Last in a series

Staff writer

What do Sony Corp., Tokyu Corp., Kyushu Electric Power Co., the Tokyo Metropolitan Government's Sewage Bureau and Toyota Motor Corp. have in common?

They are all entering the telecommunications industry by setting up their own infrastructures, hoping to capture a share of the huge, lucrative data transmission market that is emerging following recent deregulation.

Armed with state-of-the-art technology and equipment, a number of new players are challenging the Nippon Telegraph and Telephone group and other existing telecom companies in the vast data market.

Global telecom companies such as MCI WorldCom and Cable & Wireless PLC are also targeting the Japanese market, aiming to sell transnational data services to multinational corporations here.

Voice transmission is expected to cease as the main business of the telecom industry. Industry experts predict data transmission traffic will exceed that of voice transmission in terms of profit by around 2005 at the latest.

Takahiro Ozawa, an executive researcher at InfoCom Research Inc., an NTT-affiliated research center, said deregulation is the main force that has helped newcomers enter the emerging data transmission market.

"Now almost all regulations on rates are gone, saving us time-consuming negotiations with mandarins of the Posts and Telecommunications Ministry," he said. "Decline of NTT's position (in the data transmission industry) is inevitable."

Railway, subway, electric power companies and local governments that own sewage routes were the first to lay fiber-optic lines, largely because they already own the land -- usually the hardest nut to crack in starting widespread network services.

Sony Corp. and other telecom companies recently acquired government authorization to start wireless data transmission business, which will enable them to transmit data at far lower costs than through optical fibers fixed in the ground.

"Equipment (for data transmission) is becoming outdated day by day," Ozawa said. "New technologies meanwhile are lowering costs."

The NTT group still monopolizes local cable networks and will continue to hold most access lines to homes, Ozawa said.

But competition for large corporate users will be intensifying, and the advanced equipment used by latecomers will give them an advantage over the NTT group, he added.

Cross Wave Communications Inc., jointly set up last year by Sony, Toyota Motor, and Internet Initiative Japan Inc., leases fiber-optic networks from KDD Corp. The firm shocked the industry in April when it offered data transmission services for half the cost of similar services from NTT.

CWC's lines can transmit up to 600 megabits per second, the fastest speed available in Japan.

CWC spokesman Junko Higasa attributes the firm's success to the adoption of the latest equipment for fiber-optic networks, designed to optimize data transmission speed.

Another strong new competitor is PowerNets Japan, an association of local telecom companies jointly established by 10 local electric utilities in February.

PNJ claims 160,000 km of local fiber-optic networks in Japan, longer than those owned by the NTT group.

Most major European and American telecom companies have visited PNJ to see if they can use the association's local networks to launch their data transmission business in Japan, PNJ officials said.

PNJ Secretary General Junichi Tsujimura said PNJ may form business tieups with some foreign companies after examining the results of an experiment in next-generation networks linking Tokyo and Osaka via Nagoya at the end of the year.

"It does not necessarily mean we will form a business tieup with a telecom carrier," Tsujimura said.

The partners may be foreign telecom device manufacturers, not carriers, because many device manufacturers hold key technologies for future networks, he said.

PNJ now wants technologies and experience in building next-generation network systems, rather than the international connections that foreign telecom carriers have, Tsujimura added.

Sony meanwhile is trying a different tack from other new players in the telecom industry. Japan's top electronics maker will use electronic waves instead of optical fibers or metal cables to send users data.

Investments necessary for the Wireless Local Loop system are "one digit lower" than ground-based conventional systems, according to Sunobu Horigome, Sony's corporate executive vice president in charge of digital network solutions.

Sony will invest 10 billion yen for facilities to start wireless data transmission service in the Kanto, Tokai and Kinki regions around next July, and will offer nationwide services by the end of March 2001, the company announced June 18.

Horigome said Sony's data service will seek "synergistic effects" with Sony's electronic products.

Sony has recently released a number of network electronics products, including personal computers and digital camcorders, that can be connected via a memory stick or network lines to exchange data with each other or with outside networks.

Ozawa of InfoCom Research predicted that many other companies will launch data services based on the WLL system because it requires no land procurement, thus saving money and time.

But he is worried about the future of the Japanese information industry, given that the cost of setting up networks is very high in comparison to the U.S.

Cheaper land prices in the U.S. allow companies to set up fiber-optic networks for much less, giving American information network industries an edge, Ozawa said.

"I don't think Japan will narrow the current gap between Japan and the U.S. (in telecom infrastructure). You can't change the high cost structure of the country," he said, adding that he hopes the development of the WLL system in Japan will pressure NTT and other telecom companies to lower charges for users.