Japan and the us started negotiations on September 9 regarding extension of the Nippon Telegraph and Telephone Corp. (NTT) international procurement agreement, which had been scheduled to terminate at the end of the month. As of late September, when we went to press, it was expected that the arrangement would be finalized and updated by October 1.

The US side was pressing for a three-year extension of the procurement agreement, although new Minister of Posts and Telecommunications Shozaburo Jimi (appointed on Sept. 11 as part of Prime Minister Hashimoto's Cabinet reshuffle) cautioned that this "may be difficult... as it stands." He indicated that a two-year extension was more likely, considering the planned 1999 breakup of NTT into separate international, local network, and domestic (East and West Japan) long-distance companies. The US expectation was that the new agreement would cover all of the newly established NTT firms.

Negotiations on extending the NTT international procurement agreement were originally requested by the US side in August. [For more background on this, see "Telecom Becomes Latest Japan-US Trade Dispute" in our October issue, page 10.-Ed.] The Japanese side rejected that request, however, saying that the agreement (originally signed in 1980 and renewed five times since, most recently in 1994) had achieved its stated goal of increasing NTT procurement of foreign products and was no longer needed.

The real reason behind Japan's refusal to negotiate extension of the procurement pact was the continuing US Federal Communications Commission (FCC) delay in granting licenses to the subsidiaries of NTT and KDD to initiate service in the US. The delay by the FCC had been requested by the Office of the United States Trade Representative, the Department of Commerce, and the Department of State based on unspecified "trade concerns." On September 8, however, they abruptly withdrew their request to the FCC for the delay, in part because Japan had indicated that it would not agree to negotiate extension of the NTT procurement agreement unless the FCC granted the requested licenses. The FCC immediately announced that it would expedite the granting of the licenses, which was followed by Japanese agreement to enter formal negotiations on the bilateral procurement accord the next day. (In late September, KDD America announced that the FCC had approved its applications to offer services between the US and major regions of the world; FCC approval of NTT's application was expected after successful completion of the procurement agreement talks.)

At the beginning of the negotiation, MPT officials continued to insist that they did not see any good reason to extend the NTT procurement agreement. They pointed to the growth of foreign product procurement at NTT since 1992 (see chart) as evidence that the pact had served its purpose. However, they were also prepared for potential extension of the agreement, and made a proposal to the US side regarding improvement of the current conditions of foreign product procurement at NTT.

That the agreement would ultimately be extended seemed a foregone conclusion, since Jimi's predecessor, Minister Hisao Horinouchi, had admitted that it would be "very difficult to terminate the agreement because the Japanese government holds two-thirds of the NTT shares." "Assuming, just in case, that the agreement is to be extended, we had asked NTT to present us some points for improving the current procurement steps," an MPT spokesman told Computing Japan. "The proposed improvements are mainly for rationalization of the procurement steps, including publishing NTT's international procurement information on the World Wide Web."

So, Japan gets what it wanted (licenses for NTT and KDD US-based subsidiaries), and the US looks likely to get at least most of what it wants. That's the way international diplomacy works.

NEC adopts Wintel's "PC98" platform

Nec announced in late september that it will adopt the next-generation PC system design guidelines developed by Microsoft and Intel. Ironically, the new Wintel architecture has the same name as the brand name of NEC's proprietary series of PC98 computers. The two systems are incompatible, however.

NEC was scheduled to introduce 32 models in its new PC98-NX series in late October. The PC98-NX Series adopts the "PC98 System Design Guide" announced jointly by Microsoft and Intel in September. The PC98 System Design Guide is based on the "PC97 Hardware Design Guide" developed by Microsoft for a new PC hardware specification in August of last year.

"Considering the drastic changes in the PC market environment and the move towards the multimedia era, we decided to provide a new line of PCs which supports the Microsoft and Intel PC guideline," says NEC president, Hisashi Kaneko. In a video message prepared for the NEC press conference in Japan, Microsoft's Bill Gates described NEC's move as "an excellent strategy decision" and praised NEC's "fantastic commitment" to the new standard.

NEC's own proprietary PC98 product series has been sold in Japan for about 15 years. So far, more than 17 million units have been shipped, according to NEC. Long the dominant player in the Japanese home computer market, and insistent that its PC98 series was the superior solution for Japanese- language processing, NEC has seen its PC market share decline from nearly 80% in the mid-1980s to the 40% range in the past couple of years in the face of competition from IBM PC/AT-compatible DOS/V computers.

