Boldly Embracing the IP Paradigm

interviewed by Wm. Auckerman

What was the impetus for establishing AT&T Jens, and why in 1984?

Darryl Green: Actually, they had talked about establishing the company from 1979. The impetus was a product called Net-1000, which was network-based computing before PCs were generally available. Net-1000 was the prototype of a service offering massive mainframes in a distributed computing network model; people would tap in through the telephone lines using dumb terminals.

One of AT&T's first real moves into the international market was to come to Japan and look for Japanese partners... to roll the service out over here. But at that time, Japan wasn't really opening its arms widely to foreign investors, so the way that AT&T set up the venture was to go through the government, through Keidanren, and work with the Industrial Bank of Japan.

It was a lengthy courtship process, and by the time things were all lined up and it was ready to go, the original purpose was almost finished - PCs had come on strong, and Net-1000 wasn't working out as anticipated in the US. In fact, there was a time when they were debating whether to shut down the planning company. But just at that time, the Ministry of Posts and Telecommunications [MTP] was liberalizing data communications [and] in 1984 took the first measures to establish Type II companies - Type II license holders, and Special Type II.

And so it was felt that, since we had pulled all these players together and had the nucleus of a good venture, why not move forward and set Jens up as a data provider?

Why a joint venture?

Green: The conventional wisdom was that if you were in Japan, to succeed in the marketplace you had to have Japanese partners to help get things done, just in terms of getting the personnel together [and] having layers of management. We just didn't have the local presence then to be able to pull something off without having venture partners. With that in mind, originally AT&T didn't even own a majority of the company, and it wasn't called AT&T Jens; it was called Nihon ENS (Enhanced Network Services).

Since that time, we've taken more and more control over the venture. Right now, everyone in the company is a proper employee of Jens; we don't have any seconded employees. We don't depend on our partners for that sort of stuff anymore, but those relationships are still important. Having the kind of shareholders that we do serves us well as we try to work in the Japanese marketplace. What is the relationship between AT&T Jens and AT&T Japan?

Green: AT&T Japan is more or less the foreign arm of the AT&T operations in the States, for forming the relationships with KDD and the other carriers, and making sure that technically our circuits are working properly together, and that we've exchanged the proper payments. It's not a separate business in and of itself; it's a funded group of people that support the US business.

As a joint venture, Jens is a totally separate unit with a separate board of directors, separate cost structure, separate salary arrangements.... Jens lives and dies on its own. If we don't make money, we're in trouble.

Why did you decide to switch your focus to Internet-based services?

Green: It was very much a strategic decision based on where we thought the communications world was going, and which types of services have a future and which don't.

Part of it was the fact that we were the first approved commercial ISP [Internet service provider] in Japan. There are a lot of arguments back and forth about who was the first ISP, but it's a matter of record who filed the first tariff with the MPT, and who first received the license and the approval to offer that service. It was without a doubt AT&T Jens.

When we first got started, customers - mainly Japanese companies - would come to us for help in solving their IP [Internet protocol] problems, [so] we learned a lot about it. When you start looking at where we were as a company when I took over, the majority of our revenues were in proprietary services. Facing the fact that we had these proprietary networks and proprietary services that just weren't going to keep up [with our open architecture competitors], we had to make the rather bold decision to say, -Maybe it's only 10% of our revenues right now, but we are going to make ourselves into an Internet-centric company." We had the kernel of knowledge and customer relationships that we were able to grow.

What is the main difference between doing business in Japan and in the US?

Green: I'd say the big thing is regulation; it's much more ambiguous here. It's sometimes hard to find out exactly what the regulation is - and that can be frustrating.

What is your opinion of the current telecom market deregulation?

Green: I think the MPT right now is acting a little bit schizophrenic. On one hand, they want to embrace deregulation; on the other hand, they don't want to disadvantage the incumbent carriers. The incumbent carriers are trying to twist the will of the Diet, and the will of the legislators, to have the form of deregulation but not the substance. I see one of my key roles as advancing the point of view that I believe is what's meant by the deregulation that's been mandated by the [international] accords Japan has agreed to.

And so, when the MPT minister announced in Bonn that Internet telephony was going to be liberalized in August, I believed that meant the market becomes open in August - not that you announce it there in a big way, and then come back and stonewall everyone here that's trying to get it started. [It was difficult to get] an answer, or any clear direction, as to what was required to obtain a license, or when the license would even be granted.

So, I have been very aggressive in being on [the MPT] doorstep... to try and keep them lined up with what the Japanese government has agreed to. I try to present a balance to the constant pressure from the Type I carriers and the incumbent carriers to take what's been decided and put a whole Ônother regulatory layer on top of it, to bend it so that it really doesn't accomplish what it's supposed to.

Will deregulation open significant new opportunities for foreign telecom firms?

Green: Absolutely. It already has.

I think the ministry is much more open now than they have been in the past, and things are moving a good deal quicker. I just complained that in August we weren't given clear direction, but still... they did deregulate in August in an acceptable way, which I think is progress.

I'm concerned that there might be some backsliding, but this is like a Pandora's box. Once it is opened, it's opened, and a lot of the mechanisms that were used to regulate the market just don't apply anymore. I have to laugh [because] at the ministry, they still have a -voice" section and a -data" section. But those labels just don't apply anymore. The quicker people realize that packets are going to be flowing around the world through networks seamlessly, and get past that dichotomy, the better off everyone will be.

Internet telephony certainly blurs the line between -voice" and -data." But for making cheap international calls from Japan, how does Internet telephony compare with callback?

Green: Internet telephony is cheaper than callback, and will [continue to] be cheaper than callback. That's the main thing right now. But for the future....

When we brought out AT&T @Phone, there was a big debate as to whether we should even brand it as Internet or not. The reason is, we did acceptance trials. It was really fascinating to me how people reacted. If you took people in and dialed through the ordinary telephone network, but told them it was an Internet call, they graded it down. And if you dialed through the Internet network, but told them it was an ordinary international phone call, they graded it up.

There's a big perception that Internet telephony is going to have quality issues.

You say you debated as to whether or not to brand your service as Internet telephony. What swayed the decision?

Green: When we were introducing @Phone, we thought, -Well, if we just don't tell people, and call it something else, then everyone will not be as picky about it." But then we thought, -That's OK for the next six months. But where do we think the technology is going to be in six months or a year?"

There's no doubt in my mind that [Internet telephony] will eventually have faster connection times, clearer quality... The day will come when Internet telephony will be selected because it is better than what is out there right now. I believe the day will come when Internet telephony is a hallmark of superior quality.

What do you foresee as the future of telephony?

Green: As I've learned more and more about the Internet, I've become more and more convinced that IP(Internet protocol) technology and TCP/IP, since it's on everyone's desktop, is going to be the glue that holds together communication going forward. I think it's a very powerful protocol.

The technology has come together in a way that no one would have predicted, in its ability to move these huge numbers of packets all the way around the world. It's a completely different paradigm from the telephony world: packet switching versus circuit switching.

But I believe there's a ton of stuff that we've already done in telephony that's going to come around again in this new packet switched world. And I think that AT&T is uniquely positioned, in terms of scale, to start putting together networks that will ensure throughput, standard of quality, and the type of things that I think will be first embraced by multinational corporations in putting together wide area networks, and ultimately will [find their way] to everyone's desktop, and every home.

Back to the table of contents