Asia
Because of their vast populations, there is a great deal of interest in telecommunications in Asia. In Japan, large sums of money are being invested in fiber directly to businesses and residences for high-speed Internet access.
China
According to the ITU, 21% of the world population lives in China. China itself is a fragmented market with sharp regional and dialect differences between its 30 regions. Seventy percent of the population lives in 30% of the land area in the eastern and coastal sections where the cities of Beijing, Shanghai and Guangzhou are located. According to the U.S. Department of Commerce, this area carries about 75% of the domestic telephone traffic. In addition to regional differences, major gulfs exist in the level of infrastructure between rural and urban areas in standards of living and very basic items such as roads and waterways. The Chinese government has a major push underway to develop the infrastructure in the western part of China over the next 10 years.
The December 2000 International Telecommunications Internet Report, IP Telephony, page 56, states that there were 8.7 telephones per 100 people in China on January 1, 2000. According to the February 7, 2001 online magazine Public Network Wire, about 10 million new subscribers are added each year. The article stated that analysts expect that by 2005, China will have the highest number of cellular and landline phones of any country in the world.
The government controls China's telecommunications carriers. The main focus since 1999 has been in building up the infrastructure for cellular, broadband data networks, Internet services and fixed-line voice telephony. While there is no official competition to government-controlled monopolies, unofficial unauthorized competition exists in the form of IP for voice phone calls. A gray market has existed in China where people make calls through IP gateways linked to the Internet. Fees are lower than those charged by traditional carriers and are seen by the government as losses in revenue worth millions of dollars.
While potential for development is large, there are stumbling blocks. According to the article, “China Hits Snag in High-Tech Plan,” published in The New York Times on the Web, 4 February 2001, by The Associated Press, there is a shortage of skilled labor. Another major snag to development, according to the article, is that most of the companies in China are small and investments in these companies are scarce. There are concerns by foreign investors about piracy and theft of intellectual property by the Chinese.
Few foreign entities participate in the Chinese telecommunications sector. China has not entered the World Trade Organization (WTO) in which members agree to lower barriers to imports within their respective countries. However, China has indicated that it will join. If China does join the WTO, it has stated that it will then allow foreign companies to own 49% or 50% of specific types of joint ventures by the end of three years. Currently, foreign investments in joint ventures are officially banned.
While many foreign businesses have signed agreements with Chinese companies, many of them have not been fulfilled. For example, in 2000, China Unicom's parent, China United Telecommunications Corporation ended 40 contracts with foreign companies after the Chinese government stated that they were illegal. A Chinese saying illustrates some of the frustrations of doing business in China:
“When a contract is signed that means negotiations begin.”
Prior to 1998, telecommunications were regulated by the Ministry of Post and Telecommunications, MPT. In 1998, the MPT and the Ministry of Electronic Industry (MEI) were merged to form the Ministry of Information Industries (MII). The MII not only controls telecommunications but it also owns China Telecom, China Mobile and China Unicom, which compete with China Mobile.
China has a mobile phone industry second in size only to the United States'100 million subscribers. According to Pyramid Advisory Alerts, as reported in the article, “China Mobile's Wireless Data Revenue-Sharing Scheme,” Yahoo! Finance, 11 January 2001, its 78 million subscribers at the end of 2000 represents only a 6% market penetration. Because of its low penetration, the cellular market is expected to quickly become the largest in the world.
The two mobile carriers in China are China Mobile, the largest, and China Unicom. According to Unicom's Executive Director, Shi Cuiming, Unicom had 12 million subscribers or 12% of the total subscribers by November 2000. The government has decreed that caller-pays cellular service will start at the beginning of 2002. Currently, users pay for cellular calls they receive as well as outgoing calls they make.
In 1999, the Ministry of Information Industries broke the largest fixed-wireline company, China Telecom, into four companies. The goal was to introduce competition in the telecommunications sector and encourage construction of an advanced infrastructure. There are six licensed carriers in China. All are government backed:
China Telecom— Currently provides fixed-line phone and data service to 67% of the market. It owns 80% of China's fiber long haul network. Most competitors sell fixed line data networking on China Telecom's fiber infrastructure. It is backed by the MII and has been highly profitable. It is selling 30% of its shares in a public stock offering in 2001 to raise capital for expansion. It is expected to enter the cellular service market. It announced its intention in February 2001 to build a nationwide broadband network across China.
