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No. 356, May 1999

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American Companies in Japan


New, powerful examples are forever emerging of how corporate restructuring, deregulation and liberalization, and the other changes roiling Japan are creating new opportunities for outsiders. The latest addition to this series is the partnership agreement that the team of AT&T CORP. and BRITISH TELECOMMUNICATIONS PLC announced with JAPAN TELECOM CO., LTD., the country's third-largest long- distance/international carrier and a player in the data, Internet, local and digital wireless markets with about 23 million lines. AT&T and BT — which announced last July that they would form a global venture to serve multinational business customers and international carriers — will each acquire a 15 percent stake in JT at a combined cost of slightly more than $1.8 billion. The Japanese company then will become the exclusive local distributor of the AT&T-BT joint venture's branded services. At the same time, the global venture will use JT's 6,200-mile optical-fiber network infrastructure to enhance its market coverage and provide end-to-end services to customers. AT&T JENS CORP., which provides data communications in Japan, will be integrated into Japan Telecom. So will a BT-backed facilities-based company that just started to provide voice services in Tokyo and another company affiliated with the British carrier that offers through leased capacity a range of domestic and international data, voice and Internet services and distributes CONCERT products in Japan. In addition, the Internet services providers that each of the parties owns will be combined into a new data division within Japan Telecom. It will rank as one of Japan's five biggest ISPs with more than 400,000 customers.

On the heels of this announcement, AT&T CORP. and NIPPON TELEGRAPH AND TELEPHONE CORP. disclosed that they had signed a memorandum of understanding to collaborate on corporate network solutions or managed services. This is one of the fastest-growing segments of the telecommunications business since multinationals are outsourcing the increasingly challenging job of managing complex, far-flung networks. Although details of the tie-up still must be worked out, AT&T and NTT say that their first priority is operating and developing in Japan the IBM Global Network, which AT&T is in the process of buying. Deployed in more than 850 cities in 59 countries, IGN offers a menu of managed network services for enterprise connectivity, collaboration and network outsourcing. The pending partners also will explore opportunities to provide value-added networking services in other Asian countries where IGN currently operates. A third goal of the alliance is to enhance existing IGN services. As part of the proposed deal, NTT will continue to provide operational support and transport services to IGN in Japan. Moreover, its Arcstar frame-relay network, a managed, global data transmission service, will maintain its existing IGN interconnections. IGN-based services will continue to be provided to Arcstar customers worldwide in collaboration with AT&T Solutions, which will represent the American communications giant in working with NTT.

AT&T CORP. also figures indirectly in another deal designed to capitalize on market opportunities in Japan. @HOME CORP., in which AT&T has a controlling 40 percent stake, will form a joint venture with cable TV operator JUPITER TELECOMMUNICATIONS CO., LTD. and SUMITOMO CORP. to develop and market a Japanese version of the @Home Network high-speed cable Internet service. The Redwood City, California company is promising that subscribers to @Home's Japanese service will enjoy a variety of broadband content and applications, such as video on demand, CD-quality audio and high-speed games and software downloading, as well as access to the Internet at speeds up to 100 times faster than telephone lines. For now, @Home will own 42.9 percent of the joint venture. J-COM — itself a joint venture formed in 1995 between Sumitomo (60 percent) and what now is LIBERTY MEDIA INTERNATIONAL, INC. (40 percent) following AT&T's purchase of original partner TELE-COMMUNICATIONS, INC. — will put up 35.7 percent of the Japanese @Home subsidiary's capital, with Sumitomo owning the remaining 21.4 percent. However, the partners hope to recruit other investors. When @Home Japan starts operations, probably next year, it will have as subscribers the 5.1 million households mainly in Tokyo, Osaka and Fukuoka that now use J-COM or Sumitomo as CATV providers. The cost to them for @Home will be $50 per month.

The Ministry of Posts and Telecommunications has licensed KVH TELECOM CORP. to provide intracity communications services for corporate customers in Tokyo. The company, an affiliate of mutual fund giant FMR CORP.'s Fidelity Investments, will begin building an optical-fiber network this fall, with services scheduled to launch in July 2000. KVH Telecom, known in the United States as a competitive local exchange carrier, will provide discounted telephone and leased-circuit services, targeting its marketing campaign to financial institutions and other big businesses in the capital.

The company that claims international leadership in enterprise video networking has formed a wholly owned subsidiary. Santa Clara, California-based FVC.COM manufactures interactive video, streaming video and multiservice access products that deliver high-quality video integrated with voice and data for such applications as distance learning, corporate communications, virtual meetings and telemedicine. The Tokyo unit is charged with developing new relationships with broadband services providers like NIPPON TELEGRAPH AND TELEPHONE CORP., which recently announced XePhion, an extremely high-speed extranet service that uses next- generation Internet technologies. FVC.COM's subsidiary is looking for $8.3 million in orders in the initial year of operation through its channel partners, which include KANEMATSU ELECTRONICS LTD., NEC CORP. and NISSHO ELECTRONICS CORP.

