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No. 360, September 1999

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American Companies in Japan


Internet and data communications traffic is straining capacity all along the network, including what is called the backhaul segment. A company to be formed by PACIFIC GATEWAY EXCHANGE, INC. and KDD SUBMARINE CABLE SYSTEMS INC. will tackle part of that bottleneck by building backhaul circuits between the landing stations in coastal Japan for undersea fiber-optic cable networks and major metropolitan centers and selling this capacity to communications carriers. The partners will employ a new architecture for backhaul networks by locating the cable terminating equipment in a specific city rather than at a cable landing point. This arrangement, say PGE and KDD-SCS, should result in a big cut in facility costs while also improving transmission and service quality. The joint venture, in which the Burlingame, California partner will be the majority (51 percent) owner, initially will install backhaul circuits between cable landing stations in Kanagawa and Chiba prefectures and central Tokyo. This work is scheduled to be completed by mid-2000. Pacific Gateway was among the first foreign communications carriers to receive a Type I license from the Ministry of Posts and Telecommunications (see Japan-U.S. Business Report No. 351, December 1998, p. 26).

Two months ahead of schedule, AT&T CORP. and BRITISH TELECOMMUNICATIONS PLC completed their strategic and operational partnership with JAPAN TELECOM CO., LTD. (see Japan-U.S. Business Report No. 356, May 1999, p. 30). In the biggest investment to date by foreign competitors in Japan's huge communications market, they acquired a combined 30 percent stake in the third-largest long-distance carrier at a cost of some $1.8 billion. Japan Telecom then turned around and took over AT&T's in-country data communications business, AT&T JENS CORP., as well as BT's communications services and network information services. The deal strengthens Japan Telecom's ability to deploy new services and technologies to its customers. More importantly, it gives AT&T and BT an established, nationwide channel to deliver the branded services of their international joint venture to multinational business customers and international carriers. The timing of the launch of those services hinges on U.S. regulatory approval.

Corporations and other high-volume telephone users have another choice in international services providers. Through its Hong Kong subsidiary, GTE CORP. began offering low-cost, flat-rate connections September 1 by leasing capacity from other carriers between Hawaii and Japan that is tied into publicly switched networks on both sides of the Pacific. GTE is charging 43 cents for a three-minute Japan-U.S. call at any hour of the day or night. That represents a savings of 80 percent over KDD CORP.'s daytime rates, for instance.

PSINET INC. made headlines in the business press last year by using acquisitions to become Japan's number-two ISP for corporate accounts (see Japan-U.S. Business Report No. 350, November 1998, p. 27). Now, the Herndon, Virginia company, which bills itself as the world's first and largest independent commercial ISP, has announced several initiatives designed to provide a complete Internet solution to its Japanese business customers. The starting point of this push is wholly owned PSINETWORKS JAPAN INC.'s recently received Type I license, which will allow the extension of PSINet's facilities-based IP network. Once the Japan-U.S. Cable Network becomes operational in mid-2000, the company, which has capacity on this undersea fiber-optic system, will use its operating authority to provide high-speed communications networking services to customers in Japan and elsewhere in Asia. In the interim, PSINet has committed as much as $265.5 million to build three Internet hosting centers in Japan, each with the capacity to house 5,000 servers. The 43,000-square- foot Tokyo Global Hosting Center is scheduled to open in mid-October. Equipped with its own power-generating system and designed to withstand an earthquake of the same magnitude as the 1995 Great Hanshin Earthquake, the facility will provide large- scale, high-reliability, fully managed services to other carriers and ISPs. Within the next two years, a second Internet hosting center will be built in the Tokyo area as well as one in the Kansai region. Moreover, by the end of September, PSINetworks Japan will introduce an economy service plan to corporate subscribers located within about nine miles of one of its Internet access points. Customers that sign up for this package will pay $3,000 a month, including $1,400, about half the normal charge, for fast (1.5 megabit per second) Internet access and the rest for the use of dedicated lines for other services.

Low-cost, high-speed Internet access finally will be available to homes in Japan, at least those in Tokyo and the surrounding area, in the summer of 2000. This breakthrough will be delivered by an unexpected source: SPEEDNET INC., a company formed by equal owners MICROSOFT CORP., SOFTBANK CORP. and TOKYO ELECTRIC POWER CO., INC. SpeedNet will use TEPCO's fiber-optic electricity transmission network. Subscribers will be linked to this backbone via an antenna-based technology known as a fixed wireless network. SpeedNet will bypass completely NIPPON TELEGRAPH AND TELEPHONE CORP.'s regional telephone network. Since the joint venture will not have to pay the stiff interconnection fees to NTT that are said to have retarded the growth of the Internet in Japan, the new ISP will be able to charge subscribers just a fraction of the $88.50 or so a month that NTT plans to bill for a forthcoming flat-rate Internet service plan. Moreover, SpeedNet customers will have a faster connection: 1 gigabit per second versus the 64-kilobit-per- second access that the communications giant will offer. Microsoft and Softbank are talking about tying up with some of Japan's other nine regional electric utilities to bring inexpensive, fast Internet access to their service areas.

