A trial of the cost benefit analysis of nationwide ultra-high speed telecommunications network infrastructure (Fiber-to-the-Home) development in Japan

Keisuke Takachi, Tokio Otsuka, Hitoshi Mitomo

Research output: Contribution to journalArticle

Abstract

The objectives of this study were to analyze the benefits of Fiber-to-the-Home (FTTH) and to examine the economic rationale of initiatives for nationwide FTTH deployment in Japan. We applied the Stated Preference (SP) method to survey data and used the choice probability model to estimate the utility function. Then demand functions were estimated from the simulation results. The estimated annual social benefit of FTTH was found to be as high as 4,031.6 billion yen when TV channels and Internet Protocol (IP) telephony become available over FTTH. In a cost benefit analysis, the amount of consumer surplus computed for a 20-year time frame appears to be sufficient to support an investment. Also, it may take 8 to 11 years to balance out the benefits and the costs. Finally, the respondents in rural areas indicated a higher Willingness to Pay (WTP) for the availability of TV channels over FTTH. The significance of this paper is the proposal of a practical method for the cost benefit analysis of FTTH and its implementation. This study also proposes a means to evaluate the benefits of FTTH in relation to the availability of applications for FTTH. Finally, this paper postulates several broad assumptions required to attain these results.

Original languageEnglish
Pages (from-to)395-413
Number of pages19
JournalStudies in Regional Science
Volume38
Issue number2
DOIs
Publication statusPublished - 2008

Fingerprint

cost-benefit analysis
telecommunication
Japan
infrastructure
social benefits
willingness to pay
rural area
Internet
simulation
demand
costs
economics
trial
speed
fibre
time
cost

Keywords

  • Cost benefit analysis
  • FTTH
  • ICT
  • Information infrastructure
  • Logit model

ASJC Scopus subject areas

  • Social Sciences(all)
  • Environmental Science(all)

Cite this

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abstract = "The objectives of this study were to analyze the benefits of Fiber-to-the-Home (FTTH) and to examine the economic rationale of initiatives for nationwide FTTH deployment in Japan. We applied the Stated Preference (SP) method to survey data and used the choice probability model to estimate the utility function. Then demand functions were estimated from the simulation results. The estimated annual social benefit of FTTH was found to be as high as 4,031.6 billion yen when TV channels and Internet Protocol (IP) telephony become available over FTTH. In a cost benefit analysis, the amount of consumer surplus computed for a 20-year time frame appears to be sufficient to support an investment. Also, it may take 8 to 11 years to balance out the benefits and the costs. Finally, the respondents in rural areas indicated a higher Willingness to Pay (WTP) for the availability of TV channels over FTTH. The significance of this paper is the proposal of a practical method for the cost benefit analysis of FTTH and its implementation. This study also proposes a means to evaluate the benefits of FTTH in relation to the availability of applications for FTTH. Finally, this paper postulates several broad assumptions required to attain these results.",
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