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No. 365, February 2000

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American Companies in Japan


TELECOMMUNICATIONS

Industry sources report that CISCO SYSTEMS, INC. could invest as much as $476.2 million in Japan through 2002 to ensure that it remains a prime supplier of communications infrastructure equipment in this fast-expanding market. Much of the money will go into establishing before yearend Cisco's first in-country R&D facility. The company's subsidiary believes that the Tokyo center is critical to its ability to win contracts from government agencies and NIPPON TELEGRAPH AND TELEPHONE CORP. and its affiliates. Part of the projected outlay will be used to double the size of Cisco's distribution center in Tokyo in a move designed to ensure timely equipment deliveries to its customers. If the San Jose, California manufacturer's plans pan out, its Japan-derived sales will triple to nearly $2.9 billion in the year through July 2002. Its subsidiary's payroll also could jump to 1,000 people from 350 or so now.

In its first contract win in Japan, OPTICAL NETWORKS, INC. of San Jose, California is supplying its Dynamic Transport System metropolitan optical networking equipment to KVH TELECOM CO., LTD. Although behind schedule, that company still plans to build an intracity communications network in Tokyo to serve major financial institutions and other big corporations (see Japan-U.S. Business Report No. 356, May 1999, p. 31). Optical Networks' DTS supports all network topologies (point-to-point, ring and mesh), while transporting with protection virtually any client-side traffic stream, including SONET, IP, Gigabit Ethernet, Fibre Channel and ATM.

For its part, the subsidiary of Internet backbone router supplier JUNIPER NETWORKS, INC. has won its largest contract since setting up shop last spring (see Japan-U.S. Business Report No. 356, May 1999, p. 31). The local operation of UUNET TECHNOLOGIES, INC., the world's top ISP, has on order some 50 M40 and M20 routers to forward data at high speeds along the network it is building (see Japan-U.S. Business Report No. 354, March 1999, p. 30). Deliveries from Juniper Networks already have started; they should be completed this summer. The faster packet-forwarding performance of the Mountain View, California manufacturer's equipment, which was up against IP backbone routers from CISCO SYSTEMS, INC., sold UUNET. The M40, which starts around $142,900, can move 40 million packets per second with a throughput rate in excess of 40 gigabits per second. The new-to-the-market M20 also has a packet processing speed of 40 Mpps, but its throughput rate is half that of the older model. The main distinction between the two, though, is the compact design of the M20, which typically costs $95,200 and up.

Yet another company sees money to be made from offering complex Web-hosting services to the increasing number of Japanese companies that are deciding that it is more efficient to outsource the management of the servers that support their Internet businesses. GLOBALCENTER JAPAN CORP. is a venture between ASIA GLOBAL CROSSING LTD. (89 percent) and INTERNET RESEARCH INITIATIVE, INC. (11 percent). It is building a 53,800-square-foot data center in Tokyo that will provide not only complex Web hosting services but also e-commerce support and applications hosting solutions in a secure setting. The facility, which should be operational in April, will be connected to the world through the international high-capacity fiber-optic network built by GLOBAL CROSSING LTD., a partner along with MICROSOFT CORP. and SOFTBANK CORP. in Asia Global Crossing (see Japan-U.S. Business Report No. 364, January 2000, p. 10). GlobalCenter Japan will be able to draw on the Internet-related engineering and management expertise of IRI and the know-how of GLOBALCENTER INC., which manages data centers around the world for parent Global Crossing.

One of the companies that this new partnership will be going up against is EXODUS COMMUNICATIONS, INC. The Santa Clara, California company, one of the biggest names in the field of complex Web hosting and other managed Internet services, gained a significant foothold in the Japanese market late last year when it acquired a local ISP and made that company the nucleus of its subsidiary (see Japan-U.S. Business Report No. 363, December 1999, p. 36). Quickly building on this foundation, Exodus reached a tentative pact with leading systems integrator NOMURA RESEARCH INSTITUTE, LTD. to work together. The pending partners will be able to offer customers a broad range of Internet consulting services by drawing on NRI's skills alongside Exodus' Web-hosting, network connectivity and related management services. The two companies also will cooperate on marketing, although on its own, NRI will sell Exodus' services. In another sign of the U.S. firm's determination to be a major player in Japan's Web-hosting business, its subsidiary plans to buy a 157,000-square-foot building in Tokyo to house its Internet data center. The facility, the largest of its kind in operation or on the drawing boards, should be occupied by midyear. It will absorb the data center that Exodus acquired as part of its buyout. Simultaneously, the company announced that it would extend its Rapid Deployment Initiative to Japan through tie-ups with the subsidiaries of COMPAQ COMPUTER CORP., HEWLETT-PACKARD CO. and SUN MICROSYSTEMS, INC. Under this program, Exodus and its partners, including NRI, will assemble for customers everything they need to quickly build and maintain their Internet operations.