Apartments, hotels, schools and any other place where there is a concentration of people can get fast Internet access for as little as $17.70 a month per unit. NICHIMEN CORP. is marketing this xDSL (digital subscriber line) service, which is made possible by ACUCOMM, INC. access products that the trader distributes (see Japan-U.S. Business Report No. 358, July 1999, p. 35). The Santa Clara, California company's equipment is much easier to install in existing buildings than, say, a local area network. At least for apartment residents, however, this means of Internet access can involve some heavy up-front costs since they or management must pay for the networking and customer premises equipment and its installation. Another potential drawback is that all the participants must sign up with the same ISP. Nonetheless, Nichimen is projecting revenues from the sale of AcuComm equipment at $17.7 million to $26.6 million in 2000.

JFAX.COM, an Internet-based messaging provider, has introduced its Unified Messaging service in Tokyo and Osaka through KUNI RESEARCH INTERNATIONAL CORP. The Los Angeles firm's service transforms a subscriber's e-mail box into a depository for faxes and voice mail as well as e-mail, with retrieval of e-mail and voice mail possible by phone or e-mail. People anywhere in the world can get a home or business phone number in Tokyo and Osaka from JFAX.COM, through which the company sends both faxes and voice mail.

Atlanta's IXL, INC., which advises Fortune 1000 companies on how the Internet can be used to their competitive advantage and draws on its in-house expertise to design, develop and deploy advanced Internet applications and solutions, has opened an office in Tokyo. Employees already are working with current iXL clients GENERAL ELECTRIC CO. and MERRILL LYNCH & CO., INC. to help them devise Internet strategies for Asia.

A second big-name company is distributing ESOFT INC.'s TEAM line of Linux-based Internet access products for small businesses. TOMEN CORP. joins NTT ELECTRONICS CORP. (see Japan-U.S. Business Report No. 354, March 1999, p. 31) in handling the appliances, which provide low-cost LAN-to-Internet connectivity for companies with up to 200 workstations. Broomfield, Colorado eSoft's all-in-one devices include a Web server, firewall security, remote-access capability and VPN functionality.


Hoping to move farther into the Internet field, INTEL CORP.'s subsidiary is working with OKI ELECTRIC INDUSTRY CO., LTD., a big communications equipment maker that is trying to remake itself as an Internet-related firm, to develop computer-telephony devices for inexpensive but high-quality voice-over-Internet-Proto-col communications. The development partners will draw on advances in Intel's processor technology both to shrink the size of the "Internet phone" and to add other capabilities to it, such as voice playback of e-mail messages or fax transmissions. The products, which could be commercialized as soon as next year, will be targeted at the Japanese market.

Internet users interested in road or weather conditions in Iwate prefecture, one of Japan's main vacation areas, can get this information thanks to the local government's installation of VORAXRD.COM's AddView system. The Sunnyvale, California company calls its package the first complete Internet streaming video service. The Iwate prefecture installation consists of 54 cameras located along various roads, ISDN (integrated services digital network) links to local reflectors and satellite connections to the VoraRD.com AddView server in California. People accessing the service select the desired area from the 54-image menu. They then get a live image of traffic or weather at that location. A remote control feature allows the user to move the camera through a 160-degree arc and to zoom in on things of interest.

A video network platform developed by MINERVA SYSTEMS, INC. to address the video processing requirements of sophisticated IP networks is available from KANEMATSU ELECTRONICS LTD. The Mountain View, California company's Minerva VNP provides MPEG encoding and decoding for a variety of video networking applications. It incorporates an embedded processor running a real-time operating system as well as a state-of-the-art codec chip. Minerva claims that its MPEG network appliance is easier to integrate, more reliable, smaller in size and provides greater scalability than currently available PC-based encoders. Those features have led KEL to project sales of 300 systems in the first year at prices ranging from $11,300 to $36,700.

