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JAPAN TELECOM, TOKYO INTERNET start testing nationwide fixed-rate Internet connectivity service

JAPAN TELECOM and TOKYO INTERNET have started testing a new Internet connectivity service that will allow fixed-rate, 10 yen ($0.095) per minute access
from anywhere in Japan. If the connectivity experiments go smoothly, the two companies plan to offer full-fledged, fixed-rate services from July. Long distance new common carriers (NCC) DDI and TWJ are now working with Internet connectivity providers NIS and IIJ, respectively, and JAPAN TELECOM's tieup with TOKYO INTERNET is likely to encourage further cooperation between Internet providers and the NCCs, say Tokyo-based analysts.


KDD COMMUNICATIONS to offer service that allows local rate access to Internet in key cities worldwide

KDD COMMUNICATIONS, a dial-up Internet connectivity service provider launched by parent KDD in April of this year, plans from July to offer a service whereby users can connect to the Internet via a local telephone call from a number of major cities around the world. Users will enter passwords that identify them as having accounts in Japan, enabling them to log on, download mail, and use the Internet just as they would at home. KDD COMMUNICATIONS sees the new service spurring Internet use among travelling business people and says access will be available in London, Dusseldorf, Singapore, Hong Kong, Los Angeles and New York by fall.


MARUBENI to use franchise system to expand Internet connectivity business to non-metropolitan areas

MARUBENI will start using a franchise system to expand its Internet connectivity service business to Japan's non-metropolitan regions. Smaller local companies often can't afford the 30-50 million yen ($285,714-476,190) in yearly operating capital needed to start an Internet connectivity service, so MARUBENI will make it possible for such firms to get into business on a franchise basis for about one-third that amount. The company plans to open six services in Mie, Akita, and Aichi Prefectures in June and start Internet connectivity businesses in 30 new locations by the end of the year.


ASCII, HYPERNET to cooperatively offer advertising-supported free Internet access service

Publishing giant ASCII and venture firm HYPERNET will team up to offer a free Internet connectivity service supported entirely by advertising revenues. The two companies will take on a limited number of subscribers between April 15 and the end of May, then start full-fledged services from June. They hope to win 300,000 subscribers the first year and rack up sales of 4.0 billion yen ($36.7 mil), entirely from advertisements automatically displayed by browsers that subscribers will be required to use.


ASCII planning to have Internet businesses provide more than half of total revenues by 2000

ASCII will significantly step up its involvement in Internet-related businesses in the fiscal 1996 year which began April 1, planning by 2000 to have Internet operations account for more than 50% of total company sales. With this goal in mind ASCII has established cross-functional "Internet infrastructure" and "Internet content" committees that will draft both short and long term strategies. ASCII plans to create an organization composed of smaller, 50-man business units that can respond immediately to the rapid technological changes occurring in the Internet market. It also plans for each business unit to have its own server and full Internet access, and to eventually be equally known for both its publishing and Internet activities.


Corporations poised for aggressive investment in computers, Internet technology, says study

Japan's corporations are ready to invest aggressively in computer, groupware and Internet technology over the next few years, according to a survey conducted by the Japan Users Association of Information Systems (JUAS) between October of 1995 and February of this year. The survey, of 328 companies capitalized at more than 1.0 billion yen ($9.3 mil) each, found that 51% of the respondents plan to increase investment in computer-related equipment over the next year. The survey also found that 15% of the companies responding have already set up their own Internet servers in-house, and 40% are making use of the Internet in some way. Of those that are not yet using the Internet, 65% said they are considering going online. Approximately 36% of the respondents said nearly all of their employees are using PCs.


Solid growth in PC, network investment ahead, says IDC JAPAN survey

Japan's corporations will continue to increase their investments in PCs, software, and network equipment over the next year, according to a "Global IT Survey" completed recently by market research firm INTERNATIONAL DATA CORPORATION JAPAN. According to the survey, year-on-year corporate investment in hardware, software and services will rise approximately 13%, while investment in PCs alone should jump nearly 23% in fiscal 1996. The rapid growth of the Internet and other networking technologies should boost network-related equipment investment a whopping 37%, according to the study. IDC JAPAN found that DOS/V is the PC platform of choice, favored by 54% of large companies planning PC purchases, with the PC98 and Macintosh platforms favored by 46% and less than 10% of the respondents, respectively. IDC JAPAN conducted the survey between mid-December of last year and mid-March of this year, obtaining 1,288 valid responses from the 3,537 companies asked to participate.