June is the tentative date for the rollout of @HOME CORP.'s residential Internet broadband service, which promises access via cable modems at speeds up to 100 times faster than telephone lines. The completely localized service, including video on demand, will be provided in cooperation with the Redwood City, California company's partners in the Japanese @Home venture: JUPITER TELECOMMUNICATIONS CO., LTD., the country's largest cable TV operator, and SUMITOMO CORP. (see Japan-U.S. Business Report No. 356, May 1999, pp. 30-31). Through the 21 cable networks affiliated with J- COM, as it is known, @Home Japan will be able to reach more than 10 percent of all homes, mainly in the Tokyo and Fukuoka metropolitan areas. The involvement of Sumitomo, which also has CATV interests, will extend the reach of the high-speed service.

Long-distance carrier KDD CORP. and CISCO SYSTEMS, INC.'s subsidiary will conduct a yearlong test from April of a wide-area Internet telephony system using cable TV lines. As many as 200 local cable operators will be asked to participate in the VIP21 Voice-over- IP project, which could involve up to 20,000 homes that have cable service. The trial, thought to be the largest of its kind in Japan, offers Cisco another opportunity to build its IP equipment business.

In its latest attempt to develop businesses that complement its position as the world's top semiconductor producer, INTEL CORP. plans to build a family of Intel-branded Web appliances for accessing the Internet. The primary customers for the devices will be communications carriers and services providers, which will sell the Web appliances to consumers along with the new services that the cost-effective platform enables them to offer. The first Intel product, scheduled for availability in mid-2000, will integrate Internet access with telephony features, such as call management and unified messaging. Intel already is working with a number of companies to develop and deploy applications and content for its line. In Japan, its partner is NEC CORP. The operator of the BIGLOBE Internet service plans to sell the Intel Web appliance to banks as a financial terminal and to ASPs as a home-services terminal. By offering the combination of the device and new services, NEC hopes to sign up more Internet subscribers. NEC and other firms that decide to handle the Web appliance will get help from Intel's subsidiary on the content side since it plans to form a separate company to develop applications for the device.

Over the last year, INTEL CORP. has made a number of acquisitions to extend its network equipment business. One of those involved the purchase of IPIVOT INC., a manufacturer of so-called Internet commerce equipment, or devices that help customers manage more efficiently and more securely the huge volumes of traffic generated by the explosion in e- com-merce. The first of the Poway, California company's products now is available in Japan. The Intel NetStructure 7110 e-Commerce Accelerator (previously the Commerce Accelerator 1000) improves Internet performance by speeding up the processing of SSL (secure socket layer) transactions associated with e-commerce. Priced at $23,800, the system is targeted at ISPs, financial institutions and other firms that could be swamped by the growth of secure transactions.

Intelligent load-balancing equipment is another focused approach to handling the surging volume of Internet traffic, particularly peak loads. F5 NETWORKS, INC., one of the key makers of these systems, gave NTT-ME CORP. exclusive rights to market its hardware, including the Seattle firm's two newest products. global/SITE Controller, which lists for $100,500, manages and automates the job of synchronizing and distributing file-based content and applications to multiple servers at both local and geographically distributed Internet sites. F5 Networks' other product, the BIG/ip HA+2U, provides high-availability, intelligent load balancing at a local Internet site or data center like other models in the BIG/ip line; however, its distinguishing feature is a streamlined chassis that is half the standard size. This series is priced from $57,100 to $117,100. Among the companies that NTT-ME has lined up to sell these products are a NEC CORP. affiliate and TOKYO ELECTRON LTD., which already sells F5 Networks' BIG/ip load-balancing software (see Japan-U.S. Business Report No. 358, July 1999, p. 27).

ARROWPOINT COMMUNICATIONS, INC. has given NET ONE SYSTEMS CO., LTD. the right to sell its Content Smart Web switches. These products direct Web content requests to the best site and the best server at a given time based on server loads and proximity as well as application and content availability. The Tokyo distributor of network equipment plans to build a business around the Westford, Massachusetts firm's Web- specialized switches that is targeted at the specific needs of ASPs. SUMISHO ELECTRONICS CO., LTD. also markets ArrowPoint's line (see Japan-U.S. Business Report No. 361, October 1999, p. 34).

The Universal Subscriber Gateway family from NOMADIX, INC., a new class of networked devices for delivering broadband services to the consumer market, will be sold exclusively in Japan by RIKEI CORP. The Westlake Village, California manufacturer touts several benefits of its subscriber gateway devices. For starters, they eliminate a primary obstacle to deploying broadband Internet access by automatically configuring subscribers' computers for the local network regardless of setting. For ISPs, that means lower operating costs since there is no need for client-side software, on-site setup, maintenance or technical support. The three existing Nomadix products include a standard USG, one optimized for hotels and another designed for multiple dwelling units.

