation system incooperation with the Ministry of Land,Infrastructure and Transport.

Advances in Space CommunicationsSpace communication has many favorable fea-tures such as the capability of providing consis-tent service throughout the nation,simultaneous broadcasting capability, and beingdisaster-proof in nature, and as a result it hasbeen widely used in areas such as communica-tions, broadcasting, and astrometrics, con-tributing to the improvement of people’s lives. Inorder to clarify the role of space communica-tions in the information and communicationsinfrastructure which is expected to be rapidlydeveloped and advanced in the future, and tostudy technological issues and the approachesthat will be necessary for the realization ofspace communication, since May 2001 theMPHPT has held a study group on the role ofspace communication towards the formation ofan advanced information and communicationsnetwork society, for which a report was pre-pared in February 2002.

R&D on Information and CommunicationsTechnologies for the Design of GIS In fiscal 1999 the MPT (now the MPHPT) com-menced R&D on information and communica-tions technologies needed for the design of athree dimensional GIS as a four-year programending in fiscal 2002. It is expected that the useof the three dimensional GIS will prove effective,due to its realistic visual expressions, for thecreation of view simulations in urban planning,marketing evaluations in the course of businessactivity, and the design of disaster preventioninformation systems.

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Standard Time Delivery and TimeAuthentication ServicesSince January 2002 the MPHPT has held a studygroup on R&D related to standard time deliveryand time authentication services. The studygroup has focused on the following areas, forwhich a report was prepared in June 2002: 1)domestic and international trends in the timestamping business; 2) future images for thetime stamping business and their utilization; 3)selection of R&D themes and issues related tothe standardization of time stamping technol-ogy; 4) social and economic effects of the timestamping business; and 5) promotional mea-sures related to the time stamping business.

R&D on Moving Picture Natural VisionAs a leader in R&D on communications andbroadcasting technologies, the TAO has beenconducting R&D on the Natural Vision, which isable to recreate colors as close to their naturalstate as possible. With the goal of recreating anobject as close to its actual state as possible interms of its color, texture, stereoscopic effect,and glossiness, the TAO is working towards thedevelopment of a next-generation image displayand transmission system based on multiple pri-mary colors that will surpass the current colordisplay system, the three RGB primary colors.

R&D Activities of the CommunicationsResearch Laboratory On April 1, 2001 the Communications ResearchLaboratory (CRL) saw a new beginning as anindependent administrative agency. As the onlypublic R&D institution in the information andcommunications field, it is expected by many tofulfill its duties by utilizing a collection ofresearch accomplishments from its previousexistence as a national research institution, andmaximizing the advantages it possesses from itsefficient and active research conducting systemas an independent administrative agency. TheCRL has mapped out a medium-term plandesigned to achieve the medium-term goals(from fiscal 2001 through fiscal 2005) desig-nated by MPHPT Minister and has engaged incutting-edge R&D that is considered too riskyand difficult to be undertaken by the private sec-tor, in order to enrich people’s lives by strength-ening the competitiveness of the informationand communications industry in Japan and uti-lizing cutting-edge IT technology.

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Promotion of International Policies With respect to recent trends at the G8 sum-mits, a report concerning an action plan toeliminate the international digital divide (theGeneva Action Plan) was submitted by theDigital Opportunity Task Force, which was sup-ported at the Geneva Summit held in July, 2001with an agreement to review the progress sta-tus of the Geneva Action Plan at theKananaskis Summit (Canada), which will beheld in June 2002. In addition, in order toresolve international economic issues in theinformation and communications field, Japanhas been actively working to promote interna-tional mutual understanding and internationalcooperation through a variety of meetingsbetween two or more countries. In terms of thetrends in international satellite communica-tions, INTELSAT and INMARSAT have imple-mented organizational reforms in privatesector companies offering services and in thegovernmental agencies overseeing these pri-vate sector companies as a result of the inten-sified competition that is due to the entry intothe market of private sector companies and thediversification of services.

