JIN-139 -- Broadband Isn't Everything

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news
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Issue No. 139
Wednesday, July 11, 2001
Tokyo

CONTENTS
+++ Viewpoint: Broadband Isn't Everything
+++ Noteworthy news
- Government releases new stats on Japan Net usage, PC purchasing
- eBank joins Sony and Ito-Yokado as newly licensed bank
- Korea Telecom enters Japan DSL market via tie-up with eAccess
- NEC enters the PDA wars
+++ Worth a read
- How to buy cutting-edge notebooks from Japan
- What recession?

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+++ VIEWPOINT

Broadband Isn't Everything

The topic of broadband has been hot for some time now, both here in
Japan and overseas. The real Internet revolution hasn't really
happened yet, we're told, because most people can't download movies
in milliseconds. Here in Japan, NTT is rightly seen as the biggest
barrier to broadband, offering it only when an upstart threatens its
dominance (which fortunately is happening more often, most recently
and perhaps most significantly with the entrance of Softbank into
the DSL market).

But broadband is only one missing ingredient to Net nirvana. Equally
important (if not more) is micropayments. If a true micropayment
solution were widely adopted -- one as easy to use as that enjoyed
by i-mode and its official content providers, where small charges
for content automatically show up on the user's phone bill -- we'd
see a revolution even without broadband. After all, a viable
micropayments solution has been a huge factor behind i-mode's
success, despite its rather narrowband 9.6-Kbps access speed. And
even if you could download a movie in milliseconds onto your PC, if
there's not a convenient way to pay for it, big problems remain.
You'll either not download it because it's inconvenient to pay for,
download it illegally for free, or not download it because the movie
companies won't let you unless there's a viable payment solution in
place.

Everything on i-mode is designed so that nothing is more than three
clicks away. This is done by necessity. The very limitations of the
small-screen handheld force designers into offering immediately
useful services. In less than one minute you can find a news site,
agree to have a very reasonable 300 yen per month fee added to your
monthly cellphone bill, and be reading the news. Imagine if you could
do something similar on a fixed-line broadband connection capable of
transmitting movies in a millisecond. In three clicks you could find
the movie you want, agree to have a small fee added to your monthly
phone bill, and be watching it almost instantly. Such a system would
make Hollywood happy because it would be paid for the use of its
property, the phone company happy because it'd get a cut similar to
DoCoMo's (9 percent), and customers happy because they could pay in a
manner both safe and, most importantly, easy.

Of course, it doesn't have to be the phone company enabling this. In
my residence in Setagaya-ku in Tokyo, I can have 100-Mbps Net access
for a very reasonable 5,000 yen per month from a company called
Usen, which has its own fiber network linked to my home. Usen too
could act as the micropayment enabler, automatically adding the
small content charges to my bill at the end of each month.

In the future, true broadband will reach the wireless Web, and
downloading and paying for movies -- perhaps to an i-mode laptop --
as described above will be a reality. For now, though, only
fixed-line connections can offer the necessary speeds and stability.
If the micropayment solution of i-mode could be combined with the
speeds of fiber to the home, Net nirvana would be here at last.

-- Steve Mollman (steve@japaninc.com)

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+++ NOTEWORTHY NEWS
(Long URLs may break across two lines.)

** Government releases new stats on Japan Net usage, PC purchasing

EXTRACT: The number of Net users in Japan surged last year, thanks
to the continuing proliferation of mobile phones connected to the
Web. Government data released on Tuesday showed that 47 million
Japanese, or 37 percent of the population, were connected to the
Internet at the end of 2000. Much of the 74 percent growth from the
previous year came from users linking to the Internet on Japan's
advanced cell phones. While some say this means Japan still lags
behind the rest of the industrialized world in information
technology services -- cellphone Web access is mostly limited to
e-mail and brief snippets of news and information -- domestic
wireless carriers say it puts Japan at the forefront of technology.

COMMENTARY: One thing government ministries in Japan are good
at is compiling neatly organized and fairly reliable stats. Japan's
47.08 million Net users is the second-largest group after the US's
154.84 million, though in terms of penetration ratio Japan is ranked
14th, while Sweden is tops. Look for Japan to move up rapidly in
that ranking this year, especially given the explosive growth of DSL
so far. The article cites a few other interesting tidbits from the
government study, such as "PCs shipped domestically outpaced those
of color TVs for the first time in 2000" and "Japan's overall
Internet business market was worth $381.5 billion, including
telecommunications charges."

SOURCE: "Japan continues to embrace Net in a wireless way," Reuters
via CNN.com, July 10, http://www.cnn.com/2001/TECH/internet/
07/10/japan.internet.reut/index.html

** eBank joins Sony and Ito-Yokado as newly licensed bank

EXTRACT: Japan's top financial regulator, the Financial Services
Agency (FSA), on Friday granted a license to eBank Corp to start
online banking, the third such venture in Japan as newcomers take on
the country's banking dinosaurs. The approval comes after Sony and
retailer Ito-Yokado recently entered Japan's long-coddled and cozy
banking sector in a bid to lure Japan's cash-rich individuals with
more customer friendly services. eBank Corp, owned 5.68% by Japan
Telecom Co Ltd, 4.51% by Itochu Group, 2.98% by Mitsui Marine & Fire
Insurance, will start operations in late July.

COMMENTARY: More evidence of the deregulation under way in Japan's
troubled banking sector. Combine this with Japan's
tech-friendly population and we should see some interesting
innovations coming out of this country. Banking via digital TV,
i-mode, L-mode ... what's next? More important, what will work?