China Mobile— The incumbent cellular provider has an 88% share of the cellular market. Its network is based on the European GSM standard. According to the article, “China's Coming Telecom Battle,” published in Fortune Magazine, 27 November 2000, page 209, China Mobile is the world's most profitable carrier. It is second in size worldwide to Vodafone Group, which has a 2% stake in China Mobile. According to the Fortune Magazine article, “Its market is growing so fast that every three months China adds enough subscribers to equal the entire Australian mobile-phone population.” They added 19.4 million new subscribers in fiscal year 2000, bringing their total number of subscribers to 45.1 million.
China Unicom— Set up in 1994 for paging, it now also operates fixed-line and cellular services. It has the second largest data network in China in addition to its cellular service. Great Wall and Century Mobile Communications' assets, both previously owned by the military, were transferred to Unicom. Unicom's network is based on GSM and Great Wall's is based on CDMA. To help it gain market share and foster competition, Unicom has been given permission by the government to price its services 10% lower than China Mobile. Another advantage for Unicom is that, unlike China Mobile, it is not required to serve rural areas and is allowed to concentrate on economically well-off areas. It is expected to use the proceeds from its year 2000 public offering in a minority stake to upgrade its network for high-speed data communications for mobile users. China Unicom is upgrading to cdma2000, a third generation CDMA technology that has more capacity for voice and higher data speeds (see Chapter 9).
China Network Communications (China Netcom)— China Netcom is the first carrier to build a fiber optic network across China for high-speed data. Netcom is a carrier's carrier. It sells capacity to carriers, not to end-user customers. Netcom also has a highly lucrative business in prepaid IP phone cards that customers use to make long distance calls over Netcom's IP network. Netcom has signed an agreement with Singapore Telecom to offer Frame Relay services between major Chinese cities and international centers. Although majority-owned by the government, Netcom has equity financing from a number of foreign firms that it is using to build out its network. Its stated goal is to reach 100 cities by the end of 2002. The presence on Netcom's board of directors of Jiang Mianheng, the son of Jiang Zemin, the Chairman of China, gives it a great deal of political clout for expansion into new service areas.
China Railway Telecom— Known as Railcom, is owned by China's railway authorities. It operates fixed-line telephone service including long distance, data communications and Internet services. It was formed on December 26, 2000. Service is starting in 2001. Railcom has facilities in place from the 1-million end-user private network it runs for its employees. It has the added advantage of being able to lay fiber cabling relatively cheaply along its existing railway lines. It's slated to merge with Unicom in three years and already supplies 80% of Unicom's network capacity. Railcom lacks last-mile infrastructure between its network and end users' homes and businesses.
Jitong Communications— Operates an IP-based Internet and data communications backbone that connects 50 cities in China. Jitong offers collocation, ATM, Frame Relay, Internet access, virtual private networks (VPNs) and Web hosting. (See Chapter 6 for explanations of ATM and Frame Relay. See Chapter 5 for VPNs.) Its subsidiary, Jitong Network Communications Company, provides international voice and fax services.
Hong Kong
The Hong Kong telecommunications market was deregulated in 1995. In January 2000, the Hong Kong government awarded five new fixed licenses and 12 licenses for long distance services. There are six cellular carriers in Hong Kong. Hong Kong Telecom and Hutchison Whampoa are key carriers in Hong Kong.
PCCW-HKT (formerly Hong Kong Telecom Ltd.)— The largest fixed line, second largest mobile phone and major Internet service provider in Hong Kong. One hundred and twenty-five-year-old Hong Kong Telecom Ltd. was purchased by ten-month-old Pacific Century CyberWorks Ltd. in 2000 from Cable & Wireless. Pacific Century CyberWorks is an Internet startup. Telstra, the incumbent telephone company in Australia has joint ventures with Pacific Century CyberWorks Ltd for an IP backbone network, data centers and a cellular network.
Hutchison Telephone— Telecom operator in Hong Kong, which owns about 2% of China Unicom. It has fixed-line, mobile and paging operations and is owned by a holding company, Hutchison Whampoa Limited, controlled by Li Ka-shing, one of the world's wealthiest men. NTT DoCoMo owns 25% of Hutchison Telephone.