Extending a relationship that dates to 1995, PICTURETEL CORP. and NIPPON TELEGRAPH AND TELEPHONE CORP. are working together to meet the growing demand for IP-based visual collaboration. The project involves the combination of visual collaboration products and services from PictureTel, which ranks number one in videoconferencing equipment, with NTT's broadband multimedia extranet XePhion service. The goal is to eliminate the impaired image quality of current-generation videoconferencing equipment that results from slow data transmission by using XePhion's high-speed transfer capabilities. At the end of the project, NTT will be in a position to offer a complete package of high-speed video communications services, everything from systems engineering, construction and installation to operations management. The initial tie-up between PictureTel and NTT focused on the development of an ISDN (integrated services digital network) desktop videoconferencing system for businesses and consumers. Later, they formed PHOENIX COMMUNICATIONS NETWORK, INC. to provide multipoint videoconferencing services. NTT also resells its Andover, Massachusetts-based partner's products.

Eleven Japanese, American and European companies will supply equipment for the wideband-CDMA third-generation cellular phone network that NIPPON MOBILE COMMUNICATIONS NETWORK, INC. expects to roll out starting in 2001. Ending its Japan-only procurement policy for network equipment, the country's largest cellular services operator tapped LUCENT TECHNOLOGIES INC. to provide two major components of the network: expandable base transceiver stations and radio network controller/multimedia processing equipment to provides BTS control and multimedia signal processing capabilities. As it is doing on several projects with NIPPON TELEGRAPH AND TELEPHONE CORP. (see Japan-U.S. Business Report No. 349, October 1998, p. 26), Lucent will marshal the resources of three operations to fill the NTT DoCoMo contract. They are Bell Laboratories' Yokosuka R&D facility southwest of Tokyo, which was set up specifically at the end of 1997 to work on W-CDMA equipment for NTT DoCoMo's third-generation wireless communications system; Lucent's Product Realization Center in Mount Olive, New Jersey; and its GSM (global system for mobile communications) headquarters in the United Kingdom, which will provide development and manufacturing support.

All the tools that a company needs for Internet Protocol telephony service will be available later this year from CISCO SYSTEMS, INC.'s subsidiary. It will provide IP- based handsets that can be installed anywhere on a corporate local or wide area IP network. A variety of Cisco Access Gateways, including the Cisco 2600, 3600 and AS5300 Series gateways, also will be put on the market. These products are a family of IP to circuit-switched gateways that are designed solely to provide VoIP (voice over IP) gateway functionality. Regardless of the model, each gateway is managed and maintained by Cisco CallManager 2.2 software. Smaller corporate customers are expected to be a major focus of Cisco's marketing effort since these businesses largely have been ignored by other marketers of VoIP products.

Competition among American companies to provide high-speed IP platforms to Japanese carriers is intensifying. For starters, JUNIPER NETWORKS, INC. formed a subsidiary in Tokyo to support sales of its M40 Internet backbone router. The Mountain View, California company claims that its platform is the first to integrate switch-level performance with software-enabled routing and control. Another plus of the M40, according to Juniper Networks, is the fastest packet processing speed, a whopping 40 million packets per second. One key to this performance is the company's JUNOS software, which is said to be the industry's first Internet-optimized routing operating system. Juniper Networks' subsidiary already has tapped NISSHO ELECTRONICS CORP. as one of what it hopes will be four distributors of the M40. That company is bullish on the Internet backbone router's prospects. It is projecting sales of 300 units over three years at prices ranging from $125,000 to $833,300.

NEXABIT NETWORKS, INC. has claims of its own to make for the carrier-class NX64000 multiterabit core switch/router. First and foremost, the Marlborough, Massachusetts firm says, the innovative architecture of the NX64000 delivers 100 times the switch-fabric capacity of today's state-of-the-art gigabit routers: 6.4 terabits per second per chassis. Moreover, the low latency of the platform, which supports ATM (asynchronous transfer mode) and frame-relay protocols as well as IP, facilitates the convergence of voice/video/data over IP in the backbone. Nexabit Networks selected SUMITOMO DENSETSU CO., LTD. to market, install and maintain the NX64000 switch/router through its nationwide network. DIT. CO., LTD. is in charge of importing the platform, which starts at $433,300. The Tokyo company also will provide technical support.

Not to be outdone in the bragging rights department, FORE SYSTEMS, INC.'s marketing unit has something to crow about in the high-speed networking category, the just introduced ForeRunner ASX-4000 ATM backbone switch. In recent tests, this 40-gigabit-per-second nonblocking, full-duplex switch forwarded more than 90 million IP packets per second. It also delivers the first OC-48c ATM ports in the industry, says the Warrendale, Pennsylvania company, which, through its subsidiary, also put on the market the ESX-2400 multigigabit routing switch. Designed to aggregate both server and desktop traffic onto a Gigabit Ethernet or an ATM backbone, this platform provides up to 24 ports of Gigabit Ethernet, 192 ports of 10/100 Ethernet and an optional eight ports of ATM OC-12.

