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No. 363, December 1999

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American Companies in Japan


TELECOMMUNICATIONS

The latest addition to the steadily lengthening list of American communications carriers authorized by the Ministry of Posts and Telecommunications to provide facilities-based services is LEVEL 3 COMMUNICATIONS, INC., the builder of the first global network optimized for Internet Protocol technology. With its Type I license, the wholly owned Tokyo subsidiary that the Broomfield, Colorado company established last July will offer international private leased circuit and international Internet access services over its own fiber-optic network. These services will start sometime after the Japan-U.S. Cable Network, in which Level 3 has a large amount of capacity, becomes operational; the launch date now is mid-2000. This undersea, fiber-optic cable system will link Level 3's Japan- based facilities to its American and European networks. As part of its move into the Internet access services area, the fast-expanding carrier will build a 64,600-square-foot gateway facility in the Minato-ku area of Tokyo that will feature state-of-the-art security and complete redundancy. Although details are sketchy, Level 3 says that this site will be the largest colocation facility in Japan. INTEL CORP. and PSINET INC. recently announced plans in the Internet services hosting field in Japan (see Japan-U.S. Business Report No. 361, October 1999, p. 33).

In the spring of 2000, one of the world's top Internet data center operators also plans to open a state-of-the-art facility in Tokyo where ISPs, content providers, e-commerce companies and corporations can colocate their servers and other Internet equipment. The project will be undertaken by the joint venture that ABOVENET COMMUNICATIONS, INC. recently formed with MARUBENI CORP. (50 percent) and TRANS COSMOS INC. (10 percent). ABOVENET JAPAN K.K. has selected a site in Tokyo's Nihonbashi area for its approximately $19.1 million, 32,300-square-foot Internet service exchange facility, where customers will have direct connections to the San Jose, California company's global optical IP network. AboveNet Communications is a subsidiary of METROMEDIA FIBER NETWORK, INC., which is building fiber-optic local loops in major metropolitan markets across the United States.

The company that bills itself as the pioneer of Internet data centers used an acquisition to advance into Japan's Internet services hosting business. For an undisclosed price, EXODUS COMMUNICATIONS, INC. bought Tokyo's GLOBAL ONLINE JAPAN CO., LTD. Established in 1994, GOL provides Internet access, mainly to individuals, and a range of services, including Internet hosting, Web design and e-commerce solutions. Revenues for the year through March 1999 totaled $6.9 million. GOL maintains peering arrangements with 38 other domestic ISPs. The Japanese company's team of more than 80 professionals will form the nucleus of EXODUS COMMUNICATIONS, K.K., the Santa Clara, California firm's wholly owned subsidiary, while its Tokyo data center will enable Exodus Communications to provide Web-site hosting and a range of managed and professional services. Exodus Communications currently has 16 Internet data centers in the United States and Europe.

SPEEDNET INC. — the company that MICROSOFT CORP., SOFTBANK CORP. and TOKYO ELECTRIC POWER CO., INC. equally formed to deliver low-cost, fast Internet access to homes in the Tokyo metropolitan area (see Japan-U.S. Business Report No. 360, September 1999, p. 28) — has five additional backers. Through a third-party share allocation that raised a total of $1.7 million, YAHOO! JAPAN CORP. now owns 5 percent of SpeedNet. The other investors, each of which has a 0.5 percent stake, are: GLOBAL CROSSING LTD., HIKARI TSUSHIN, INC., KDD CORP. and TOKYO TELECOMMUNICATIONS NETWORK CO., INC.

MICROSOFT CORP. is exploring other broadband options for delivering its products and services to homes as well as to businesses in Japan. As in the United States and elsewhere, cable TV networks are near the top of its list, even though only an estimated 17 percent of Japanese homes subscribe to cable service. Microsoft's immediate way to gain access to this channel reportedly is to buy MEDIAONE GROUP, INC.'s 60 percent share of TITUS COMMUNICATIONS CORP. Japan's number-two CATV operator, the money-losing, four-year-old company serves about 80,000 customers in the Tokyo area as well as in Hokkaido, Kanagawa and Chiba prefectures, offering them not only TV programming but also cable-based Internet and telephone services (see Japan-U.S. Business Report No. 358, July 1999, p. 37). MediaOne might be interested in selling its stake in Titus to Microsoft simply because AT&T CORP., which plans to buy the Englewood, Colorado-based cable operator, has said that it would shed the company's international operations. MediaOne's partners in Titus are ITOCHU CORP. and TOSHIBA CORP., each with a 20 percent interest.