Internet Services
The Internet in China is largely controlled by the state. It has decreed that “chat rooms” only cover politically approved topics. In addition, state-run newspapers have published rules that portals can only cover news issued by government sources. While trying to prevent the use of the Internet for dissension, the government actively promotes it for e-commerce and as a way to advance its views. For example, to encourage Internet use, in December 2000 it announced 50% telephone rate cuts to access the Internet. To date, less than 1% of the Chinese population owns a personal computer or has access to the Internet. However, personal computer and Internet use is expected to grow rapidly. Two Internet portals are Chinadotcom Corporation and Netease, which is the biggest portal in China.
The Impact of Voice over IP
In countries where telecommunications services are regulated, rates for international and long distance are often high to subsidize local service. This enables carriers to set affordable rates for consumers. High international rates afford opportunities for competitors to enter these markets by offering lower priced international calling. They often do this using voice over IP before authorities give regulatory approval for competition.
China is an example of illegal IP traffic catching the attention of authorities, which then license governments' own companies to carry IP traffic at greatly reduced prices. When governments own carriers, they receive a fee for each call made through the public switched telephone network (PSTN). Therefore, when IP operators circumvented the public network, the Chinese government lost money. The February 5, 1999 WSJ.com The Wall Street Journal online edition carried a Dow Jones Newswires story, “Beijing to Break Up China Telecom; Seeks Control Over Internet Telephony.” The following quote is from a director of its Ministry of Information Industry about illegal voice over IP gateways: “This is tantamount to information smuggling…and we will crack down very harshly on these illegal operations of IP telephony.” In 1999, China licensed domestic companies for trials of IP telephony. In 2000, it issued IP licenses to China Telecom, Unicom, Jitong and Netcom.
This illustrates the point on page 61 of the December 2000 International Telecommunications Internet Report, IP Telephony: “The rise of IP Telephony has affected the evolution of the regulatory environment as much as, if not more than, the regulatory environment has affected the evolution of IP Telephony. One of the most tangible effects, in those markets where IP Telephony has started to spread, is the acceleration of market liberalization.”
Connecting Calls to China via IPU.S.-headquartered iBasis was awarded a license to trial IP connections on calls carried into and out of China. iBasis received these contracts in a joint sales effort with Cisco, which supplies the hardware that iBasis uses to operate its service. Chinese providers carry the IP traffic within China and connect with iBasis for traffic coming into and leaving China. iBasis carries over 10% of the traffic between China and the United States. It carries calls to 12 cities in 11 of the 12 largest states and is licensed for connections with China Mobile, China Unicom and Jitong. iBasis opened its office in Beijing in 1997 and hired Chinese nationals to work with and forge relationships with licensed carriers. It started trials of IP in 1999. China's first concern in the trials was making sure China received revenues on voice over IP service. Secondly, it wanted a strong infrastructure for development of new services the carriers could sell. By licensing only a few companies, it was felt that competition would not drive prices so low that profits would be eliminated. Because carrying traffic over IP costs so much less than traditional switched services, many Asian and Middle Eastern countries are monitoring IP services in China with the thought of using the technology themselves. They are interested in lowering infrastructure costs and adding new types of service such as voice messaging in conjunction with IP. Savings on new infrastructure is less of an issue for established carriers in developed nations where much of the infrastructure is already in place. Voice over IP savings are more crucial when replacing central switches, adding significant capacity or in the case of new carriers and emerging nations building new infrastructure. |
Japan
Japan has the world's second largest economy in terms of gross domestic product (GDP). Japan's two largest cities, Osaka and Tokyo (its capital and the most populous metropolitan area in the world), are both on the island of Honshu. Japan is made up mainly of four islands of which four-fifths of the land is mountains.
Japan experienced booming economic conditions following the post–World War II U.S. occupation of Japan during which the United States invested heavily in Japanese infrastructure. The state was heavily involved in engineering the recovery after World War II. It decreed who should compete with whom and had many rules in place. Bureaucrats, many of whom had attended elite universities, were regarded as scrupulous civil servants above the fray. Economic growth continued in the 1970s and 80s.
In the 1990s, growth slowed and recessions occurred. The number of bankruptcies increased and exports and household spending decreased. Moreover, gradually corruption was revealed in terms of government deals with companies. For example, the Ministry of Finance let some companies know when it was doing an audit in return for money or company secrets. As a result, faith in government lessened. Experts asked if it made sense to have government so involved in business. They questioned whether businesses thrived because of protection, not competency.