Promotion of International CooperationThe MPHPT has been providing assistance for thedevelopment of human resources in the IT field,the creation of IT policies and systems in develop-ing countries via communication with the respon-sible information and communicationsauthorities, the development of an informationand communications groundwork by conductinginternational joint tests, and for international andregional institutions promoting global cooperationin order to resolve the international digital divide.At the same time, in cooperation with the Ministryof Foreign Affairs, the Japan InternationalCooperation Agency (JICA), and the JapaneseBank of International Cooperation (JBIC), theMPHPT has made contributions to the continuousdevelopment of the information and communica-tions fields in developing countries mainlythrough Official Development Assistance (ODA).

Promotion of Activities Towards InternationalStandardization The International Telecommunication Union (ITU)plays a central role in international standardiza-tion in the information and communications field.Within the ITU, the TelecommunicationsStandardization Sector (ITU-T) and the RadioCommunications Sector (ITU-R) engage in stan-dardization activities.

Response to Development of theInternational Distribution ofTelecommunication DevicesThe MPHPT has consistently promoted mutualrecognition between the countries of the world.For example, the Agreement on MutualRecognition between Japan and the EuropeanCommunity was signed in April 2001 and cameinto effect in January 2002, enforcing mutualrecognition in four areas, namely, telecommuni-cations devices, electronic products, chemicalproducts, and pharmaceutical products. As aresult of this agreement, the MPHPT has beenpromoting mutual recognition with the EuropeanUnion and has enacted and enforced the Law forImplementation of the Mutual Recognitionbetween Japan and the European Community inRelation to Conformity Assessment of SpecifiedEquipment, which is designed to facilitate theexport and import of telecommunicationsdevices, and cabinet orders.

9 UTILIZATION OF THE POST OFFICE NETWORK

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Partial Privatization of the Postal Servicesand the Entry into Postal Operations by thePrivate SectorIn order to freely exchange opinions with influ-ential individuals on the partial privatization ofthe postal services and the entry into postaloperations by the private sector, a study groupon the partial privatization of the postal service,sponsored by the minister of MPHPT, has beenheld since August 2001 and an interim reportwas prepared in December 2001. Based on thisinterim report, the MPHPT has just recentlysubmitted to the 154th session of the Diet adraft law on the partial privatization of theJapanese postal service, a draft bill on theenforcement of the law related to the national-ization of the Japanese postal service, a pro-posed law concerning the delivery of letters byprivate sector carriers, and a proposed law con-cerning the development of laws related to theenforcement of the law concerning the deliveryof letters by private sector carriers.

Promotion of One-Stop Service at Post OfficesA proposed law concerning processing desig-nated administrative functions of local publicbodies at post offices was submitted to the151st session of the Diet, passed at the 152ndextraordinary session of the Diet, and came intoeffect on December 1, 2001. The said law isdesigned to enable post offices to process theadministrative work required for the issuance ofcopies of the Resident Register and other suchthings in order to enhance convenience for resi-dents and to contribute to the rationalization ofthe organization and operations of local publicbodies.

Liberalization of the Postal NetworkIn order to improve the delivery of parcels thatneed refrigeration, which is becoming popularthese days, the post office has begun handlingthe delivery of these parcels, which are con-signed to the post office by private sector trans-porting companies, to any place in the countryby utilizing the postal network. This will result infurther improvements for customer conveniencethrough a continued liberalization of the postal

network, which is a significant infrastructure inthe every day life of Japanese people, and anincrease in the number of access points wherecustomers can send parcels that need refriger-ation via the existing network of private sectortransporting companies.

Enhancement of Postal Savings NetworkServicesIn order to increase the convenience for users ofpostal savings, the MPHPT has implemented anumber of measures that enable various ser-vices to be utilized without the need to go to thepost office, such as ATM services linked to thebanks and reciprocal fund transfer servicesbetween post offices and banks, debit card ser-vices, and postal savings Internet home services.

Cover photo by Jun Lee

General Policy Division, Information and Communications Policy BureauMinistry of Public Management, Home Affairs, Posts and Telecommunications, Japan

1-2, Kasumigaseki 2-chome, Chiyoda-ku, Tokyo 100-8926, JapanPHONE: +81-3-5253-5720 F A X : +81-3-5253-5721

www.soumu.go.jp/This booklet is an unofficial translation of the

Japanese version of Information andCommunications in Japan (Summary).

ministry of public management, home affairs, posts …...ministry of public management, home...

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