To improve the situation, NEC has decided to adopt the 32-bit, global standard architecture developed by Microsoft/Intel. In August, NEC had already announced a technology alliance with Microsoft for the development of next-generation servers for corporate use.

NEC says the company will continue to manufacture and sell its own proprietary PC98 series products to meet the needs of its installed user base in Japan. New models of NEC's proprietary PC98 series will not support Microsoft/Intel's PC 98 architecture, but it will support the forthcoming Windows 98, according to NEC. (There are rumors, however, that older PC98 models cannot fully accommodate all of the Windows 98 features.)

The new PC98-NX series, which supports Windows 95 and Windows NT 4.0, features 32-bit (PCI slot/CardBus) expansion slots, the Universal Bus Serial (UBS) interface, and an Accelerated Graphics Port (AGP) bus between the main memory and graphics accelerator. Other notable features include a Remote Power On function that enables a LAN network administrator to turn on/shut down client PCs, an Advanced Configuration Power Interface (ACPI) for all power management (including modem, floppy disk, and other internal peripheral devices), as well as Plug and Play installation.

The problem for NEC now will be that of names - differentiating its new Wintel PC98 models from its proprietary PC-9800 series (also shortened to PC98 since the introduction of PC-9821 models a few years ago). The similarity in names is likely to lead to confusion among consumers when purchasing software and peripherals. In an attempt to minimize the confusion, the new machines released in October carry the NX suffix (reportedly for "New eXellence").

Live Picture Opens Office in Japan

California-based venture company Live Picture established its Japanese subsidiary in September, placing John Sculley as chairman. The company's focus will be on electronic commerce and Web application businesses as well as a new industry market, PC photography.

"Twelve years ago, the desktop publishing business was launched based on the PostScript platform. But we are introducing another platform, FlashPix - a new image file format - jointly with supporters such as Eastman Kodak, Hewlett-Packard, and Microsoft," says Sculley. "The current Web is mainly text-based. However, with high-quality digital photo publishing and high-quality photo distribution, there are many applications available, such as electronic commerce, marketing/communications, and customer enjoyment. The implication will be extraordinary in the mega-industry of network photography."

FlashPix is an open-industry standard optimized for real-time viewing, sharing, and printing of photo-quality images across networks. Two Japanese companies, Fuji and Canon, have already announced their support for FlashPix. For the expansion of the new market, Sculley says that the company has been seeking cooperation from Japanese manufacturers of digital cameras, digital scanners, and inkjet printers. "Since the Japanese companies have know-how [in such fields], I believe they can give many incentives for us to build the market."

As a first step, the company has introduced the Japanese version of PhotoVista (a tool to create 360-degree panoramic images on the Web) and RealSpace Image Server (which enables Internet users to pan and zoom on high-resolution images). PhotoVista retails for ´16,800, while RealSpace Image Server sells for ¥98,000. Sales of the products are to be handled by Trans Cosmos, a Tokyo-based multimedia service provider that has invested in Live Picture in the US as well as in Japan.

PC Sales Grow Slow

Following a pronounced sales slump in the april-June quarter of 1997, growth of PC shipments in the Japanese market seem likely to be less than half of what was originally predicted. In the spring period, sales of desktop PCs fell 11% from the same period in 1996, the first year-on-year PC sales decline in five years. The bright spots were sales of portable PCs, which grew 42% year-on-year in the same period, and sales of corporate-use servers.

The Electronic Industries Association of Japan (EIAJ) in September projected that Japan's domestic PC production in 1997 will increase by only 16% in value and 9% in unit volume, instead of the 37% value and 30% unit sales increases it had previously predicted.

The EIAJ's revised figures for 1997 are 9.7 million units (not the 12 million units originally forecast), with a value of ¥2.2 trillion. This suggests that PC sales in the second-half of 1997 will continue to be sluggish, with sales value remaining flat and unit sales down about 5% year-on-year. Home computers are not moving as expected, suggest analysts, because manufacturers are emphasizing feature-filled, high-priced models. Several makers have announced significant price cuts to try and stimulate demand.

Year-end sales, however, are likely to be lackluster in the wake of Microsoft's announcement that the introduction of Windows 98 will be delayed by at least three months.

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