Japanese cable-TV operators copy U.S. hybrid fiber/coaxial-cable networks
Paul Mortensen
Japan`s trading houses are the leading promoters of Japan`s fledgling cable-TV business. One major trading company, Sumitomo Corp., is developing interactive cable-TV services based on fiber-optic cable delivery. If the venture is successful, other major trading and electronics companies, such as Itochu and Fujitsu, stand poised to follow.
According to industry analysts, expansion of fiber-based cable-TV networks is expected to speed the benefits of fiber connections to the general public long before the Japanese government`s planned network reaches households by the year 2010.
Aware of that possibility, the government is belatedly encouraging the installation of cable-TV networks. To make it easier for operators to profit, the Ministry of Posts and Telecommunications, for example, is deregulating the cable-TV industry. So far, deregulations have included expansion of permissible service areas, permission to provide telecommunications services and allowance of 33% foreign ownership to encourage the import of foreign expertise in programming, network operation and financing. Business leaders say that MPT has become more responsive to their needs, but that much more has to be done--particularly in allowing more participation of foreign companies in cable-TV ventures.
The overall strategy of Japan`s trading companies entails participation in both commercial satellite business and cable-TV networks.
To obtain a clear view of public demand trends, Sumitomo Corp. is concentrating on cable TV. By providing fiber-optic systems that connect directly to customers, the company can cover a larger market than is possible with only satellite broadcasting. Sumitomo plans to position cable TV as an information supermarket that offers product information and direct delivery to customers.
To date, Sumitomo is participating with more cable-TV operators than any other trading house. It is managing 20 operators and has invested in another 11. Of these, 27 have started operation.
For its fiber-based cable-TV system, Sumitomo has partnered with Tele-Communications Inc. to exploit the expertise of the U.S. cable-TV giant for use in the Japanese marketplace. Sumitomo needs skills in technology and management of cable TV and in the marketing of such interactive cable-TV services as video-on-demand, cable telephony and tele-shopping. To that end, Sumitomo has launched Japan`s first interactive fiber-based cable-TV service for a new operator, Suginami Cable TV.
Diverse approaches
Its relationship with TCI has enabled Sumitomo to learn the diverse approaches to installing cable-TV networks. For example, in Japan, cable-TV operators are reluctant to launch a new business until the laying of fiber-optic and coaxial cables in the target area has been completed. Then, they would offer full services from the beginning.
For this Japanese approach, the initial investment is high, which often discourages new companies. Most Japanese trading companies now realize that the U.S. industry approach of expanding service networks with fiber and coaxial cables in stages corresponding to subscriber demands is the best way that will allow cable-TV networks and optical fiber installations to increase in Japan.
In the long-term, Sumitomo wants to provide interactive services via the government`s nationwide fiber infrastructure. Meanwhile, the company does not plan to wait. For a conservative Japanese trading company, Sumitomo has taken the adventurous design of using for the first time a hybrid fiber/coaxial-cable-TV network. Fiber will be used from the headend center to the curb; coaxial cable will run from the curb to the subscriber.
From a commercial point of view, Sumitomo says that the hybrid network is more practical than a full fiber network because it is one-third less expensive and can transmit 500 channels. Depending on the outcome of this trial, the company says that in the future, it might install fiber to the home.
Despite some deregulation, however, problems abound for Japanese cable-TV operators. Typical technical problems involve installation costs: The use of a utility pole to string fiber or coaxial cable is approximately $15 per year per pole. Some operators pay more money for poles than they do for programmers. In addition, to cross a road with a transmission line, the cable-TV operator must get permission from several ministries, as well as from local governments; such negotiations generally last as long as one year.
Most operators maintain their own rooftop-to-downlink/uplink facility because a leased fiber line to a gateway proves expensive. Moreover, despite growing price competition, the satellite transponder cost is approximately $4 million per 36 megahertz, still too high for most operators.
In another competitive move, Sumitomo is installing U.S.-type cable-TV systems. This move goes against tradition; Japanese trading companies usually use suppliers within their affiliated companies.
In the ongoing Japanese recession, pricing is the issue that concerns most cable-TV operators. If operators use U.S. cable-TV systems instead of Japanese types, they can cut facility costs by approximately one-third. Some operators have expressed concerns that differences in standards between U.S. and Japanese systems could cause problems in terms of connectivity and compatibility with Japanese products. Sumitomo has dismissed these concerns. In fact, it has successfully persuaded two major utilities--Tokyo Electric Power Co. and Kansai Electric Power Co.--to allow cable-TV operators to join U.S. products to their transmission networks.
Opto-electronics makers are also involved in cable-TV tests. Last month, Fujitsu began multimedia service trials with several of Japan`s leading cable-TV operators in which they hold major financial shares--Hachioji Telemedia, Yokohama TV, Yokohama Urban TV, Akashi Cable TV and City Television Nakano. During the first phase of the program, which is scheduled to last from six months to one year, new services will include near video-on-demand, video-game delivery, karaoke-software delivery links to telephone, and facsimile and computer-based information services. Although these trials will not involve fiber, Fujitsu, as Japan`s largest fiber-optic cable-TV systems maker, is committed to deploy fiber systems after the successful completion of trials and positive user acceptance of services. q
Paul Mortensen writes from Tokyo.