The ability of CABLETRON SYSTEMS INC. to meet the requirements of the Seirei Gakuen Educational Organization for infrastructure that will enable the big health-care training facility to support multimedia education landed the Rochester, New Hampshire network equipment supplier a major contract. The Hamamatsu, Shizuoka prefecture organization ordered Cabletron's high-performance, Layer 4 SmartSwitch Router 8000. Among the uses envisioned for this hardware, which provides wire-speed Gigabit routing to back high- band-width applications, are to allow students to have access to the Internet and to the campus-wide LAN regardless of where their PCs are located and to prepare for upcoming classes by remotely viewing lecture notes and materials.

With steady growth expected in the market for videoconferencing, especially distance learning, GENERAL DATACOMM, INC. signed OMRON CORP. to distribute its GDC APEX ATM (asynchronous transfer mode) wide area network switches and MAC 500 ATM video access concentrators for these applications. Omron, which has some large-scale videoconferencing trials underway in the Tokyo area, will integrate the Middlebury, Connecticut manufacturer's multiservice ATM products with radio-wave transmitter systems from HARMONIX CORP. of North Andover, Massachusetts. The combination, the Japanese company says, will deliver advanced but lower-cost video and data capabilities to customers.

The team of 3COM CORP. and HITACHI, LTD. has commercialized a Japan-only IP gateway system in an attempt to offer local exchange carriers a solution for the increasing problem of system overload caused by expanding dial-up access to the Internet. The Hitachi IP Gateway System SG8000, which incorporates 3Com's server expertise and its partner's exchange technology, does this in simplified terms by segregating the Internet traffic from regular telephone calls carried over the same lines and making the Internet connection directly via dedicated lines.

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Carriers and network services providers looking for ways to more efficiently and profitably meet the requirements of their broadband customers, whether businesses or individuals, have two new options in REDBACK NETWORKS INC.'s flagship family of Subscriber Management Systems. The Sunnyvale, California company's SMS 500 and SMS 1000 are designed to bridge the operations gap between the high-speed access equipment installed in central telephone, cable or wireless offices and the backbone routers that network services providers use. To prevent this equipment from creating bottlenecks in high-speed networks, the SMS 500 and the SMS 1000, which network services providers deploy at points of presence, take the incoming high-speed data traffic and "groom" it for the backbone routers. Redback Networks tapped TERILOGY CO., LTD. to distribute its SMS line, which in Japan is priced at $47,600 (the SMS 500) or at $95,200 (the SMS 1000).

MIRAPOINT, INC., the inventor of the Internet e-mail server appliance, has given an ITOCHU TECHNO-SCIENCE CORP. affiliate marketing rights to a router that can filter out computer viruses contained in e-mail messages — a potent defense against attacks. The $52,400-and-up system, which can handle more than a million messages a day and is said to be extremely easy to set up and operate, is designed for ISPs and companies that provide e-mail outsourcing. The Itochu Techno-Science unit estimates that it can sell 500 of the virus-blocking servers in 2000. NISSHO ELECTRONICS CORP., an investor in Mirapoint (see Japan-U.S. Business Report No. 361, October 1999, p. 11), markets other products in the Cupertino, California firm's line of dedicated messaging appliances.

Just because it is the dominant world supplier of the equipment behind the Internet revolution does not mean that CISCO SYSTEMS, INC. is satisfied with its position in any particular market or segment. In Japan, the company hopes to strengthen its standing in the low-end router business by localizing the Cisco 800 series. These routers link small offices and corporate telecommuters to the Internet or to the corporate LAN via ISDN, digital subscriber line or various serial connections. At the same time, the Cisco 800 series enables network services providers to deliver such value-added services as secure Internet access, VPNs or managed data network services.

For just $150, Japanese mobile computer users who travel to any one of 60 foreign countries can be assured of hassle-free connections to the Internet or the corporate intranet. That capability is possible with the RealPort CardBus Modem 56-GlobalACCESS from XIRCOM, INC.'s subsidiary.

With communications expenses so high in Japan, RAMP NETWORKS, INC. believes a strong market exists among small companies and branch office for its latest IP faxing solution. Like other products in the Santa Clara, California company's line, the WebRamp 200Fx is designed to complement standard fax machines. Connected to one of them, the WebRamp 200Fx converts paper faxes into electronic documents that can be transmitted through the Internet to PCs as e-mail messages or to regular fax machines connected to another Web-Ramp. Either way, customers can send faxes anywhere for the cost of a local phone call. MACNICA, INC., which helped Ramp Networks design the WebRamp 200Fx for the local market, is distributing the device under a spring agreement (see Japan- U.S. Business Report No. 358, July 1999, pp. 35-36).

