Cable TV and the Internet:

A Marriage of Necessity?

In the tradition of omiai (arranged marriage), Japan's cable TV operators and Internet service providers are courting each other as prospective business partners. And by continuing to throw around its considerable weight, telecom giant NTT is serving as the inadvertent nakôdo (matchmaker).

by Noriko Takezaki

In the midst of japan's ongoing Internet boom, all sorts of companies are looking for profitable business opportunities and tie-ups. It should come as no surprise, then, that arranged marriages between cable TV operators and Internet service providers (ISPs) have been active. Besides holding the promise of profit for both partners, such tie-ups will enable the cable TV companies and ISPs to rid themselves of a common thorn in their sides: intransigent telecommunications giant NTT.

Encouraging the consummation of Internet-cable TV unions, albeit behind the scenes on a modest scale, is Japan's Ministry of Posts and Telecommunications (MPT). Not only does the MPT see Internet-over-cable as beneficial to the development of the nation's communications infrastructure, but it gives a boost to the ministry's enduring efforts to reduce the near-monopolistic presence of NTT in Japan's domestic telecommunications market.

In search of the elusive profit

According to MPT figures, only 38% of Japan's 160 urban cable TV operators (61 companies) produced a profit in fiscal 1995. In their search for new opportunities that could produce a breakthrough for their struggling operations, Japanese cable TV companies have turned to the prospect of providing their subscribers with Internet access services. Formerly, they had high hopes for getting into the cable telephony business, but have grown weary of the lack of progress in negotiations for interconnections with Japan's telecommunications giant, NTT.

This is why, early this year, many cable TV operators decided to stop the single-minded wooing of NTT and instead seek a partner that could provide a more immediate boost to their flagging revenues. With Japan now riding the crest of the Internet wave, naturally the opportunity that has attracted them is offering Internet connections and services.

"Cable TV operators have carefully selected their direction so as not to confront NTT," says Daiji Hasegawa, managing director of the Japan Cable Television Association. "For their connection to the Internet, they won't have to worry about NTT any more. They can start the business by just negotiating with the Internet Service Providers directly."

Japan's Internet service providers, meanwhile, have also been facing a tough competitive environment. In spite of the rapid growth in the number of Internet users, the number of competing ISPs has grown even faster (nearly 900, according to MPT estimates, a more-than-threefold increase in six months). Many of Japan's smaller ISPs are facing bankruptcy, and only a handful of all providers are earning a profit. Even for Japan's major ISPs, NTT's new Open Computer Network (OCN) Internet service business, to be introduced early next year, poses a major threat of reducing their business opportunities. (For more information about how OCN will affect Japan's ISPs, see "NTT's Open Computer Network," page 17, in the September 1996 issue of Computing Japan.)

The ingredients of a happy marriage

Because of what they share in common -- the same fear for their survival, and a common thorn in the side in the form of NTT -- the courtship of the cable TV companies and ISPs has been proceeding smoothly. Following its initial summer installations, Japan's first Internet-over-CATV service, by Musashino-Mitaka Cable Television, started full-scale operation in the fall. Led by its shareholders, Fujitsu and Secom (a residential security company), the Musashino-Mitaka network -- which utilizes a Hybrid Fiber Coaxial (HFC) configuration -- is offering three types of services:

* a dial-up IP connection at 28.8K bps for home users, at a monthly charge of JPY1,860 (up to 4 hours) to JPY5,700 (up to 20 hours; JPY8 per minute for additional
usage);

* a 192K bps to 10M bps LAN-type IP assign connection for individual users, at a monthly charge of JPY3,860 (up to 4 hours) to JPY12,500 (up to 20 hours; JPY18 per minute for additional usage); and

* a 256K bps to 10M bps LAN connection for corporate users, for a monthly fee of JPY255,000.

For the latter two LAN-type connections, access speed of 10M bps is available inside the network LAN. The Internet access connection for the Musashino-Mitaka services will be via Tokyo Internet, in which Secom is an investor, and Infoweb, Fujitsu's Internet access service.