In telecommunications, the incumbents NTT, which supplied local and long distance service, and KDD, with the franchise for international long distance, were protected against competition and had no incentive to build infrastructure or develop technological innovations. They were not burdened with the obligation to succeed or fail based on sheer market demand or conditions. While telecommunications is in the process of being deregulated, there are still numerous rules in place. These government rules and privileges from government protection that NTT enjoys include:
Detailed rules on how and when streets can be dug up to lay new cable
Access to connect cables to wiring interfaces within buildings is controlled by NTT
Registration of public IP addresses is complex and takes up to three months
ISPs own IP addresses, so when customers change Internet providers, they must change their public IP address
High interconnection fees NTT charges competitors to complete competitors' calls (an agreement is in place to lower these fees)
These kinds of regulations where telecommunications is run in large part by government-mandated regulations make it more difficult for foreign companies to do business. They are also an important factor in the high prices Japanese customers pay for telecommunications services, the slower speed data services available to businesses and the relatively low penetration of Internet access by consumers. To promote investments in telecommunications and more availability of high-speed data and Internet services, the Japanese government has been in the process of deregulating telecommunications.
Interestingly, cellular services are the arena in which the most technological progress has been made to date.
Regulatory Highlights
Prior to 1985, the government owned NTT and KDD. In 1985, the government privatized a majority of NTT. The goal was to make NTT more efficient prior to deregulation. At the time, NTT was perceived as bureaucratic and corrupt. It retained its monopoly on domestic service and KDD Corporation kept its monopoly on international calling. In 1990, NTT started developing a digital cellular network and in 1995 launched cellular service. The cellular arm, NTT DoCoMo, was spun off in 1992.
In 1996, the government unveiled a plan to break up NTT into separate parts for local and long distance services. NTT was broken up in 1999 into NTT East and NTT West for local service and NTT Communications for out-of-region long distance and international service. This model somewhat mirrored the breakup of AT&T in 1984 with the exceptions that NTT had not done manufacturing and that as a holding company, NTT owns all three carriers. When AT&T was broken up, it no longer owned the Regional Bell Operating Companies (RBOCs), which sold local services.
To further encourage competition and in accordance with the World Trade Organization, in February 1997 the Japanese Diet passed a law effective February 1998 that removed limitations on foreign investments in telecommunications providers. WorldCom in 1998 became the first non-Japanese company to offer facilities-based services.
Competitors have taken the most market share from NTT Communication's international and long distance services unit. New common carriers (or NCCs as competitors to NTT are called) had an increase of 43 million long distance subscribers, a growth of 11% in 1999. Carriers that sell local service in competition to NTT had only 52,000 subscribers. In 1999 the number of fixed lines in service through NTT dropped 3.9% to 57.28 million (8.6% decrease in business lines and 2% decrease in residential lines). Included in the preceding totals were 5.1 million basic rate ISDN (BRI) lines in service.
Deregulation of Local Services
Local services were deregulated in 1999 with unbundling and access to NTT's facilities mandated. However, interconnection rates to NTT's facilities are high. The U.S. Department of State FY2001 Country Commercial Guide for telecommunications estimates that NTT's rates are five times higher than rates in some U.S. cities and twice as high as those in the UK and France. This makes reselling services a costly proposition where competitors have to either charge high rates for service they resell over NTT's cabling or operate at a loss.
Interconnection Fees Hinder Competition and Result in High Calling Charges
Roughly 40% of competitors' revenues go to interconnection fees that NTT charges to connect other carriers' calls to customers in locations where the carriers don't have their own fiber networks. These high interconnection costs are factors in high rates for end users, higher costs for competitors and NTT's near monopoly of the local services market. In anticipation of competition, telephone rates have been dropping. However, they are still among the highest in the world. Currently, NTT East and NTT West hold over 90% of their respective markets. T-1 Internet access for business customers is often $2300 monthly, compared to $1200 in the United States. Most businesses connect to the Internet at lower than T-1's 1.54 million bits per second (bps) speeds. Instead they have lines of, for example, 128,000 or 256,000 bps.
In 2000, Japan agreed to lower interconnection fees over three years with 90% of the reductions in the first two years. The government's goal is to encourage infrastructure investment to promote Internet access and innovation.
Digging Up the Streets and Gaining Access to Buildings—Costly Propositions
Regulations surrounding laying fiber are a deterrent to new carriers' installation of fiber networks within cities. In Japan, the conditions of streets are immaculate—not a crack is seen. Streets may only be opened up to lay new fiber once every three to eight years with five the average. When they are opened, strict regulations surround the work. For example, new dirt must be added and the old dirt carried out in separate trucks than those carrying the new dirt. This rule pertains to laying new fiber as well as to opening manholes for connections from the street to building wiring interfaces.
