Interview with Bill Sheils President and CEO of MCI WorldCom Japan Ltd.
- Interviewed by Terrie Lloyd -
MCI WorldCom has been in the news a lot recently as a foreign carrier taking advantage of Japanese market liberalization. What do you think about your reputation of being a "pushy" new upstart? William Sheils: I don't think the market views us as pushy, but since we have achieved some of our goals quickly, I think people have been surprised. To move fast, I don't think we've had to be pushy. All we've done is ask questions - we have bravely asked for things that were considered improbable in the past. As a result, we received some positive responses which allowed us to move ahead. I think timing has been important. People welcome change here, and I think we have the advantage of being a global company and coming in fresh so we are not afraid of doing things differently.
Do you think other foreign carriers have more to lose than you do here in Japan? Sheils: I don't think they have more to lose. They just think in a traditional manner. If you look at other foreign telecommunications companies operating in Japan, their core business is based in their home market. For them, what's going on outside their home market is secondary. On the other hand, MCI WorldCom stockholders want us to establish global networks, so we have a completely different focus. Our strategy and business focus is clear and simple: to build a global network, and do it in the best possible way. The best way means what's good for the local market, stockholders, the company as a whole, and more importantly, customers. Customers have been waiting for a truly global telecom service provider for years. A lot of myths have come up about your construction activities. What kind of infrastructure are you putting in, and where is it going? I heard that you're using sewers. Sheils: We use whatever is the best solution - structurally and geographically. We look for the most effective and least disruptive way to build networks that will serve our customers. Although it sounds unglamorous, sewer networks are simply tunnels under the city that have the potential to provide functional ducts for fiber. Any duct that is structurally sound and in the right place could be a sensible option. In many cases in Japan, digging the roads was the best option for reaching our customers, so we did it. We are also looking into sharing or leasing agreements in certain passages as well. If it works out, sharing the costs associated with building networks and laying cable in Tokyo and Osaka could be economical and mutually beneficial for all involved. Before now in Japan, everybody assumed that the telecommunication business belonged solely to NTT, so there were no opportunities to have these types of discussions [on sharing facilities]. What we've now created is an opportunity to have these debates. People are now talking to each other in terms of mutual support and cooperation. The reason why we can do this is because we've done it elsewhere in the world, so we're importing our practices from other countries - particularly with respect to customer satisfaction - into Japan. Everybody is looking for ways to cut costs, so here there is an opportunity to pass savings on to our customers. Digging up the ground is expensive, so I assume you're laying high-capacity lines for high-bandwidth users. Which companies are you starting with, and what kind of services do you offer? Sheils: If you look at the areas we're targeting, you'll find that it's the central business districts of Tokyo, including Chuo, Chiyoda, Minato, Shinjuku, and Shinagawa wards. We've completely finished digging up the streets in Chuo ward. Our customers are those who need international services. They're likely to already be customers of MCI WorldCom somewhere else in the world, probably using our services in Europe or the US, so this is a natural extension of the global network for them. Do you have plans to link up with any of the PHS companies? I understand there is a lot of unused bandwidth on PHS networks right now. Sheils: We're not really in the mobile business at all at this point. At the moment, our focus is to build the infrastructure and get into the market with standard products and services appropriate for Japan. How do you view the Japanese telecom situation? Sheils: One of the problems that Japan suffers from is the high cost of connections to the US. A few Japanese companies wrote to the FCC recently asking for US subsidization because the amount of Internet traffic from the US to Japan is three times the amount of traffic going to the US from here. The market has traditionally been this way. However, with initiatives like the Japan-US Cable scheduled to vastly increase bandwidth next year, the whole cost model will change, and therefore the entire market will change. Do you own your cable coming into Japan? Sheils: We own capacity on cables, but the Japan-US Cable was our initiative, and MCI WorldCom is the single largest owner of capacity on that cable. What kind of services do you offer now? Sheils: We offer international voice service using the 0071 access code, and in the Tokyo metropolitan area, we provide local voice service using the 03-5539 prefix. We install 155Mbps lines in customer buildings as a standard, which are easy to access. For example, the building that houses this office (MCI WorldCom Japan offices - ed.) is already equipped downstairs with a 155Mbps connection - each building that we connect will get the same capacity as standard procedure. Things like television applications, high-speed data, corporations having two offices in Tokyo that want to connect their LANs together, can be implemented easily. Traditionally, these have been cost-prohibitive because they take too much bandwidth, but now with fiber optic cables, two buildings can be physically interconnected. This is quite a change in network structure, and has been one of our most successful products in Europe. Why is nobody brave enough to say, "Okay, we're going to do a ¥3,000 per month, flat-rate service"? They could get all the Internet users straight away. Sheils: The problem is the fact that you're still paying NTT for most calls. With interconnect access costs structured the way they are, it's very difficult to offer flat-rate service. You're very much driven by the interconnect costs. As in Europe, you're going to have to wait for the interconnecting cost structure to change. That's yet to