: Moving, Shaking Japanese Style
Feb. 08, 2000 (ISP Business News, Vol. 6, No. 6 ) -- By
Ruth Suarez
The Japanese Internet market has plenty to offer entrants. Japan
has more Internet users than any other Asian country. According to San
Jose, Calif.-based Dataquest [GART], Japan generated $1.4 million in
online and Internet access revenue in 1998, compared to $873,000 for
the rest of the Asia/Pacific region.
Industry players such as PSINet [PSIX], Exodus Communications [EXDS],
AboveNet Communications [MFNX], Portal Software [PRSF] and iAsiaWorks
are chipping away at the Japanese Internet market through partnerships
and acquisitions.
PSINet is anxiously peddling its service to grab a bigger piece of
the market. The ISP tucked three acquisitions under its belt in 1998.
Among PSINet's collection of Japanese acquisitions: RimNet Corp., one
of Japan's pioneer dial-up companies; TWIC Co., an online service; and
Tokyo Internet Corp., an ISP. Its earliest Japanese acquisition was
IIKK Intercom International in 1994, which became the basis for PSINet
Japan.
In Japan, market dynamics are shifting with deregulation, and smaller
players are bucking against former state monopoly Nippon Telegraph and
Telephone Corp. [NTT]. Three Japanese telecommunications companies
announced plans Dec. 16 to join forces to compete with NTT. DDI Corp,
a national carrier, KDD Corp., an international carrier, and IDO Corp.,
a cellular carrier, will merge to become $21.2 billion DDI Corp. The
newly formed carrier will be Japan's second largest telecom company.
The deal will not be complete until next fall.
Other telecom players are adhering to the "if you can't beat 'em,
join 'em" motto. Since Japan's NTT isn't loosening its white-knuckled
grip on the Japanese market, U.S.-based companies are partnering with
the monopoly. Armonk, New York-based IBM Corp. [IBM] and Austin,
Texas-based Tivoli Systems Inc. are partnering with NTT's E-Business
Outsourcing program. Their service, launching in April 2000, will
provide enterprise customers with consulting, design and implementation
of managed computer networks, as well as outsourcing services for
corporate intranet, extranet and Internet servers.
Britain's Cable & Wireless [CWZ] announced Dec. 14 it would snap up a
20 percent to 30 percent stake in local provider Tokyo
Telecommunications Network Co., known as TTNet. TTNet's nationwide
fiber optic network is attracting other big name suitors, such as MCI
WorldCom [WCOM]. However, this isn't Cable & Wireless' first visit to
the country. Earlier this year, the cable giant tussled with NTT and
won, acquiring IDC, an international call operator.
U.S.-based telecom players would be wise to put together business
strategies for the Japanese marketplace. One vendor attempting to jump
ahead of U.S. competitors in Japan is Santa Clara, Calif.-based Web
hoster Exodus Communications Inc. [EXDS], which in December acquired
Global OnLine Japan, a Web hoster touting 23,000 subscribers. Neither
company disclosed terms of the deal. No sooner had the ink dried on
that merger, Exodus was already busy touting a Jan. 19 partnership with
Nomura Research Institute, a Japanese system integrator. Through the
alliance, Exodus plans to expand its Tokyo Internet Data Center.
AboveNet Communications Inc., a subsidiary of Metromedia Fiber
Network Inc., also is extending its Internet network into Japan by
partnering with Marubeni Corp. and Trans Cosmos Inc. The joint venture
will streamline the flow of Internet traffic within Japan and between
Japan, the United States and Europe.
AboveNet Japan will build an Internet service exchange facility in
Tokyo modeled after AboveNet's facilities in the United States and
Europe. The facility, which will target Japanese ISPs, content
providers and e-commerce companies, is expected to open in the second
quarter of 2000.
Yoshiaki Matsuda, AboveNet director of international business
development, says vendors hoping to establish partnerships should
follow these steps:
* Conduct extensive market research, study pros and cons of each
category of potential partners, i.e., carriers, manufacturers, and
trading companies;
* Narrow down potential partners for selection; and * Outline a
joint venture deal with partners and negotiate the deal.
Cupertino, Calif.-based Portal Software Inc., an ISP infrastructure
software vendor, also is setting up shop in Japan. Its new Tokyo-based
unit, Portal Software Japan, will focus on emerging Internet services
such as wireless IP.
"For those aspiring to gain entry into the volatile market, grab a
partner. Otherwise, it's a tough road," Network Dynamic Associates'
Ken Zita says. "You need some sort of entry vehicle, a distribution
channel to get to customers. You don't just go in there and throw up a
shingle and hope it works."
(John Beizer, iAsia, 650/524-1790; Yoshiaki Matsuda, AboveNet
Communications, 011-090-1540-6108; Jeffrey Shapard, PSINet,
703/375-1103; Ken Zita, Network Dynamic Associates, 718/858-6618; Desa
Zraick, Cobalt Networks, 650/623-2625.)
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Copyright Phillips Publishing, Inc.
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