These rules triple the cost of laying fiber compared to costs in the rest of the world. Companies have to be quite creative and some have used sewers and underground subway passages in which to string fiber. In addition, realtors control access to the cabling within buildings and sometimes make exclusive deals with certain carriers, blocking access to these buildings by other carriers. Thus, Internet service providers and competing carriers have challenges in reaching customers to sell them Internet access, high-speed data communications and alternative local calling services.
Number Portability and Dialing Parity to Promote Competition
To further competition, number portability was mandated in regulations set forth in August 1999. The Ministry of Post and Telecommunications recommended that dialing parity (called MYLINE) be implemented on May 1, 2001. With dialing parity, users make calls using the carrier of their choice without dialing a special prefix.
Key Competitors
Competition (see Table 10.3) is alive and well in Japan. According to the Ministry of Posts and Telecommunications Japan in its White Paper 2000 Communications in Japan, as of March 1, 2000, there were 252 service providers with their own fiber networks, cable TV or fixed wireless infrastructure. 7522 providers resell service over other carriers' facilities. However, very little competition exists for local services.
In 1998, WorldCom was the first carrier granted a license to sell telecommunications services over its own cabling facilities. It is building fiber networks throughout Tokyo and Osaka and has plans to expand to other major cities in Japan. It has a data center in Tokyo where it will offer Internet services such as Web hosting.
| Entity | Owners | Details |
|---|---|---|
| Asia Global Crossing | Global Crossing
Microsoft Softbank (headquartered in Japan) | Web hosting centers and undersea cables throughout the Asia Pacific region. |
| Cable & Wireless IDC | Cable & Wireless PLC | Long distance and Internet services. |
| eAccess | Morgan Stanley Dean Witter
Goldman Sachs Both U.S. financial firms | DSL provider. |
| Global Access Ltd. (GAL) | Vectant, a Marubeni subsidiary Asia Global Crossing | IP-based terrestrial connections for Asia Global Crossing's undersea fiber cables for carriers in Tokyo, Osaka and Nagoya at STM 1 (155 million bit per second) and STM 4 (622 million bit per second) speeds. |
| Japan Telecom | Vodafone Group 45% East Japan Railway 15.1% | Third largest carrier in Japan; sells fixed-line and data services. Started by three railway companies that used their rights of way to build fiber optic networks. |
| J-Phone Communications | Japan Telecom 54% Vodafone 45% | Third largest cellular company. Plans to offer 3G service in 2002. |
| Jupiter Telecommunications | Liberty Media Group—entertainment and cable conglomerate Sumitono Corporation | Largest cable TV provider. |
| KDDI | Kyocera Corporation 15.8%
Toyota Motor Corporation 13% Rest public | Second largest carrier in Japan. |
| KVH | Fidelity Investments | Fiber optic metropolitan networks in Tokyo and Osaka; targets financial companies. Also offers Internet data services. |
| NTT (Nippon Telegraph and Telephone) | Japanese government 46% | Incumbent carrier. Owns Verio Corporation; 49% of Hong Kong ISP, HKNet; 49% of Daytel IP network in Australia plus others. Largest telephone company worldwide. |
| NTT DoCoMo (DoCoMo means anywhere in Japanese) | NTT has a controlling interest | Largest cellular provider in Japan with 21 million customers as of March 2001; owns 19% of Hutchison Telecommunications Ltd., 15% of Dutch cellular carrier KPN and 16% of AT&T Wireless. Third largest cellular carrier worldwide after Vodafone and China Mobile. |
| TTNet (Tokyo Telecommunication Network) | The Tokyo Electric Power Company, Inc. | Switched and private-line telecommunications services. |
| WorldCom | Public company | Building fiber networks; provides Internet services to businesses. |
Cable & Wireless IDC was formed in 1999 when Cable & Wireless PLC purchased a majority stake in midsize international carrier International Digital Communications, Inc. (IDC) based in Tokyo. Cable & Wireless IDC is building out its fiber optic infrastructure in Osaka and Tokyo. Unlike the rest of Cable & Wireless PLC, which focuses exclusively on data services, Cable & Wireless IDC sells voice telephony as well as data services in Japan.