really develop here. Let's talk about some of the head-butting that you must have engaged in over the past couple years to get this far. Have you been faced with aggressive meetings with government ministries or anything like that? Sheils: It hasn't been the red carpet, but we haven't met any head-butting either. Japan has been ready for change, I think. From my perspective, having left here in early '96, I was refreshingly surprised to see how it was more open this time. There hasn't been any head-butting, but there have been issues and challenges which, actually, are the same issues and challenges we faced in every other country in the world. The only real surprise has been cost, which is much greater here in Japan. How about all the approvals you've had to get? Sheils: It just takes time. When applying to the regulatory agencies, you have to be precise on everything, and your planning has to be absolutely thorough - 100% perfect - and submitted on time. We have received comments back from the different companies and organizations that we deal with about how professionally experienced MCI WorldCom is. That's because of all the experience we've had elsewhere. When we connected with NTT, they commented that it was the fastest, most successful interconnection they've ever done, with the fewest problems. Have you seen anything that has really stood out over the last few months, anything that you think is a killer application in waiting? Sheils: What we are looking at is the financial sector, specifically financial information, which will be very important. Global financial institutions need a huge amount of financial information in real time. If we make the bandwidth available here in Japan at the right price, the financial information industry will expand. Customers of financial information services are all complaining about the cost - it's high. I imagine that once the pricing structure is changed, this will blossom and grow. There's one other thing: call centers. This is something that recently caught my attention. There are 60,000 call centers in the US, and 1,500 here in Japan. The market is crying out for call centers. You've got the financial big bang and the insurance big bang, which are generating a need for call centers. One of the things that has been developing very well in the US is the tie-up between call centers and the Internet using something called "Click & Connect." When you are viewing a company's Web page and you have a question, you connect to the company's customer service call center by clicking on a link in the Web page. When you switch to a different page, the Web page being viewed by the operator changes also, or the operator can change it for you and lead you through that particular area and then they drop off the call and you carry on. In the States, most of the call centers are concentrated in certain locations, like Colorado. Have you got your eyes on any particular place in Japan that you think will serve the same purpose? Sheils: I haven't. It's a separate division; but I'm working with them to examine the Japanese market. The beauty of call centers is that they do not have to be located in any specific location. With a high-speed, high quality network, call centers serving the main business districts could be in any region of Japan - from Hokkaido to Kyushu. One of the interesting things which I found from customers like car rental agencies and companies in the travel industry - customers that use call centers for reservations - is that they actually locate their call centers offshore. Australia seems to be a hot favorite for some of them. The reason is that costs are a lot lower in Australia. In addition, it's in the same time zone and Japanese is a second language. This is just one option, though. Does that mean you intend on establishing bandwidth between Japan and Australia? Sheils: Yes, MCI WorldCom is planning on establishing a high-bandwidth connection with Australia - but it is for more than just call center possibilities, it is more strategic than that. As a global telecom company, we focus on making connections - and providing all of our services where they are most needed. We are already laying fiber in Sydney and the Southern Cross Cable Network is coming into service this year, connecting the US, Australia, and New Zealand. The Japan-US Cable will come online next year. The discussions now are about connecting Japan to Australia to complete the triangle. That will take two or three years. For call center applications, were you also involved in development of software as well? Sheils: No. Lots of people are involved in the call center business, such as system integrators and hardware and software vendors. The Japanese press has already reported on the Nihon Unisys and MCI WorldCom call center. There are, however, various initiatives going on and huge opportunities exist. One of the other things we're exploring is the teleconferencing business. MCI WorldCom has extensive expertise in teleconferencing, which we offer in Japan. We guarantee teleconference availability within ten minutes. We have full-time dedicated staff in some very famous companies in the Otemachi area in Tokyo [financial district - ed.]. The customers pay for our staff to be onsite full time because they have so much business. In this sense, we are not just a telecommunications carrier but also a service company. That extends to videoconferencing as well? Sheils: To a certain degree, yes. We don't have our own videoconferencing equipment because most of these corporations have their own. Instead, they need somebody who knows how to keep the system in operation. Their IT department typically doesn't, so we have dedicated staff onsite. We are building a team here in Japan now because Japan is probably going to be the largest conferencing market outside of the US. How many people in your company now? Sheils: MCI WorldCom has about 100 people now, and at the end of this year maybe 250. We are growing to fit demand and this will not change. That's pretty big growth. And in two years from now? Sheils: Could be thousands; could be hundreds. A lot depends on how the market grows, how the business grows, and how things move. As a global company, we have human and technological resources that we can reach out to at any time. That lets us arrange our staffing wisely to meet the demands of each market while maintaining a high level of expertise.
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