Telecommunications

July 2005

DOMESTIC SHARE SURVEY: Cellular Phones
The 2004 domestic market for cellular phones showed no year-on-year change in the order of the top two companies -- NEC Corp. and Panasonic Mobile Communications Co. -- though both firms lost share points due to competition from rivals. Third-ranked Sharp Corp. maintained its upward momentum from last year, while fourth-place Sanyo Electric Co. achieved share growth on the popularity of its models for the "au" mobile phone service of KDDI Corp.. Domestic shipments of handsets dropped 10.5% in 2004 to 43.57 million units, the first decline in two years. The fall reflects the near saturation of the domestic market and a surge in demand for camera-equipped terminals. The drop in demand hit the top two companies the hardest. NEC lost 4.5 percentage points of market share due mainly to a delay in shipping handsets for the third-generation service of NTT DoCoMo Inc.. Its products also apparently failed to attract new customers owing to the lack of novelty in their design. Panasonic enticed young people with models whose exteriors can be decorated with various colors and patterns. In the October-December period, the company grabbed the top slot from NEC for the first time in four years. Sharp successfully differentiated its products from those of the firm's competitors by offering high-performance camera units and high-quality LCD screens. By raising its market share 3.0 points, it sharply narrowed the gap with the top two companies. (The Nikkei Business Daily, July 27, 2005)

KDDI To Absorb 3 Tu-Ka Subsidiaries By Year-End
KDDI Corp., a major telecom carrier, will absorb its three wholly owned mobile phone subsidiaries by the end of the year, company sources said. KDDI offers the au mobile phone service on its own, while the three subsidiaries -- Tu-Ka Cellular Tokyo Inc., Tu-Ka Cellular Tokai Inc. and Tu-Ka Phone Kansai Inc. -- operate under the Tu-Ka brand. KDDI has decided to integrate the group's mobile phone services into the au brand to strengthen the business in expectation of stiffer competition. In December, Softbank Corp., which aims to enter the mobile phone market, approached KDDI for a possible purchase of the three Tu-Ka firms. KDDI eventually refused Softbank's offer as the two sides failed to agree on the price of the three firms and some other terms. KDDI also feared the loss of customers and the leakage of technology and know-how. The three Tu-Ka firms had about 3.56 million subscribers at the end of June, while the KDDI's au service had about 20.12 million. The Tu-Ka firms see the number of subscribers falling due mainly because they do not offer third-generation mobile phone service, although their handsets for the elderly are gaining popularity. (The Nihon Keizai Shimbun, July 25, 2005)

Government, Industry To Replace Domestic Telecom Networks With IP Tech By '07
The government will urge private telecom carriers to upgrade domestic telecom networks to a next-generation telecommunications network (NGN) designed to use Internet Protocol technology by 2007, The Nihon Keizai Shimbun learned Monday. The International Telecommunication Union is expected to decide on the global specifications for an NGN by around 2008. The ministry aims to develop and propose the standard to the ITU by establishing a forum with telecommunications carriers, such as Nippon Telegraph and Telephone Corp. and KDDI Corp., as well as manufacturers of communications equipment, including NEC Corp., Fujitsu Ltd. and Hitachi Ltd.. Academic experts will also participate. The Ministry of Communications hopes Japan will take the initiative in formulating the standards by making a proposal early and thus help the domestic industry tap the potentially huge global market. The adoption of an NGN is expected to substantially lower communications costs because it will require only half the plant and equipment investment and maintenance expense required for current phone systems. The network will use low-cost routers instead of the expensive switchers used in existing fixed-line telephone networks. Replacing the current domestic phone networks will require investment of 3-6 trillion yen in plant and equipment over a five-year period. With KDDI proposing replacement by 2007 and NTT by 2010, the ministry intends to speed up the schedule. Japanese manufacturers have dominated the domestic market for telecommunications equipment through joint development with NTT. However, given that U.S. companies control 90% of the global market for routers, there is concern among Japanese companies that the switchover will erode their market share. (The Nihon Keizai Shimbun, July 19, 2005)