KDDI offers fixed-line, cellular and long distance services. It plans to add infrastructure for fixed wireless services. KDDI was formed in October 2000 as the result of DDI's purchase of KDD and IDO.
KDD, originally Kokusai Denshin Denwa, was created in 1953 by the Japanese government to carry international traffic.
DDI was Japan's second largest cellular carrier at the time of the merger. It was controlled by Kyocera Corporation, a semiconductor materials and ceramics company.
IDO, a cellular and long distance company, was controlled by Toyota Motor Corporation.
Utilities
Utilities have entered telecommunications because their pre-existing rights of ways eliminate much of the expense and difficulty of digging up streets, obtaining rights of ways and building infrastructure. They also envision more growth potential in telecommunications than in utilities.
Tokyo Telecommunication Network (TTNet) started private-line service in 1986 and dialup service in 1998. It sells local, long distance and international services plus private-line data services. It often leases circuits to Internet service providers for ISPs' access to their customers' buildings. Another utility that has a subsidiary in telecommunications is Osaka Media Port. It is owned by the electric utility in Osaka.
Cable TV Service
Cable TV penetration is low with a total of 1 million subscribers divided up among its many (mostly small) operators. There are a small number of cable modem subscribers in Japan. The largest cable TV company is Jupiter Telecommunications, which in 2000 combined its 600,000-subscriber cable company with the second largest cable company, Titus Group, which is 80%-owned by Microsoft. At that time, Titus Group had 150,000 subscribers.
DSL
DSL trials started in Japan in December 1999. In August 2000, the Ministry of Posts and Telecommunications (MPT) certified two new carriers for DSL service to small and medium-sized businesses as well as consumers. These are Tokyo Metallic and eAccess, both of which are in the process of building out their networks in major cities. DSL is available from other carriers, including NTT and Japan Telecom. KDDI is testing the service in Tokyo and two other cities.
According to Pyramid Research, a market research company headquartered in Boston, Japan had only 5000 DSL customers by year-end 2000. A factor in slow deployment of DSL is NTT's desire to recoup its large investment in integrated services digital network (ISDN), which is slower than DSL but which NTT envisioned as migrating to Fiber to the Home (FITH). Fiber to the Home would provide higher speeds than DSL, which works on copper not fiber. Sales of DSL could potentially cause ISDN lines to be replaced by DSL before NTT recoups its investment in ISDN equipment.
To foster competition in local services, NTT was required to unbundle the local loop and central office connections in 1999. DSL runs over NTT's outside cabling and uses central office connections. NTT presents a serious stumbling block to competitive DSL providers by requiring that they meet unnecessarily complex requirements for interconnection and by generally not cooperating with competitors on DSL installations. In 2000, Japan's Fair Trade Commission (FTC) investigated whether NTT was blocking competition. The investigation concluded that NTT might be in violation of antitrust laws and that it take steps to promote competition.
Another impediment to DSL implementation is that DSL hardware from the United States does not match Japanese standards. Providers such as NEC and Fujitsu are adapting their DSL equipment to Japanese standards.
The Internet
According to the article, “Bandwidth Briefs,” published in DJ Bandwidth Intelligence Alert, 12 March 2001, page 3, about one-third of the population has Internet access. The brief further cites an Associated Press article as its source that the Japanese government plans to spend $16.7 billion to connect every house to the Internet within five years. NTT is constructing fiber optic links directly to homes and businesses in Tokyo and Osaka. The Ministry of Posts and Telecommunications (MPT) has stated that by 2001, all public schools are to be connected to the Internet. Most landline users access the Internet via analog dialup or BRI ISDN (two 64,000-bps or one 128,000-bps digital dialup link) lines. However, half of the Internet users use their cellular phones for Internet access.
Most businesses in Japan have local area networked computers with connectivity to the Internet. Unlike the United States, Japanese employees do not use the Internet for personal use at work. It is considered a serious breach of work ethics. Therefore, night usage from homes is heavy. However, the high cost of PCs in Japan has hampered the growth of Internet access by consumers.
The rarity of high-speed cable modems and low penetration of DSL service dampens Web surfing from personal computers. Another impediment is the high cost of metered calling to access the Internet. The Japanese government's committee on information technology has set an objective to surpass the United States in broadband networking. Japan is currently behind Singapore and South Korea in broadband Internet access.
