Telecommunications

September 2001

Japanese telecommunications firms are trying to compete with their European and U.S. rivals in the Chinese market by taking full advantage of the technological edge in third-generation (3G) mobile phone systems and the related Internet Protocol version 6. In July, portable phone service subscriber numbers in China surpassed U.S. levels, giving the country the most cell phone users in the world. However, over 70% of the market is in the hands of Nokia Corp. of Finland, Motorola Inc. of the U.S. and Sweden's LM Ericsson, partly because of China's selection of the GSM (group special mobile) protocol adopted by European nations. In the area of telecom services, Vodafone Group Plc of the U.K. has a stake in a China Mobile Communications Corp. subsidiary that is listed on the Shanghai Stock Exchange. AT&T Corp. plans a high-speed Internet service in Shanghai, while America Online Inc. has formed a joint venture with the Legend group, China's largest personal computer maker, to provide Internet services. With the introduction of a 3G portable phone system in China, Japanese firms have the chance to show their technological superiority in setting up relay stations and developing software. China is also preparing to introduce digital broadcasting, giving Japanese electronics makers the opportunity to exploit their lead over foreign rivals in the equipment market. China's recently confirmed entry to the World Trade Organization will accelerate the struggle for local IT market share by foreign firms. Japanese makers with limited experience in the Chinese telecom market will need to secure a bridgehead before expanding business in that country. (September 26, the Nikkei Business Daily)

The government will deregulate bandwidth use for the wireless net service. The Telecommunications Ministry plans to allow wireless Internet service providers to use part of the 25-gigahertz bandwidth without seeking ministry approval by next spring. The bandwidth will be seven times larger than what is currently dedicated to cell phone services and is expected to enable transmission of large-volume data, including high-resolution images, at a speed comparable to that of a Net service using a fiber-optic network. The measure aims to ease the entry of wireless service firms, which do not require the telecom infrastructure of Nippon Telegraph and Telephone Corp., into the Internet business. It is also beneficial for foreign companies and smaller/start-up firms, resulting in lower service fees and an increase in the variety of services for consumers. (September 24, the Nihon Keizai Shimbun)

Kenji Kosaka, senior vice-minister for telecommunications, revealed a policy for partial deregulation of criteria for newcomers entering the telecommunications industry. The new policy would mean government authorization of entry if a power company, railway company or other non-telecom firm rents fiber-optic or other telecom networks for more than a year rather than the current 10-year minimum. Such deregulation would enable companies to move full scale into telecommunications with far less initial capital, helping to speed up the entry of such newcomers. Such a move is expected to speed the spread of Internet use through increased competition. The 10-year minimum, however, makes it hard for smaller start-ups to rent the networks and enter the ultra-high-speed network business. (September 20, the Nihon Keizai Shimbun)

Japan's manufacturers of electric machinery and information communications equipment are slashing jobs at a record pace in the face of a worsening global recession in the information technology industry. Major IT industries alone will cut a total of almost 80,000 jobs in Japan and abroad, as the simultaneous economic slowdown in Japan, the U.S., Europe and the rest of Asia forces them to step up their restructuring measures, such as shutting down or selling overseas plants. Almost half of the 80,000 job reductions are slated to take place in Japan. (September 1, the Nihon Keizai Shimbun)