Having made a name for itself in the field of packet voice communications systems for voice/fax/data/video networking over IP, frame relay and circuit-switched networks, NUERA COMMUNICATIONS, INC. has moved into the Japanese market. The San Diego, California firm chose TERILOGY CO., LTD. to distribute two of its products. For carrier customers, Nuera offers its new ORCA (open, reliable communications architecture) Internet telephony gateway, which provides voice, fax, data and voice- band data signals across a broad range of packet transmission networks. ORCA delivers up to 2,000 voice channels per gateway. Among the many Access Plus models that Nuera makes for the corporate marketplace, Terilogy is selling a high- performance voice-over-frame-relay access device. The Access Plus F200, which can accommodate up to 30 voice/fax channels per unit, offers integral switching capabilities and advanced traffic management features. It includes analog and digital interfaces to PBXs (private branch exchanges) and the publicly switched telephone network.

With the help of a major marketing partner, AVICI SYSTEMS, INC. will bring the first commercially deployed terabit switch/router to facilities-based carriers and ISPs in Japan. The Billerica, Massachusetts company selected NISSHO ELECTRONICS CORP. to sell and support its TSR, short for Terabit Switch/Router. This next- generation backbone solution scales from 2.5 gigabits to 6 terabits. That capability, Avici says, assures throughput for native TCP/IP-based Internet traffic at 10,000 times the speed of existing products at roughly 10 percent of the cost. Moreover, it supports frame relay, ATM and SONET (synchronous optical network) traffic. In another plus, TSR's self-healing switch fabric is inherently redundant, eliminating the need for backup ports. Nissho Electronics has priced Avici's TSR from $354,000 to $885,000.

Big data center networking systems supplier MC-DATA CORP. added NETMARKS, INC. as a marketer and systems integrator of its Fibre Channel networking products. The Broomfield, Colorado manufacturer's flagship product is the 32-port, high- availability McDATA ED-5000 Fibre Channel Director, which is used in enterprise SAN applications. Netmarks, which handles Fibre Channel products from other U.S. vendors for small to midsize SAN situations, also will sell the 16-port departmental ES- 2500 Fibre Channel Switch and Enterprise Fabric Connectivity Management products. The company has priced the McDATA line from $83,500 to $357,400.

Broadening the distribution channels for its switches and other network equipment, CABLETRON SYSTEMS INC.'s subsidiary signed a reseller agreement with SOFTBANK CORP. Until now, the Rochester, New Hampshire company has relied on systems integrators in major metropolitan areas to handle its products, in large part because most of its actual and potential customer base is located in big cities. With the addi-tion of Softbank, Cabletron hopes to reach a wider group of systems integrators and end users. The firm is looking for first-year sales of $8.9 million through the marketing network of the software distributor/Internet investor.

In another move to capitalize on the expected popularity of NTT MOBILE COMMUNICATIONS NETWORK, INC.'s Internet-capable iMode cellular phones, the marketing unit of COMPAQ COMPUTER CORP. has tied up with NTT-ME CORP. on the computer hardware and software for the mobile professional-targeted service. The recently formed NIPPON TELEGRAPH AND TELEPHONE CORP. subsidiary is marketing 20-, 50- and 200-user versions of Compaq's new Prosignia server line as well as its Bizport groupware, which can support up to 50 iMode clients or as many as 200 users (see Japan-U.S. Business Report No. 359, August 1999, p. 32).

The latest wireless LAN product from LUCENT TECHNOLOGIES INC. that NCR JAPAN, LTD. is marketing is a card that allows a local area network to be constructed between buildings that are up to 1.25 miles apart or within a spread-out complex. The reach of the WaveLAN IEEE Turbo Exterior System, which costs $4,400 to connect two buildings, can be extended to 4 miles if the normally top transmission speed of 8 Mbps is slowed. NCR Japan has forecast sales of 1,000 for this WaveLAN product.

The subsidiary of XIRCOM, INC., which bills itself as the leading provider of connectivity solutions for mobile computing professionals, has introduced two more products. The PortStation provides instant network, communications and peripheral device attachment via a single USB connection to Windows-based computers. The USB Hub Starter Kit costs $155. To it, users can add separately priced modules that give them access to a variety of networking and communications technologies. The Thousand Oaks, California company's other new product is the RealPort ISDN Connection Kit, a $210 integrated PC Card with a built-in connector system that allows notebook users to connect to an ISDN without installing a proprietary cable.

Expanding its line of two-way mobile radios for business or commercial use, MOTOROLA INC.'s subsidiary introduced the Japan-only Visar II. The simplified, handheld unit can be used for communications within a building, for example. Depending on its wattage, the Visar II costs either $1,200 or $1,800.

An exchange rate of ¥113=$1.00 was used in this report.aaaaaa

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