Offering secure, on-line banking is the latest way that the subsidiary of WEBTV NETWORKS INC. hopes to attract elusive subscribers for its TV set-based Internet access service (see Japan-U.S. Business Report No. 361, October 1999, p. 33). The Internet banking option will be available to BANK OF TOKYO-MITSU-BISHI, LTD. customers who sign up for WebTV. The near-term goal of WebTV Networks, which is owned by MICROSOFT CORP., is to have 100,000 subscribers in Japan. How many it now has was not disclosed.

Subscribers to the cdmaOne digital cellular communications services offered by DDI CORP., Japan's number-two cellular services provider, and IDO CORP. will have access to the Internet at speeds of up to 64 kilobits per second starting in January 2000. This capability was installed by MOTOROLA INC., the builder and the infrastructure equipment supplier for the CDMA digital cellular networks owned and operated by DDI and IDO as well as the power behind their earlier cellular systems. Motorola's high-speed wireless Internet access technology is unique in that it uses cost-saving packet data switching. The hardware implementation of this advance was jointly developed by Motorola and 3COM CORP.

A small (9-inch), high-performance millimeter-wave customer premise antenna developed by ENDGATE CORP. will enable TOSHIBA CORP. to roll out in major urban areas high- speed Internet access systems based on broadband wireless technology. Significantly, the Sunnyvale, California company was able to design, fabricate and test the antenna in just three weeks, thanks to its in-house expertise and an incredibly powerful computer built by Endgate engineers. The antenna will allow corporate subscribers to the Toshiba service to connect with the local switching office or Internet access point at broadband frequencies rather than at the far slower speeds available with today's typical wireline infrastructure.

SEIKO EPSON CORP.'s innovative Locatio mobile communications device — a combination personal digital assistant, wireless phone, personal navigator and digital camera — and the supporting i-Point network infrastructure use global positioning system technology from TRIMBLE NAVIGATION LTD. for their locational capabilities. Locatio is the first consumer implementation of the Sunnyvale, California firm's new GPS architecture for power-sensitive communications devices. Trimble also supplied its server technology for the i-Point network to improve the accuracy of the user's position as well as to speed initial GPS signal acquisition.

With the launch of next-generation (3G), high-bandwidth digital wireless services on the horizon in Japan, CONDUCTUS, INC. decided that the timing was right to move into the market. A manufacturer of superconductor-based filters, the Sunnyvale, California company selected SEKI TECHNOTRON CORP. as the exclusive representative of its ClearSite line. These prod-ucts, which mate cryogenically cooled, low-noise amplifiers with the superconducting filters, expand coverage, reduce radio-frequency interference and increase capacity for wireless networks, regardless of generation. RF interference is a particular problem in Japan for operators of wireless systems.

In the latest expansion of its two-way radio lineup, MOTOROLA INC.'s subsidiary released a pair of multiservice products. The lightweight but ruggedized GP328 and GP338 give users one-touch access to members of various talkgroups as well as the convenience of regular telephone calls. Among other features, the output power of both products can be varied to fit the calling environment. Moreover, they run off of four different types of batteries, including lithium-ion ones. Equal-ly important, the two products can be used on the move.

The marketing unit of videoconferencing equipment leader PICTURETEL CORP. introduced new versions of two of its network systems. The top-of-the-line PictureTel Montage 6.1 Multilocation Server is designed specifically for large, reservation-based video networks and multipoint service operations. In particular, it can connect up to 48 sites in any number of conferences. PictureTel would argue, though, that the main strength of the Montage 6.1, which is priced at $61,000, is its flexible architecture. Organizations interested in a more affordable videoconferencing tool yet one capable of linking up to eight sites have the option of the $25,800 PictureTel Prism 6.1 Workgroup Conferencing Server.

In a potentially powerful pairing, HUGHES ELECTRONICS CORP. and NIPPON TELEVISION NETWORK CORP. have agreed to explore business opportunities in the fields of multimedia and communi-cations. Indicative of the seriousness of the search, the two formed an equally owned company in Tokyo to conduct feasibility studies. What Hughes and NTV specialists detailed to this company are looking for are opportunities that combine the American company's expertise in satellite-based services and technologies with the Japanese firm's strength in broadcast programming and content. Among its other distinctions, Hughes is the world's largest digital satellite broadcaster through its various DirecTV operations. For its part, NTV is Japan's top commercial broadcaster with 29 affiliated stations. Industry sources speculate that a Japan-based interactive TV business is a leading candidate for a Hughes-NTV joint venture.

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

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