Japans cable-TV networks integrate new services

June 1, 1997

Japan`s cable-TV networks integrate new services

n PAUL MORTENSEN

Japan`s cable-TV industry has shown increasing interest in the provision of telephony and other networking services. So far, this nascent movement is being led by multiple system operators and major companies with holdings in local and urban cable-TV companies.

Toyota Motor Corp., for example, plans to set up a telecommunications network connecting its group companies with fiber-optic lines owned by cable-TV companies. The network is expected to cost 30% to 40% less than using existing telephone circuits provided by Nippon Telegraph & Telephone (ntt).

The auto maker will first connect communications circuits between two cable-TV firms affiliated with Toyota in Aichi Prefecture. It will then connect its headquarters and major offices in Tokyo, Nagoya, Osaka, and other cities with high-speed circuits owned by Teleway Japan Corp., a firm in which Toyota is a major shareholder. The two cable-TV companies are applying to the Ministry of Posts and Telecommunications (mpt) for approval of the connection; they hope to start service by year-end.

Meanwhile, encouraged by recent mpt decisions, multiple system operators Titus and Jupiter are discussing the connection of their cable networks and sharing of network hardware to reduce costs. This extended coverage will let operators bypass ntt`s network, thus saving on access charges. The multiple system operators still have scattered service areas and cannot yet connect their networks. The companies will need ntt`s cooperation if they decide to roll out interactive cable TV nationally, but this cooperation is not assured.

At the same time, ntt, Kokusai Denshin Denwa (kdd), Japan Telecom, and Tokyo Telecommunication Network have agreed to form the Inter-Cable Network project, whose goal is to link cable-TV networks nationwide and provide 10-Mbit/sec transmission pathways to households throughout the country. The four communications carriers are founding members of the Inter-Cable Network Promotion Committee, a sponsorship organization founded last October. The committee remains driven primarily by academics from the University of Tokyo and Keio University; stronger participation by ntt and kdd would accelerate the convergence of communications and broadcasting in Japan.

While Japanese users wait for these alli ances to bear fruit, individual cable-TV entities have taken steps to enter the market on their own. For example, Titus--the first multiple system operator to win a Type 1 license--has received approval to launch a hybrid fiber/coaxial-cable-TV-based telephone service in Kashiwa, Chiba Prefecture. The service will undercut ntt`s non-local rates by approximately 15% and provide local calls at fixed charges. The company started telephony interconnection experiments at the end of March 1997 and will start services in Kashiwa this July to 110,000 households. Titus plans to expand these services to two more areas, which will make it Japan`s first multiple system operator that is a telephony competitor with ntt. Among the service options to be introduced will be three hours of free local calls per month and a discount rate of 6 yen (4.8 cents) per three minutes for calls between network subscribers. The company also plans to offer Internet connections via cable modems at about 10 to 30 Mbits/sec upstream. (Downstream rates will be lower.) Thus, Titus will offer a package of video, voice, and data services.

As for other Internet services supported by cable-TV networks, Marubeni Corp. and Motorola are planning a joint venture company to address this market. The new company, called Interactive Cable and Communications, will offer services via Town TV Kanazawa, a cable-TV company affiliated with Marubeni in Yokahama. Marubeni--a major trading company--will hold 66% of the joint venture, while Motorola will hold 30% (the maximum share permitted for a foreign company). The remaining 4% will be held by Fuji Bank. The venture plans to inaugurate its services later this year via a 10-Mbit/sec Internet link. The service will be provided with the help of ntt Data Corp., ibm Japan Ltd., and Sumitomo Electric Industries Ltd.

Despite some efforts at interconnection and the provision of new services, Japan`s cable-TV industry is struggling and deeply in debt (see table). To increase the number of subscribers, its cable-TV companies will need to follow the Japanese corporate trait of planning for the long term. Cut-price telephony, Internet connections, and other interactive services may draw subscribers and, perhaps, even make cable TV profitable in Japan.

But these companies might face new obstacles on the road to profitability. Japan`s major electronic companies see plenty of profit potential in cable-TV services and the Internet. Fujitsu, for example, has earmarked 30% of its research and development expenditure for the development of intranet- and Internet-related services and networking equipment. Fujitsu states that it expects half of its income to come from this sector in three years. q

Paul Mortensen covers the Asia-Pacific region from Australia.

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