KDDI Lab Develops Mobile Phone Voice ID System
KDDI R&D Laboratories Inc. has developed a prototype system to verify by voice the identity of a mobile phone user. Voice is converted into data and sent to a server. There it is checked against pre-registered voice data. The system will make it possible to carry out user authorization for Internet banking via a mobile phone without the need for password input or other procedures. The company will aim to make practical application of the system in two years. A user will register his or her voice on the server of a financial or other firm by reading numbers out loud. To bank via the Internet, for example, a customer will access the site of a financial institution via a mobile phone and input an ID number. An instruction will then appear on the screen to read out loud four numbers. The voice is transmitted to the server and verification is carried out in about 10 seconds. The procedure is easier than pushing keys to enter a password, and the risk of unauthorized use resulting from the leak of a password to a third party is minimized. At present, the system has an error rate of about 1%. KDDI R&D Laboratories will work on reducing this rate so that it can provide the system for practical use. (The Nikkei Business Daily, July 19, 2005)

Cell phones switch between PHS, LAN
Fujitsu Ltd. has developed a telecommunications system that allows cellular phones to use personal handyphone system circuits when making calls outside the office but a wireless LAN in-house. The handset automatically chooses which network to use in accordance with the type of call, enabling firms to reduce cell phone costs. The system also allows a single phone to make calls to many receivers simultaneously, enabling efficient communications among staff based in different locations. It also allows a terminal to send e-mail and instant messages. The firm expects the system to be particularly useful for communications among employees who travel outside the office, such as salespeople and staff who perform repair or maintenance work. (Nihon Keizai Shimbun, July 18, 2005)

Optrex LCD Panel Improves Mobile Phone Video Display
Flat-panel maker Optrex Corp.,an affiliate of Asahi Glass Co., has developed a LCD panel that improves the display of video on a mobile phone. The company incorporated in a mobile-phone panel functions to increase response speed through voltage adjustment. The so-called overdrive technology thereby improved video display capabilities. The company developed a 2.2-inch amorphous silicon TFT (thin-film transistor) panel that has a resolution of 240 x 320 pixels and can display about 260,000 colors. The overdrive technology is often used in LCD televisions to increase panel response time and improve picture clarity. Optrex was able to adapt the technology for use in mobile phones by incorporating overdrive functions in a display-use chip and miniaturizing circuitry. Optrex aims to be producing 200,000-300,000 of the panels a month by September. (The Nikkei Business Daily, July 15, 2005)

Japan's Broadband Users Numbered 19.51mn At March End
The number of broadband Internet service subscribers stood at 19.51 million as of March 31, up by 850,000 from Dec. 31, according to a quarterly survey released Friday by the Ministry of Communications. FTTH (fiber-to-the-home) broadband Internet services achieved the sharpest growth, increasing subscribership by 17% from Dec. 31 to 2.85 million. Broadband services offered by cable television companies followed with a 3% rise to 2.95 million subscribers. ADSL users, meanwhile, grew by 2.6% to 13.67 million. Nationwide, 39% of households had access to broadband Net services. By prefecture, Tokyo had the highest proportion of households with broadband network access at 52%. Kanagawa came in second at 50%. Kagoshima had the lowest figure at 18%, while Kochi fared a little better at 21%. (The Nihon Keizai Shimbun, July 8, 2005)

Cell Phone Firms, Newcomers At Odds Over Band Allocation
Softbank Corp. and eAccess Ltd. urged the Ministry of Communications to give larger frequency bandwidths to cellular phone newcomers, while existing mobile service providers called for just the opposite in their opinion papers submitted to the ministry on Monday. Softbank argued that the ministry should expand the frequency spectrum allotted to new entrants to at least 10MHz instead of the currently planned 5MHz. eAccess wants the ministry to lower its conditions for assigning additional frequencies to a newcomer from 500,000 users per 1MHz band to 300,000. Among existing cell phone service providers, Vodafone KK insisted that the ministry change its plans of allowing two newcomers and instead only accept one. NTT DoCoMo Inc. and KDDI Corp. called for the ministry to make the assessment criteria for new entrants tougher. The Communications Ministry is expected to finalize the frequency allocation policy after a meeting of the Radio Regulatory Council in late July. It then intends as early as late August to begin soliciting applications from businesses interested in receiving frequency allocations, with the goal of completing the process within the year. According to the plan announced on June 3, the ministry aims to assign frequencies in the 1.7GHz and 2GHz bands, with a priority given to newcomers. (The Nihon Keizai Shimbun, July 5, 2005)