Telecommunications

August 2003

New realignment moves are becoming clear in the telecommunications industry. Internet Initiative Japan Inc. (IIJ) will go under the wing of Nippon Telegraph and Telephone Corp. (NTT), while Ripplewood Holdings LLC of the U.S. had signed a deal with Vodafone Group Plc of the U.K. to buy Japan Telecom Co., the third-largest fixed-line provider in Japan. Intensifying competition in the data telecom market and rate deflation are sparking greater collaboration in the sector. Crosswave Communications Inc. (CWC) filed for court protection from creditors under the Corporate Rehabilitation Law. It is ascribed the failure of the data communications company partly to keen price-cutting competition. With the fixed-line telephone market dwindling rapidly, carriers regard data services, including broadband, as a promising market following cellular phones. The number of private individuals using broadband telecom services such as asymmetric digital subscriber line (ADSL) has expanded nine-fold in two years. Meanwhile, corporations are becoming increasingly dependent on data services, including exchanging data and video online. However, the rapid pace of price declines in the data sector is not slowing. While the average bandwidth available to customers of a major provider has expanded some 40-fold in the past five years, annual revenue per megabit per second of bandwidth has plunged to Y40,000-50,000 from more than Y1 million. With rapid advances in technology, the amount of data that can be transmitted per line has increased, but demand has not grown at the same pace. According to Nippon Telegraph and Telephone East Corp. it is better to increase market share by selling access at lower prices than leaving idle capacity. With telecom providers working harder to produce less profit, they are entering a new era of collaboration to survive. The sector has experienced two major waves of restructuring so far. The first was the realignment of NTT in 1999, which created two regional telephone service firms and NTT Communications Corp. The second took place among new carriers from 2000 to 2001, including the trilateral merger of then KDD Corp., DDI Corp. and IDO Corp., and the takeover of Japan Telecom by Vodafone. The restructuring of NTT was aimed at helping enhance competitiveness through the entry of new providers, while the realignment of new carriers was largely due to the integration of formerly separate service sectors such as long-distance and international telecom services, as well as deregulation allowing foreign firms to enter the Japanese market. Both trends were greatly affected by government guidance aimed at promoting competition in the industry. Carriers are at a loss as to how to cope with severe price-cutting. With no sign of firming prices in sight, the third wave of realignment in the telecom industry will likely continue for some time. (August 29, the Nihon Keizai Shimbun)

The Ministry of Economy, Trade and Industry (METI) drew up guidelines to combat security lapses in wireless LAN (local area network) communications. Formulated with the Japan Electronics and Information Technology Industries Association (JEITA), the security guidelines require personal computer manufacturers to warn buyers about such potential risks as information leaks and unauthorized access in using PCs for wireless LANs. The manufacturers are forced to warn buyers of such risks in writing. The wireless LAN, which enables users to exchange data among their computers wirelessly, is spreading quickly in households and companies, as it facilitates Internet access and reduces the cost of installing cables. But some people have pointed to security risks associated with it.　(August 6, the Nihon Keizai Shimbun)