The company that virtually led Musashino-Mitaka's move to start Internet access service was Fujitsu. In addition to the Musashino-Mitaka venture, Fujitsu has so far joined with 13 other cable TV operators with the intent of providing Internet access for their subscribers via its own Infoweb service in the future. "Fujitsu has anticipated that the cable TV network will be a major communications infrastructure," says Norio Endo, director of Fujitsu's CATV businesses. "For the cable TV operators' connection to the Internet, we expect synergistic effects between broadcasting and communications."

Among ISPs, the most aggressive has been Internet Initiative Japan (IIJ), which announced its Network Management Center plan in July. IIJ intends to establish a network for Internet access over cable TV, and it will provide cable operators with remote router- and server-management and firewall system operations. As of late September, some 30 cable TV operators were lined up to join in the IIJ plan; these included Iwate Cable Television, Nagoya Cable Network, and Kumamoto Cable Network, in addition to Jupiter Telecom, a Tokyo-based MSO (Multiple System Operator) whose shareholder Sumitomo Corp. is also a shareholder of IIJ. In preparation for the start of full-fledged service of the center, IIJ conducted service trials with cable TV operators in September via 1.5M bps dedicated lines.

"What we intend [for this Network Management Center] is not for it to make a profit out of itself, but to expand our business chances for offering our high-speed, large capacity services to cable TV operators as large business accounts," reveals Hideshi Hojo, deputy general manager of IIJ. "Since 10M-bps-class transmission speed is available over the network, we can meet the needs of motion picture transmission over the Internet, something we have not been able to offer so far."

Concerns for the future

In addition to Musashino-Mitaka, as of the end of August another 11 cable TV operators had received the Type I Communications Carrier license required to realize Internet-connection services. Most of them are expected to inaugurate their services in 1997. These operators have some technical concerns, however, about jumping too quickly into offering Internet connections.

The biggest concern is network configuration. For bi-directional service, HFC (such as that used by Musashino-Mitaka) is considered in Japan to be the best suited network type. HFC can provide larger bandwidth for downstream transmission, from 60 MHz to 770 MHz, with about 110 channels being technically feasible (although IIJ claims that, practically, the usable number is less than half). The bandwidth of a coaxial network for downstream transmission is more limited, from 60 MHz to 450 MHz, with up to 58 channels technically feasible (and fewer in practice).

Only about 30 of Japan's cable TV operators, 15% of the total, have HFC networks; the rest utilize coaxial networks. And since upgrading a coaxial network to an HFC network would be a major expense, few cable TV operators are willing to install HFC unless they lay it from the beginning.

Even the biggest cable TV operator, Tokyu Cable Television, is reluctant to upgrade its coaxial network to HFC. Instead, it is attempting to use the existing coaxial network for its new bi-directional services, including Internet access.

"We have to think carefully about the investment efficiency," cautions Masaaki Arima, director of communications business at Tokyu Cable Television. "We now rather think the use of our existing resources is meaningful. If we could be sure of getting more subscribers [through new services], though, we will consider the network renovation into HFC."

The choice of which type of cable modem to use is another concern for cable TV operators. Although three organizations -- the IEEE, MCNS (Multimedia Cable Network Systems Partners), and DAVIC (Digital Audio-Visual Council) -- have been working for standardization in the US, there is as yet no agreed-upon product standard.

Not waiting for the development of an industry standard, companies have started introducing to the market two types of products: a symmetric type, and an asymmetric type. The symmetric type enables the same transmission speed (4M to 10M bps) for both the downstream and upstream channels; LANcity and Zenith offer products of this type. The asymmetric type utilizes an upstream channel speed (128K to 2.56M bps) that is slower than the downstream speed (30M bps). Asymmetric cable modems are being developed by such manufacturers as Motorola, Hybrid Networks, Hewlett Packard, Toshiba, NEC, and Pioneer.