Cellular Service
In Japan, cellular phones outnumber fixed phone lines. According to the U.S. Department of Commerce Country Commercial Guide for Japan, on June 1, 2000 there were approximately 58.6 million cellular phones in service in Japan. Japan, for the most part, uses a proprietary TDMA cellular technology not used anywhere else called Pacific Digital Cellular (PDC). (For TDMA service, see Chapter 9.)
By February 2001, large numbers of Japanese customers accessed the Internet from cellular phones:
19.5 million subscribers used i-mode phones as of March 2001. The i in i-mode (top speed 9.6 thousand bits per second) stands for Internet, interactive and independence.
5 million subscribers used carrier J-phone's J-sky phone to access the Internet.
According to the article, “Wireless—Bright Future, Tough Challenges,” published in Business Communications Review, February 2001, page 90, 60% of i-mode users download cartoon characters and songs to be used for ringing patterns. Part of the popularity of i-mode service is that it is “always on.” There are no delays while users dial into the network for service. Less than 1% downloads information from services such as restaurant listings. It is unclear if availability of higher speed wireless Internet access will change these usage patterns. DoCoMo has stated its intention of expanding its i-mode technology, which works on cellular standards in Europe and the United States, throughout the world.
The way teens use cell phones is changing their life style. They no longer make plans for specific times—rather they email their locations to each other and make plans on the spot.
Short Messaging Service—A Way for Young People to SocializeTeenagers throughout the world are using their cellular phones to send each other short text messages. (See Chapter 9 for short messaging service.) Short messaging services (SMSs) are good news for carriers' revenue. In Europe, data services (the bulk of which are SMS), contributed 9% and, in Asia, 12.5%, of Vodafone's total revenue. Japanese and European teenagers have adopted a technology and lingo that is changing the way they interact with each other. They no longer need to make plans in advance to get together. They spontaneously send each other messages and meet at the spur of the moment. Moreover, they do not have to be in a face-to-face social setting to stay in touch with multiple friends serially. Despite phones capable of displaying only eight lines of text, Japanese youngsters with i-mode phones have found a way unique to their culture to express feelings in their messages. They use symbols called kaomoji for happiness, embarrassment, confusion, triumph and apology. Many of these symbols reflect the Japanese culture of transmitting feelings through eyes. The following are a sample of kaomoji notations. They can be stored as symbols so that they can be sent easily without typing each character:
European teenagers use shorthand expressions such as: GAL (get a life), ATB (all the best), BTDT (been there, done that), F2T (free to talk?) and QL (cool). |
Reasons for the popularity of wireless services and Internet access are:
High-quality wireless coverage—the phones work almost everywhere.
Wireless costs are equivalent to landline costs.
NTT DoCoMo lowered its rates between 9% and 21% in December 1999.
All Internet service charges from NTT-sanctioned sites are billed on one NTT DoCoMo bill so customers don't have to bother with many different bills. Fees are based on the number of packets downloaded. NTT receives a 9% fee from Internet service providers for its billing services.
It costs less to send a text message from an i-mode phone than from a PC connected to a fixed telephone line. Users pay per packet, not for the time it takes to download a message, so users are not hesitant about piling up large bills due to slow-speed services.
High penetration of wireless phones—for some teenagers, the wireless is their only phone.
In big cities people get around by walking and by train more than by automobile. This makes cellular service more convenient and safer than using the service while driving.
Lower penetration of personal computers in homes—people without PCs use their phones for messaging.
In an effort to promote high-speed cellular network build-outs, the Japanese government awarded 3G spectrum without charging the high fees associated with 3G auctions in much of the rest of the world. This will have an enormous impact on the speed at which Japanese corporations recoup their investments in third generation cellular networks capable of supporting broadband data services. DoCoMo has committed to third generation (3G), 384 thousand bits per second, wireless service by October 2001 with 2 million bit per second speeds in the future. The new service is called Freedom of Mobile multimedia Access (FOMA). It is envisioned that FOMA phones with color screens and Internet access will be used for downloading videos, digital photographs and entertainment. Businesses might use the high-speed service with portable or hand-held computers to download email, spreadsheet, word processing and graphics files.
Personal Handyphone System (PHS) is another digital wireless technology in Japan. PHS has a top speed of 64 thousand bits per second for Internet access and is offered by DoCoMo, KDDI and ASTEL Group. As of December 2000, 5.6 million customers used PHS service. PHS is digital but does not operate on cellular technology and can't be used for roaming. It emulates walkie-talkie service, where users within a few hundred feet from each other can converse without incurring usage fees.