TOKYO INTERNET to slash dedicated line rates as much as 50%

Internet connectivity service provider TOKYO INTERNET, a member of the SECOM
Group, will from July slash its dedicated line services by as much as 50%. The company plans to offer the lowest dedicated line rates in the industry, cutting the monthly fee for continuous 64Kbps connectivity, the most popular service, to under 100,000 yen ($935). The dramatic cost cuts by TOKYO INTERNET, the nation's largest provider, are certain to intensify the already furious price competition taking place in Japan's exploding corporate Internet market.


KANEMATSU to start Japanese language Internet search service with INFOSEEK

KANEMATSU will establish a Tokyo-based joint venture with INFOSEEK in July and start offering a Japanese language Internet search service from August. KANEMATSU and its U.S. subsidiary, KANEMATSU COMPUTER SYSTEM, recently invested $3 million to acquire a 1.5% stake in INFOSEEK, the largest Internet search service in the U.S. The two companies plan to hold equal shares in the new joint venture, which will be capitalized at 200-300 million yen ($1.8-2.8 mil). The new Japanese language search service, to be supported entirely by
advertising revenues, will be free of charge to users.


NRI to release PC software that enables users to build virtual malls on the
Internet

NOMURA RESEARCH INSTITUTE (NRI) will release at the end of June CB-DOCK, PC
software that it claims will enable users to easily construct full-fledged virtual mall systems capable of supporting electronic commerce on the Internet. Prices for the software, which will run on Windows NT PCs, will start at 2.0 million yen ($19,048). NRI foresees first year sales of 100 packages.


Video rental chain GEO to move into Internet service business

Aichi-based GEO, a nationwide chain of video and CD rental stores, will move into the Internet service business. The company plans to develop and set up at 50 of its key stores a system whereby customers will be able to fax in materials that are then automatically converted to Web pages. GEO will then host the sites at a monthly rate of 10,000 yen ($95) monthly for five pages. GEO also plans to set up at its video rental stores coin-operated PCs that will enable customers to surf the Internet at a rate of 100 yen ($0.95) per six minutes. GEO has 94 stores across Japan and had sales of approximately 19 billion yen ($181.0 mil) in the year through March 1996.


COMMENTARY

We're so late getting this issue out that we'll let the articles do most of the talking, and just note a few trends:

- The major search engine services are coming to Japan under advertising-supported business models that set the tone for the rest of the online market. And as the skyrocketing number of information providers chase a much slower-growing pool of available advertising revenue, the competition to create compelling content is intensifying. As a result, the cost of creating content in Japan will rise, just as it has in the U.S. Computer space and access is growing cheaper; content is getting more expensive.

- Japanese firms appear willing to take the 100% advertising-supported model even further than their counterparts in the U.S. HYPERNET appears to be the world's first company to offer free Internet connectivity supported entirely by advertising revenues.

- Amid intensifying competition to win new subscribers, Internet access providers are slashing prices and moving to offer fixed-rate, nationwide connectivity.

- The rush to create "cybermalls" is on in Japan, but the real opportunity may be in selling the tools to create those cybermalls, rather than in actually selling products online. With franchised Internet connectivity service providers, coin-operated "Internet PCs," and other only-in-Japan services about to appear, it seems that commercialization of the Internet may proceed even more quickly and furiously in Japan than in the U.S.

* * * *

We've decided to keep this newsletter on a distribution list for the time being rather than move to Majordomo, as the distribution will probably remain quite small.

We'll be in New York 6/5-6/9 to present a segment on export and catalog marketing via the Internet at the Opportunity Japan Seminar to be held at One Chase Plaza Thursday, June 6. Looking forward to meeting a subscriber or two in person. Michael Solomon Associates (212-764-4760) has details on the seminar.

Tim Clark
Editor


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