Well behind other first-world powers, Japan is finally emerging from the analog days. Dan Grunebaum taps into Tokyo's DSL revolution.
At a glitzy Internet cafe near bustling Shinjuku station, crowds of young tech types sit
in front of PC displays, transfixed by streaming audio and video downloading at speeds the
likes of which they've never before seen.
But this isn't the latest technology from telecoms giant NTT - rather, it's the
demonstration room for Tokyo Metallic Communications, one of several upstart Internet
service providers that may prove to be the Trojan horse that topples the telecoms status
quo in Japan, and in the process kick-starts the country in a broadband race that it is
rapidly losing to nearby Korea.
Industry sources estimate the current number of Japan's broadband subscribers, including
Digital Subscriber Line (DSL), cable and wireless broadband, at 570,000. This excludes
NTT's far slower but widely used Integrated Services Digital Network (ISDN) service. The
figure puts Japan well behind nearby Korea, which already has some four million broadband
users, and light years behind the US.
Backed by 60 million dollars in pre-IPO financing from the likes of J.P. Morgan, Jardine
Fleming, NEC and Hitachi, Tokyo Metallic is rapidly deploying its Digital Subscriber Line
(DSL) technology throughout Tokyo. DSL can transmit large volumes of data over standard
copper phone lines (hence the name Metallic) at low cost and speeds more than ten times
that of ISDN or a standard dial-up modem.
Even as the Japanese government's IT Strategy Council issues edicts calling for Japan to
bring fiber optics to each and every home and surpass the US in five years, Tokyo
Metallic, eAccess and other DSL providers - with the quiet blessing of the Ministry of
Public Management, Home Affairs, Posts and Telecommunications (previously the MPT) - are
already supplying broadband solutions that may put paid to NTT's grandiose fiber-optic
The one-man revolution behind Tokyo Metallic and its newly founded sister Osaka Metallic
is President and CEO Hiroaki Kobayashi, a former word processor salesman who has almost
single-handedly managed to force NTT to open up its copper lines to Metallic's DSL
While NTT continued to push the ISDN technology in which it had heavily invested,
Kobayashi saw in DSL a golden opportunity to bring true high-speed broadband to his
countrymen. After all, unlike Japan's fragmented cable network or still-limited fiber
optic network, every home in Japan is wired with POTS (plain old telephone service). He
faced just one small hurdle: convincing NTT, which has a monopoly on Japan's telephone
network, to open up its lines to his DSL service.
Kobayashi's strategy in forcing NTT to allow Tokyo Metallic to set up its equipment in NTT
facilities was to play patriotically on the government's anxiety that it is losing the
broadband race. "MPT people feel that the Japanese situation is falling behind the
world," says Kobayashi. "Even in Korea and Taiwan the local telephone companies
now provide very high quality broadband DSL services. Japan cannot be defeated by other
countries in broadband. Thanks to the MPT's help we could start this service last
Winning the right to run DSL over NTT's telephone lines was a stunning achievement and one
that may be looked back on as the spark that set off Japan's broadband makeover. "It
[NTT] deliberately tried to deflect attention away from DSL," comments Industry
analyst Tim Clark, Strategy Director for The Web Connection Japan. "Because that
means opening up its local loops, which of course are the crown jewels of its copper wire
monopoly. That's why they keep talking about how wonderful fiber optic is."
With connection speeds between ten and 30 times faster than NTT's ISDN, Tokyo Metallic's
DSL service is attracting between 100-150 applicants every day, says Kobayashi, who adds
he is hoping to poach some ten percent of NTT's some eight million telephone subscribers
in Tokyo. "I think at this moment DSL will develop quickly-the reason is that anyone
Tokyo Metallic and the other upstart DSL providers must be on to something, because NTT
East along with Japan Telecom, Japan's third-ranked phone company, have now come online
with DSL services of their own. At prices recently cut to as low as JY4000-over 20 percent
cheaper than Tokyo Metallic's 5500-the upstart DSL firm will be hard-pressed to compete
with its larger rivals.