SOURCE: "eBank gets online banking license," Reuters via japantoday,
July 7, http://www.japantoday.com/e/?content=news&cat
=4&id=41561&page=2

** Korea Telecom enters Japan DSL market via tie-up with telco
startup eAccess

EXTRACT: The Japanese unit of Korea Telecom, South Korea's largest
fixed-line telephone company, said Thursday it will join hands with
Internet service company eAccess Ltd. to begin high-speed Internet
services in Japan. The two will jointly provide DSL services to
building owners and corporate customers, utilizing Korea Telecom's
extensive experience and know-how based on its DSL service in South
Korea.

COMMENTARY: Sure, broadband upstarts are getting slaughtered by NTT,
but neither of these two companies is to be taken lightly. eAccess is
run by a top-flight telecom team, and Korea Telecom has proven its
ability in the DSL arena. Note that the duo is targeting not the
residents of buildings, but the owners -- a lesson learned from South
Korea. This feels less like a trivial business tie-up and more like
Korea Telecom's full-scale launch into Japan's lucrative Net access
market.

SOURCE:
"Korea Telecom, eAccess To Offer DSL Svce In Japan," July 5, Dow
Jones via Yahoo, http://sg.biz.yahoo.com/010705/15/18u5g.html

** NEC enters the PDA wars

EXTRACT: NEC, Japan's biggest PC maker, said on Monday it will launch
its first PDA by the end of this year in Japan's increasingly crowded
market for handheld devices. The new PDA will use Windows CE
instead of Palm, and Intel's StrongArm processor (like the Compaq
iPAQ PDA). It will include slots for a Compact Flash Type II card,
which can be used for wireless communications as well as memory, and
an SD Memory Card slot. A number of Japanese and foreign companies
are jumping into Japan's PDA market, with Toshiba Corp among those
expecting to offer new products this year. A company rep says that
PDAs in Japan face particularly tough competition from Net-enabled
cellphones and that the company will focus on the business market.

COMMENTARY: So we've got Sharp using Linux, Sony using Palm, and NEC
using Windows CE. Considering cellphones are increasingly stealing
the consumer PDA market in this country -- "Expect cellphones with
more PDA functions in the consumer market and PDAs with more
cellphone sections in the business space," one source told us
recently -- it makes sense to go after the business sector, and if
you're going to do that it makes sense to use Windows CE so that
users can easily take their work with them. If Sharp is targeting
consumers more, it makes sense to use a free OS to keep costs down.

SOURCE: "NEC to launch 1st PDA in Japan this year," Reuters via
Yahoo, July 9, http://biz.yahoo.com/rf/010709/t48295.html

+++ EVENTS (ADVERTISEMENT)

** Net Communication 2001 In Korea & Japan-Korea and Japan
Cultural/IT Industrial Business Fair- Tokyo International Forum,
Exhibition Hall 2, Tokyo, Japan (July 25, 2001-July 26, 2001)

This event will be a good opportunity to encounter very promising
Korean and Japanese cultural/IT companies in the increasingly noteworthy
broadband business, the theme being 舛ooperation between Korean and
Japanese Cultural/IT Companies In the Broadband Era・ Sponsored by
Korean Government (Ministry of Foreign Affair and Trade/Ministry of
Culture and Tourism), about 40 Korean companies and 10 Japanese
companies are to be presented. During this exhibition, there will be
seminars by speakers who have been taking active parts in this
sphere. Please visit the official site for more details and
registration in advance. For more information visit
http://www.bi-net.co.jp/netcom2001/, or contact
netcomevent@bi-net.co.jp

** iLocus Show, the Biggest IP Telephony Trade Show to be held in
Hong Kong

Scheduled to be held on 31 July - 3 Aug 2001, iLocus Show (Asia 2001)
will be the biggest IP Telephony Trade Show in Asia, snd
will build further on the success of the previous year's event. The event
will be a combination exhibition and conference and will be devoted
entirely to the IP telephony industry, offering the best opportunity
to network with the right people in the industry in Asia. There will
be about 30 exhibitors and over 100 speakers at the event. Further
information please visit www.ilocus.com/asia2001.htm, email to
asia2001@ilocus.com or call + 852 2413 0918.

+++ WORTH A READ
(Long URLs may break across two lines.)

** How to buy cutting-edge notebooks from Japan

EXCERPT: "We always want what we can't have. We were recently
reminded of that at the PC Expo trade show in New York where many of
the coolest notebooks--most of which were prominently displayed in
Transmeta's oversized booth--were models only available in Japan.
That's why we were intrigued when we heard about a company called
Dynamism.com. Though the name sounds a little like L. Ron Hubbard's
belated attempt to cash in on the Internet craze, Dynamism actually
specializes in selling notebooks only available in Japan to US
customers, albeit at a slightly higher premium."

SOURCE: "How to get tomorrow's notebooks today (hint: Import
them!)," Ziff Davis Anchor Desk, July 9, http://dailynews.yahoo.
com/h/zd/20010709/tc/how_to_get_tomorrow_s_notebooks_today_hint_impor
t_them__1.html

** What recession?

EXCERPT: "This is the mystery of Japan in 2001. On paper, the country
is in a devastating economic downturn, bringing unprecedented
bankruptcies, unemployment, homelessness and deflation. But, to
anyone who lived through European recessions, it looks like the
opposite of a country fallen on hard times, one of the richest, most
expensive and most shopping-hungry nations in the world."

SOURCE: "Recession? Not for the shopaholic Japanese," The
Independent, July 7, http://news.independent.co.uk/world/pacific_rim/
story.jsp?story=82204

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STAFF
Written by Steve Mollman (steve@japaninc.net)
Assistance with news compilation:
Richard Ochero (richard@japaninc.com)

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