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Japan Internet Report No. 60 August/September 2001
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In this issue:
- September 11, 2001
- Broadband boom, broadband bust
- Japanese M-commerce by the numbers
- A fine group of fellows
- Last word on Japan's cell phone market
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- September 11, 2001
All the content I originally prepared for this issue became trivial at 7:15 a.m. September 12 Japan time, when I saw the three-inch newspaper headlines on the train platform at Yutenji Station.
The size of the font alone told me something was terribly wrong, even before the meaning of the words registered in my mind.
We had put the kids to bed around 9:30 p.m. the previous night and turned in ourselves shortly thereafter without watching the evening news, and I didn't turn on the television that morning. So I first learned of the disaster in New York looking over the shoulder of that middle-aged salaryman on the Yutenji platform. I flicked on my i-mode handset and read four woefully inadequate stories, then peered at other passengers' newspapers until I got to Kamiya-cho and a full source of news.
The mother of one of the women in the Strategy Group that I lead was working alone in her office on the 45th floor of North Tower of the World Trade Center when the first plane hit, so the event froze us in our tracks.
She lived to tell the story.
We didn't get any work done that day, and it was hard to concentrate for a week.
I think anyone who writes for any audience of any size feels compelled, even responsible, to say something about this tragedy. All I could think to write for my long-overdue JIR was a secondhand account of this woman's experience, so I did, and was given permission to print it here. But in the end, I decided not to do so: the time for harrowing accounts is past.
Instead, let me make my one and only comment on this event.
We at Ion Global extend our deepest sympathies and condolences to all those who were touched by the events of this month.
At the same time, I see some of those close to me growing timid and meek amid a perception that "everything has changed" and that somehow threats now surround us everywhere. I don't buy it.
Let me quote verbatim a wonderful story by Thomas L. Friedman from the September 26 edition of the New York Times entitled "No, I Won't Be Hiding in the Basement." I don't think Mr. Friedman would mind:
"My mentor in such things was my late friend George Beaver, an Englishman who played golf, as a man in his 80s, almost every day of the Lebanese Civil War at the Beirut Golf and Country Club. When I would say to him, "You know, George, it's crazy to play golf under such conditions," he always had the best answer: "I know I am crazy to do it, but I would be even crazier if I didn't."
On with the trivia!
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- Broadband boom, broadband bust
This is the year of broadband in Japan, in the same sense that 1989 was the year that Thai cooking was all the rage, and 1992 was the year everyone wore bellbottom pants.
The difference, we hope, is that the broadband boom will continue, and high-bandwidth connections will soon become as boring and commonplace as the telephone system.
Early this month a morning edition of the Yomiuri carried a half-page ad from yet another entrant into Japan's exploding DSL market: @nifty (Fujitsu). Two days later, Yahoo! Japan placed a full-page ad in the same newspaper announcing the startup of its ADSL services following day.
The pattern in Japan these days seems to be for the latest player to announce a "coming soon" DSL service along with prices even lower than the next-most-recent entrant, then later announce further discounts even before starting services.
The problem is that it's very difficult to make money from data services alone. The demise of overseas DSL pure plays such as Rhythms and NorthPoint Communications are elegant testimony to this fact.
The unpleasant truth is that carriers still make most of their money from voice services, not data services. So without an enormous cash cow in the form of voice services, it is extremely risky to roll out capital-intensive DSL or other broadband offers.
This is one reason why NTT enjoys such an overwhelming advantage over its fledgling competitors. Another, of course, is that NTT controls virtually 100% of the copper wiring connecting customers to its local switching offices, and DSL operators have to rent both the wiring and the switching infrastructure to provide their services.
No wonder, then, that NTT has already taken the lion's share of Japan's fledgling DSL market. This is exactly what happened a few years ago with the rush by individuals and smaller firms to connect to the Internet via low-priced dedicated data line services. Within a year of its launch of a new service (OCN) aimed at this market, NTT went from zero to a majority market share position.
As a matter of fact, NTT has always been and still is the biggest "broadband" player in Japan, according to my understanding of the definition of the word. In a telecommunications class I took a few years ago, we were taught that "broadband" means anything with transmission capacity greater than a plain old analog telephone line ("DS0").
This is because ISDN offers 64kbps speed, and NTT currently has somewhere around ten million subscribers to these ISDN services. In Japan, though, that isn't really considered "broadband" anymore. Many of those ISDN subscribers are now eyeing DSL services that offer downstream speeds in excess of one megabit per second.
But when these users try to upgrade, they may find that a ride on the new DSL bandwagon comes at a price: in order to switch to DSL, those who started with ISDN as their only telephone service will have to purchase new "ownership rights" for a traditional copper analog telephone line from NTT. This archaic transaction still costs 70,000 yen (about U.S. $580), which is not exactly chump change for the average individual subscriber in Japan.
It's not the Japanese government's job to make broadband service available to all who want it, but it is the government's mandate to help shape a competitive arena that's driven by market forces. If the Japanese government is serious about its new IT initiative, it needs to ensure that NTT doesn't impede the rapid uptake of broadband services. In this sense, Japan's broadband boom is, so far, more of a bust...
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- Japanese M-commerce by the numbers
Some recent figures from Japan's mobile commerce sector:
mink rink, an online retailer of women's apparel via its "Ladies Direct" service, claims monthly sales of 30 million yen (about U.S. $250,000) over the cellular telephone channel.
Xavel, which sells perfume, "beauty foods," etc. through its Girls Walker site, reported sales of 25 million yen (about U.S. $208,000) in June of this year.
These services are noteworthy in two respects. First, they do not operate under the "official" menus of any carriers. They have successfully developed their businesses without "official" site advantages such as a co-op payment settlement system, a 100% "pushbutton" environment (under which no manual URL entry is necessary), or the credibility afforded by a carrier's endorsement. Second, they are squarely focused on young women customers...
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- A fine group of fellows
This month I had the pleasure of addressing the Tokyo PC Users Group, along with Tim Romero of Vanguard and Tom Foley of Silver Egg Technology.
A fine group of fellows, these, by which I mean not only Messrs. Romero and Foley, whose remarks were both insightful and witty (hilarious at times), but the assembled listeners as well. The assemblage would benefit from more women participants; on this particular night there were only four or five.
The Tokyo PC Users Group, which meets monthly near Omotesando Station, is a long-standing organization devoted to computer-related information exchange, mutual support, and fellowship between speakers of English here in Tokyo. Most members are serious PC users working in areas such as network design, programming, Web development, translation, and journalism.
I've known about this group for years, but it was my first attendance at a meeting. Highly recommended, especially for those new to Japan.
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- Last word on Japan's cell phone market
...at least for this month. For the last couple of years, I've made my share of acidic remarks about Japan's Internet-enabled cellular phone market, calling the applications "childish" and "trivial." Now that I'm a heavier user myself, and have talked to and observed many more users - I find the applications childish and trivial.
But I've made the quintessential blunder of the entrepreneur: Mistaking my personal worldview for the real marketview. Forty million users of Internet-enabled cellular telephones here in Japan couldn't give a rat's ass what I think about the market. They keep on enjoying and deriving real utility from their trivial and childish applications. And more and more of them are even doing "useful" things as well.
So recently I'm thinking more like colleague Christian van Ghelder of Lucent, who reminds me that "these services are not for us. They are for our children and grandchildren..."
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Tim Clark
Strategy Director, Japan
tim@jir.net
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strategic e-business integration
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