Nice article on NTT plans in InfoWorld
[Lots of ASND equipment needed]
infoworld.com
NTT goes for the global telecom market
with unique strategy
By Rob Guth
InfoWorld Electric
Posted at 3:11 PM PT, Apr 16, 1998
Anyone who still thinks MCI is the undisputed diva of telecommunications merger
proposals would be wise to check out the Tokyo opera house.
While WorldCom, British Telecommunications, and GTE grabbed headlines late in 1997
with their battle to acquire U.S. long-distance carrier MCI Communications, many more of
the telecommunications industry's brightest stars quietly visited offices above the Tokyo
opera house where Nippon Telegraph & Telephone's (NTT's) international division
resides.
Some carriers pitched mergers, others partnerships. All hoped to befriend a company that
holds the keys to the world's second largest telecommunications market and that aims to
become a carrier with global influence to match its size.
"The landscape is being fundamentally altered," Peter Bonfield, chief executive officer of
London-based British Telecommunications (BT), said in 1997 of Japanese deregulation
that is pushing NTT to change. On several occasions in 1997, BT officials publicly
declared that they seek a "preferred partnership" with NTT.
Such overtures began in late 1996 when Japan's Ministry of Posts and
Telecommunications said it would break up NTT and do away with the regulations that
segregated Japan's carriers by international and domestic markets. The ministry is also
loosening laws on foreign participation in Japan's market. Given NTT's near monopoly in
Japan's $38 billion local telecommunications market -- second in size only to the U.S.
market -- foreign carriers must connect to NTT to do business in Japan.
Market deregulation
More importantly, starting in early 1999 the market deregulation will thrust NTT onto the
international telecommunications stage for the first time in its history. Due to Japan's market
segregation, NTT's revenues currently come solely from its home market. Despite its size,
though, the company remains uncommitted to the kind of global telecommunications
alliance or major merger that the world's other big carriers -- including AT&T, BT, Sprint,
and MCI -- are betting their futures on.
"NTT has no intention of getting involved in that kind of money game," said Mitsuhiro
Takase, vice president of NTT's strategic planning and international cooperation division.
"In the first stage, we have to establish our main business base with our own efforts."
NTT is shunning traditional telephone companies, but it is investing in next-generation
network operators. This week, for instance, NTT said it will commit as much as $100
million to Denver-based Verio, an ISP that has grown rapidly by eating up small U.S.
ISPs. This deal echoes one of equal size that NTT made in 1997 with Teligent, a fixed
wireless provider headed by former AT&T President Alex Mandl.
International licenses
Recently, NTT also received telecommunications licenses in many major markets including
the United States, and it is an investor in a project to connect the United States and China
with 30,000 kilometers of fiber-optic cable.
"What you are seeing is a new NTT coming up," said Azzman Shariffadeen, president and
chief executive of Mimos, the agency behind Malaysia's Multimedia Super Corridor
technology zone and an NTT partner in Kuala Lumpur, Malaysia.
Japanese regulations had bound NTT "in a state of uncertainty over which way they were
going," Shariffadeen said. "Now that uncertainty has been removed, and you will see NTT
prosper."
But it remains to be seen whether NTT President Junichiro Miyazu, who has been with the
company for nearly 40 years, can move the telephone company through a transformation
never before witnessed in Japan's tradition-bound corporate world.
Whether NTT succeeds or fails, the changes it makes during the next few years will likely
have far-reaching effects on global communications. The world's telephone companies are
watching closely.
"There is a fear founded on the notion that all NTT needs to do is add international
[service]," said Timothy Wiest, president and CEO of the Tokyo-based Japan unit of the
telecommunications consortium Global One, describing general industry sentiment. "Since
they control the domestic market already, they can lock up Japanese customers."
Pacific ambitions
Where NTT is opening doors to telephone companies is in its backyard -- the rest of Asia.
With less than one year to go before regulations that confine it to its home market are
lifted, NTT is now dotting Asia with new offices and new partnerships, and is strengthening
old friendships with the region's carriers and telecommunications authorities.
In Hong Kong, the Philippines, and Australia, NTT launched new local subsidiaries in
1997. In Singapore, in addition to a local unit, the company teamed with BT to bid for a
local service license. In Sri Lanka, NTT took a large stake in the national carrier as a
possible step into the vast Indian market nearby. Late in the year, it finalized a deal to
place 240,000 telephone lines in the capital of Vietnam. Meanwhile, in Malaysia, the
company is one of the founders of the Multimedia Super Corridor.
NTT needs a strong Asian presence so it can serve its Japanese customers, many of
whom have extensive operations throughout the region. Moreover, if it can solidify
relationships with key players in Asia, it will have a bargaining chip for winning business
from global customers and for signing partnerships with United States and European
carriers, officials said.
"NTT wants to bring to the equation not just their own market of 125 million people, but a
region of 2 billion potential multimedia users," said a top official at a U.S. carrier who
asked not to be named. "It's ambitious, to say the least."
But the real ambition is Miyazu's quest to remake NTT into an integrated provider of
value-added services and multimedia and Internet-commerce applications. Following the
lead of BT's Concert offering, NTT is marketing bundled services called Arcstar that offer
corporate customers end-to-end services from the network layer to network management,
consulting, and applications.
At the core of the initiative is a project, code-name Iceberg, which marshals resources
across all of NTT to create a systems integration business capable of building global
value-added network services for corporate customers.
The goal is for NTT to offer virtual private networks and attendant services to customers
worldwide, according to Kiyoshi Isozaki, president and chief executive officer of NTT
Worldwide Telecommunications, a newly formed subsidiary that handles the Arcstar
business.
Iceberg might prove to be aptly named. NTT has a history of showing far less than it
holds, as it demonstrated with its domestic Internet service. Soon after the service was
announced in 1995, NTT -- in a rare display of humility -- deflected criticism that its low
prices would undercut most other Japanese Internet services.
In interviews, NTT officials said the Open Computer Network (OCN) would start slowly,
and be just a low-quality service attractive to mostly "unsophisticated" users. Now, just
more than one year old, it is nearly the largest Net service business in Japan in both the
individual and corporate markets, said Toshiaki Iba, senior analyst at ING Baring
Securities (Japan).
Even as OCN has taken Japan by storm, NTT officials say that their global services
objective is far more ambitious.
To make Iceberg a reality, NTT may even, in time, acquire a foreign systems integration
specialist, officials said.
"NTT's capability alone will not suffice, so we are looking for cooperative opportunities,"
said Masanobu Suzuki, executive vice president of NTT's Global Business unit. "If we
don't do so, we won't be able to succeed in building our global services."
But many observers argue that NTT, though flush with resources, is too big and slow to
get in step with the fast-paced telecommunications industry. Indeed, Miyazu, and in turn
his company, were late converts to the Net. There are still factions within NTT, proud of
its traditional telephone company roots, that oppose NTT's Internet efforts, sources said.
"How can you capitalize on economies of scale, if economies of scale are not needed
anymore?" commented Shumpei Kumon, longtime NTT watcher and executive director of
Center for Global Communications, a Tokyo-based think tank. "NTT's huge network is
more of a liability than an asset -- particularly if the Internet is the future."
Nippon Telegraph & Telephone Corp., in Tokyo, is at ntt.co.jp.
Rob Guth is a Tokyo correspondent for the IDG News Service, an InfoWorld
affiliate.
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