Although there is as yet no industry standard, the products currently available are mostly of the former (symmetric) type. Many industry planners feel, however, that the latter (asymmetric) type is suitable for planned Internet-over-CATV services. This is making some cable TV operators hesitate to deploy their services by using the currently popular symmetric cable modems, waiting instead for reasonably priced asymmetric cable modems to hit the market.

"There are many cable TV operators who say they want to wait and see regarding the introduction of asymmetric type cable modems to the Japanese market," observes IIJ's Hojo. "Since the asymmetric-type modems will be available here sometime next year, we expect more cable TV operators to become interested in Internet connection service then."

Noise is another big concern, particularly for upstream transmission quality. Since existing cable TV networks were not originally designed for the use of upstream transmission, little attention was paid to guarding against ingress (noise from the electronic appliances used in homes). The industry is attempting to implement various ways of solving this problem, such as installing shield wiring, but so far no completely satisfactory solution has been found.

Lukewarm government support

To help address such industry concerns, the MPT has been organizing -- as part of its Regional Multimedia Highway plan -- a consortium to offer seminars and hold meetings regarding Internet-over-CATV service. The Consortium for Service Trials for Regional Multimedia, established in August, which is scheduled to last for three years, will conduct technical research, develop public service applications for Internet-over-CATV services, and coordinate internetworking between regional networks via the Internet backbone network. The consortium had as of September attracted 164 member companies: 61 cable TV operators, 32 regional governments, and 71 private companies (such as IIJ, Tokyo Internet, Japan Telecom, KDD, Fujitsu, Hitachi, NEC, Sharp, and Sony).

Since the MPT has not allocated a budget for its Regional Multimedia Highway plan this fiscal year, however, the support it can provide to the companies of the consortium is limited. So far, the consortium's activities have been financed by membership fees. Therefore, for example, although IIJ's service trials for its Network Management Center plan were handled as part of the activities of the consortium, IIJ did not receive any financial support from the MPT for those trials.

The financial support currently offered by the MPT is limited to that which falls within the range of its Teletopia project (designed to promote the "informatization" of regional areas). This includes no-interest loans from the Japan Development Bank for facilities investment to cable TV operations run by semipublic entities in the Teletopia-designated regional areas (currently 149), and subsidies for facilities investment to public- or semipublic-owned cable TV operations.

As part of its fiscal 1997 budget, the MPT plans to offer limited additional subsidies. These will go for facilities investment by public and semipublic entities for the
development and introduction of image data applications, and for software R&D
by small and medium-sized companies for Internet-over-CATV services (via the MPT-affiliated Telecommunications Advancement Organization).

Academia joins the family

In addition to industrial and governmental activities in developing Internet-over-CATV service, Japan's academic community has decided to tackle investigation of the necessary technologies -- again with support from the MPT. To coordinate the effort, the Inter Cablenet Promotion Committee (ICPC) was established in late August. In addition to universities, numerous cable TV operators, communications carriers, system integrators, and regional governments have expressed their interest in joining the committee.

The ICPC intends to set up a nonprofit R&D institute, the Inter CableNet Laboratories (ICNL), that will focus on technologies for convergence of broadcasting and bi-directional communications in Japan. To prepare for this, Keio University, a major promoter of the ICPC, plans to conduct joint studies with two American partners, Cable Television Laboratories and the University of New Hampshire's Inter Operability Laboratory.

"Our primary objective is to establish a neutral entity to promote standardization and interoperability activities for convergence of broadcasting and communications," explains Masao Nakagawa, a professor at Keio University and deputy chairman of the ICPC's organizational committee. "Since this is a field that requires a comprehensive approach, an industry-centered effort alone would not be enough."

Through the combined efforts of the concerned industries, government, and academia, Japan is moving toward the realization of Internet-over-CATV -- or, to be precise, CATV-based wide Area Intranets. To ensure that the public is able to enjoy the benefits of information access and bi-directional communication via a regional network, the closest network to them, however, tight cooperation among the three groups will be necessary. In particular, the MPT, which has so far shown little inclination to take leadership in promoting cable TV, must play a more active role than before and not allow regulatory obstacles to hinder the industrial challenge for convergence of broadcasting and communications.