To backstop its two-year-old business in Japan, EXTREME NETWORKS, INC., a supplier of Layer 3 LAN switching systems that speed up the flow of information, opened a subsidiary in Tokyo. The Santa Clara, California company's line of Summit stackable and BlackDiamond modular Layer 3 switches, which are designed for enterprise desktops, server farms or network cores, provide routing of IP traffic at wire speed on all switch ports. These products are distributed by SUMISHO ELECTRONICS CO., LTD. and TOKYO ELECTRON LTD. Extreme Networks also supplies selected Summit models to NEC CORP. on an OEM basis.

NTT INTERNATIONAL CORP. has on the market the CompactPCI Alliance Generation Quad T board from NATURAL MICROSYSTEMS CORP. It provides 96 ports of call processing and up to 60 ports of programmable voice processing in one slot with four T1 integrated digital truck interfaces. Unlike the one sold in the United States, the board available in Japan is designed for the ISDN-INS-15 protocol. Last summer, Framingham, Massachusetts-based Natural Microsystems opened a Tokyo subsidiary to support NTT International and other distributors (see Japan-U.S. Business Report No. 347, August 1998, p. 27).

Shipping from INTEL CORP.'s subsidiary is the Intel PRO/100+ Management Adapter. The network interface card, priced around $120, provides Ethernet/Fast Ethernet connections from PCI-bus desktops along with advanced management features, including remote management and troubleshooting. .....For its part, the subsidiary of Irvine, California-headquartered LINKSYS has introduced the Linksys EtherFast 10/100 LAN Card V2 for Ethernet/Fast Ethernet functionality. The card is priced at less than $50.

Cable modem manufacturer TERAYON CORP. has licensed its synchronous-CDMA technology to SUMITOMO CORP. for local production. The trader is an investor in the Santa Clara, California company, and its wholly owned CROSSBEAM NETWORKS CORP. subsidiary is the exclusive distributor of Terayon's product line. Terayon's S- CDMA cable modem addresses the problem of noise and other impairments in the 5- MHz to 42-MHz upstream path of two-way hybrid-fiber/coaxial networks. This interference makes sending data reliably from the user's site to the network problematic. S-CDMA cable modems use spread spectrum techniques to make data transmission highly immune to narrowband interference and impulse noise. That ensures a robust, high-speed (10 megabits per second in both directions) and scalable cable modem.

In its latest attempt to promote Internet access via set-top boxes attached to TV sets, ORACLE CORP. and its NETWORK COMPUTER, INC. affiliate are heading a project to interest content providers and other organizations to create programming, including on-line services, for so-called network computer television. The partners are SUMITOMO CORP. and ISP DREAM TRAIN INTERNET INC., a MITSUBISHI ELECTRIC CORP. company. Oracle and NCI will provide NCTV hardware, development kits and related services to project participants for three months for a charge of about $6,700.

CELOTEK CORP. appointed NEC CORP. to distribute its CellCase cryptographic systems to secure high-speed ATM networks. The Research Triangle Park, North Carolina company's products use 168-bit-key Triple DES encryption to provide secure multimedia transmission and access control services for broadband networks. Accordingly, companies can reap the cost advantages of public ATM WANs over private or leased lines without compromising security.

Start-up CALIBRE INC. signed RYODEN TRADING CO., LTD. as the exclusive distributor of its hardware/software communications subsystems for cordless connectivity. The San Jose, California developer's initial product offerings provide a total infrared data transfer solution.

DATRON SYSTEMS INC. has in hand a pair of contracts from Tsuru Gakuen Hiroshima Institute of Technology totaling $5 million for remote-sensing-satellite earth station equipment and services. The first order covers one of the Vista, California company's RSS earth stations, including a 13-meter data-acquisition system coupled with an Open 2000 data-processing system. The second contract involves adding Open 2000 data-processing capabilities and associated hardware and software to one of HIT's Datron transportable 7.3-meter antennas. Datron also will provide hardware and software to process data from a variety of remote-sensing satellites, including America's Landsat and Europe's ERS-1 and ERS-2. Contract fulfillment is set for the first quarter of 2000.

IBM JAPAN LTD. and MPT's Communications Research Laboratory have developed a way to scan video footage for specific scenes without relying on information like titles or names to conduct the search. Project participants envision the use of this technology in such applications as spotting violators captured on tape by traffic- monitoring systems or identifying crime suspects videotaped by security systems.

An exchange rate of ¥120=$1.00 was used in this report.aaaaaa

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