INTERSPEED, INC. has another solution for providing fast, low-cost Internet access to apartments, schools and other parts of the so-called multitenant-unit market. The North Andover, Massachusetts firm's access routers are based on DSL technology, which uses existing copper telephone lines to deliver high-speed data communications. Interspeed named SOLITON SYSTEMS K.K. to market its family of DSL access routers. The Interspeed 1000, Interspeed 500 and Interspeed DART integrate in a single device all the main components required to offer DSL service, including signal concentration, Layer 2 switching, IP routing and VPN (virtual private network) functions. That, Interspeed says, is a cost-saving first that should help it become the leading supplier of building-centric DSL solutions in Japan.

The first easy-to-use handset for low-cost Internet-based long-distance calling could be in stores in the United States as soon as mid-2000 under an agreement that NET2PHONE, INC. signed with KYUSHU MA-TSUSHITA ELECTRIC CO., LTD. The cordless Panasonic One Touch Internet phone, which also will be able to transmit calls over the publicly switched network, will allow consumers to access Net2Phone's VoIP service without the hassles of first logging on to the Hackensack, New Jersey firm's Web site. Instead, once they have registered with Net2Phone, owners of the Panasonic product simply can press its Internet button and they will gain instant access to the Net2Phone service. Industry analysts expect the One Touch dual-mode phone to be priced slightly about the typical $70 cost of a regular cordless phone.

The high-speed — up to 64 kilobits per second — wireless Internet access now offered by DDI CORP. and IDO CORP. to their cdmaOne subscribers is based on MOTOROLA INC.'s digital know-how. Not only does this expertise provide the fastest cellular phone data transmission service available in Japan, but the dormant-mode feature of Motorola's packet-data technology ensures the most efficient use of the available radio-frequency spectrum. That benefits consumers since they are billed only for the active portion of their calls. Motorola supplied the infrastructure equipment for Japan's nationwide cdmaOne network.

The world's first wireless personal location service now is in commercial operation in Japan. Offered by NTT MOBILE COMMUNICATIONS NETWORK, INC., the DokoNavi service is made possible by enhanced GPS (global positioning system) technology from SNAPTRACK, INC. called Wireless Assisted GPS (see Japan-U.S. Business Report No. 359, August 1999, p. 33). To access DokoNavi, which costs $3.80 a month plus the cost of the phone call, NTT DoCoMo subscribers link their cell phones to a $650 personal digital assistant from DENSO CORP. called Naviewn. The San Jose, California developer's technology enables this device to process the position signals it receives from GPS satellites and to show the caller's location within a fairly narrow range on a map on the Naviewn's display. Subscribers to NTT DoCoMo's DokoNavi service not only can get their current location but also detailed instructions and maps to inputted destinations while on the move as well as directions to approximately 210,000 places across Japan, including businesses, stores and restaurants.

Hoping to expand the market for its ERP software, ORACLE CORP.'s subsidiary is working with FURUNO ELECTRIC CO., LTD. on wireless LAN systems. This is an area in which the Hyogo prefecture manufacturer already is represented through its MORS wireless LAN devices for tracking production processes in factories and stocks at distribution centers. By the spring, Furuno Electric expects to release a product that is compatible with the Oracle Applications ERP package.

By the spring of 2001, the seven CATV operators under the umbrella of TITUS COMMUNICATIONS CORP. will be equipped to receive and retransmit to their customers digital signals from satellite and terrestrial broadcasters. The Tokyo-based company — a partnership of MEDIAONE GROUP, INC. (60 percent), ITOCHU CORP. (20 percent) and TOSHIBA CORP. (20 percent) — will construct a fiber-optic network connecting a retransmission facility in the capital with its six affiliated cable firms in the greater Tokyo metropolitan area. Titus Communications' Sapporo cable operation will have its own setup. Japan's money-losing number-two cable company expects to spend $9.5 million on the project.

SIRIUS SATELLITE RADIO INC. (formerly CD Radio Inc.) has contracted with a fourth Japanese company and the eighth manufacturer overall to develop receivers for the digital satellite radio broadcast system that it now expects to launch next year for motorists. Like the other suppliers, KENWOOD CORP. will design receivers for installation as original equipment by automotive builders and for sale in the aftermarket. Sirius plans to offer 50 channels of commercial-free music and as many as 50 channels of news, sports and entertainment programming in the continental United States for a monthly fee of $9.95. ALPINE ELECTRONICS, INC., CLARION CO., LTD. and MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. are the other Japanese firms working on Sirius-capable receivers.

An exchange rate of ¥105=$1.00 was used in this report.aaaaaa

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