Meanwhile, cable broadband holds the lead in a market that the government's IT Strategy
Council is projecting to hit 30 million by 2005. Japan's first commercial cable TV
Internet service launched in 1996, and major operators such as Tokyu Cable and J-COM are
now offering bundled video, voice and data services at highly competitive rates
(JY6500/month for J-COM). J-COM says it is signing up new subscribers at the torrid pace
of as many as 45,000 a month.
Cable service is more widely available than DSL right now, since NTT is not involved, says
Clark, noting that NTT is clearly trying to thwart upstart DSL providers. Clark adds that
cable has higher bandwidth than DSL, but says, "One disadvantage of cable is that it
was not originally designed for two-way communications, and congestion can be a real
Other broadband solutions set to challenge DSL and cable are also on the horizon. One of
them is fiber-optic cable, which promises lightning fast connection speeds.
"Japan leads the world in optical fiber connections to individual homes,"
explains Clark. As of the end of 1999, NTT claimed that its fiber-optic coverage of
individual households was 36 percent. And they have massive government support for their
fiber-to-the-home project, which has been going on for years. So fiber-optic cable is a
Meanwhile, cable radio provider Usen in March launched what is being billed as the world's
fastest Internet connection service, at speeds of up to 100 Mbps. The fiber-optic service
is presently limited to Shibuya, Setegaya, Suginami, Meguro and Ota wards, with blanket
coverage of Tokyo's 23 wards to be rolled out by October.
Other potential competitors include NTT's Biportable personal wireless broadband service,
a solution aimed at the PDA market currently in trial testing in the Shibuya Bit Valley
area, and the next generation of high-speed G3 iMode cell phones.
Nonetheless, with 100 percent penetration of POTS, DSL has an advantage that cable and
fiber optics will probably never be able to duplicate. But can the DSL upstarts survive
the NTT challenge? The politics and payment shenanigans involved in getting NTT to open
its local stations to the DSL providers are not to be underestimated," grants Clark.
"But I think that history and logic favor the upstarts. Frankly, I hope they kick
Portions of this article previously appeared in the International Herald Tribune.
Internet Cafe Necca: The
Broadband Future Is Now
In South Korea, they're called PC bangs, and they're the center of a booming broadband
gaming culture addicted to speed. In Japan, a Korean electronics giant is hoping to
duplicate the success of its Korean bangs, with one of its high-speed Necca Internet
cafes-opened in Dec 2000-in the heart of Shibuya.
Situated a stone's throw from the police box on Inokashira Dori, Necca competes with game
centers, telephone clubs, record and department stores for attention, announcing its
offerings with catchphrases such as Music Download, Net Phone or Visual Chatting.
A closer look reveals that this is an Internet Cafe with a difference: The latest Pentium
III computers are outfitted with ultra fast 1.5 megabyte per second lines (provided by
Tokyo Metallic), available for JY500/hour. Computers in the Net Game Zone (there is also a
Net Contents Zone and a Business Zone) are kitted out with game joysticks and game titles
such as Diablo and Quake, enticing the networked gaming fanatics that the cafÈ is hoping
will make it as successful as it has been in Korea.
On a recent Monday afternoon, one of Necca's young, personable hosts, Yuzuru Miura,
explained that the gaming freaks had yet to materialize in great numbers. Things are
taking off a bit different than we had planned, he admitted, but we already have 5000
members and repeaters are growing. Miura also notes that on weekends Necca sees many
foreign and business costumers who come in to take advantage of the free international
calls available with the installed telephony software. MP3 junkies will also be pleased to
learn that Necca welcomes customers to download music and burn your own CDs with the
cafe's CD writers.
Before the gamers and day traders materialize, the 24-hour Necca provides an crowd-free,
comfortable environment in which to get a taste of Japan's broadband future-a future on
hold as the country's government and corporations struggle to wire the country.