KDDI Boosts Japan’s Connectivity via Starlink’s Direct-to-Cellular (D2C) Service—What Is the Commercial Potential of the D2C and Non-Terrestrial Network (NTN) Deployment Wave in Asia-Pacific’s Market?

On October 23, 2024, KDDI announced a successful test of its upcoming Starlink Direct-to-Cell (D2C) service. Conducted in Kumejima, Okinawa, Japan, the trial demonstrated that users of KDDI’s au mobile service could send and receive Short Message Service (SMS) messages directly via Starlink’s D2C satellites, even when outside of KDDI’s terrestrial network coverage. KDDI has stated that its D2C service will be compatible with existing smartphones and Internet of Things (IoT) devices without the need for any hardware or software modifications. The service will initially offer SMS capabilities, with plans to expand to include voice calls and data services in the future.

KDDI partnered with Starlink for satellite D2C services in August 2023. The partnership will use SpaceX's Starlink Low Earth Orbit (LEO) satellites, along with KDDI's national wireless spectrum to deliver services. This initiative will extend KDDI's cellular connectivity beyond the reach of traditional 4G and 5G networks, enabling coverage in remote and challenging areas like islands and mountainous regions.

Japan: A Hub for NTN D2C Satellite and HAPS Service Innovations

Japan has emerged as a focal point for the development of NTN D2C satellite services and High Altitude Platform Station (HAPS) technologies. Major Japanese telecommunications companies have engaged in strategic partnerships with global satellite and HAPS specialists, marking a significant shift toward integrating these advanced technologies into Japan's connectivity landscape.

• NTT DOCOMO invested in AALTO HAPS, a subsidiary of Airbus and partnered with Amazon's Project Kuiper for satellite-based connectivity.
• HAPSMobile, a SoftBank and AeroVironment joint venture, has been actively developing HAPS technology to provide broadband Internet access from the stratosphere. Its efforts target less-connected areas of the world, with a significant milestone being Rwanda's government teaming with SoftBank to deliver the first publicly announced 5G connection from a HAPS Unmanned Aerial Vehicle (UAV) in the stratosphere.
• SoftBank partnered with Eutelsat/OneWeb, Intelsat, and Skylo Technologies for various NTN services.
• Rakuten Mobile partnered with AST SpaceMobile, focusing on providing D2C services.

The Strategic Impact of NTN D2C Services in Japan

• Enhanced Connectivity in Remote Areas: Japan's unique geography, with nearly 70% of the landmass being mountainous and numerous remote islands, makes traditional cellular coverage challenging. NTN D2C services aim to bridge this connectivity gap by providing satellite-to-cellular connectivity. This service will allow residents and visitors in these areas to send and receive SMS messages, and eventually voice and data, without the need for terrestrial infrastructure.
• Disaster Response and Recovery: Given Japan's vulnerability to natural disasters, the ability to maintain communication during and after such events is crucial for emergency response and coordination. NTN D2C services can play a critical role in disaster response and recovery efforts. For example, after the Noto Peninsula earthquake in January 2024, Starlink donated terminals to support network recovery and provided connectivity to evacuation centers.

• Strategic National Importance: NTN D2C services are seen as part of a broader strategy to ensure robust connectivity across the nation, and this is especially in line with Japan's ambition to provide "always-on connectivity" for critical services and distributed computer applications. This strategy aligns with Japan's technological leadership in managing control systems for various sectors that can benefit from enhanced communication capabilities.

The future for D2C and NTN deployments could be transformative with substantial market potential. ABI Research forecasts that segments like The 3rd Generation Partnership Project (3GPP) (Long Term Evolution (LTE)/5G), 3GPP (IoT NTN), and 3GPP (New Radio (NR) NTN) in the Asia-Pacific market could exceed 40.4 million connections by 2030, supported by increasing demand for expanded connectivity solutions.

ABI Research has three key recommendations for the Japanese MNOs as they navigate the opportunities within NTN D2C and HAPS technology:

• Strategic Partnerships: Strengthen partnerships with satellite operators like Starlink, Project Kuiper, OneWeb, AST SpaceMobile, and HAPS providers like AALTO HAPS. These collaborations should focus on NTN D2C services, such as providing connectivity in remote areas, during natural disasters, and in scenarios where terrestrial networks are inadequate.
• Disaster Resilience: Prioritize NTN services for emergency messaging and voice communication, particularly in disaster-prone areas. This includes establishing protocols for rapid deployment of satellite and HAPS services during times of crises.
• Market Differentiation: Use NTN D2C services as a competitive differentiator, especially in offering emergency alert systems and messaging capabilities. Although the initial revenue might be low, these services can enhance brand value and customer loyalty. The Japanese MNOs could also focus on niche markets like recreational travelers, rural residents, IoT applications, and first responders, which require connectivity beyond traditional network coverage.

By following these recommendations, Japanese MNOs can position themselves at the forefront of the NTN and HAPS revolution, ensuring they are well-equipped to provide ubiquitous connectivity, enhance disaster resilience, and tap into emerging market opportunities.