Masayoshi Son may be just 5-feet, 3-inches, but he isn't afraid to pick a fight. On June 19, the president and chief executive of Softbank Corp. announced an accelerated rollout of the world's fastest and cheapest asymmetric digital subscriber lines. For just $18.50 a month -- one-third the cost of the competition -- consumers can access the Internet at top speeds of 8 megabits per second, five times faster than conventional ADSL lines.
Son expects 1 million customers by yearend and 2 million to 3 million by next year. The plan has heads in the telecom world spinning, since ADSL has barely 175,000 users right now. Yet Son says his goals are realistic because one of the partners in his venture is Yahoo! Japan (51% owned by Softbank), the country's most popular portal, with 20 million unique users.
It's hard to believe that NTT Corp., the country's dominant telephone carrier, will let Softbank swipe market share away from its own budding ADSL service. But Son is eager for a showdown. Recently he spoke with Tokyo correspondent Ken Belson. Here are edited excerpts of their conversation:
Q: Why did you announce this service now?
A: Until the end of last year, NTT had a completely closed system. Even if we asked them to allow us to co-locate our systems or connect our networks, they vaguely said they might do it and maybe not. They had a monopolistic position.
But at the end of last year, I was on [Japan's] IT strategy commission, and the government passed the Basic IT Law that requires NTT to open its facilities. The Fair Trade Commission for the first time also visited NTT and warned them [to open their system]. Now NTT can't hide things any more. All of Japan is watching.
So I said, "Our time has come." I was looking at fiber and wireless [broadband solutions], but that was the wrong approach. If we want to offer the best service at the best price, we have to use some of NTT's facilities.
Q: How will your service provide download speeds of 8 megabits per second when everyone else offers 1.5?
A: It's a combination of having the biggest backbone and all sorts of gigabit connections. Internationally, we use Global Crossing's network. Within the city, we use all sorts of technology connecting to central switches through optical fiber. In the U.S., no one has gigabit connections throughout the local switches. We have 8 megabits for short distances, 5 to 6 megabits for average distances, and at the peak times, 2 to 4 megabits, which is still faster than anything else.
Q: How were you influenced by the rapid development of broadband services in Korea?
A: I really admire them. Two years ago, I visited South Korea with [Microsoft Chairman] Bill Gates. He and I visited President Kim [Dae Jung]. I wrote three words in the visitor's book you sign when you visit the President's house. I wrote "broadband broadband broadband," and I told President Kim the same thing. Kim said, "What is broadband?" But President Kim took the leadership to deregulate the infrastructure for broadband and suddenly all sorts of competition followed.
Q: Many analysts say you can't make money providing ADSL so cheaply.
A: Many people call me crazy, and I know many analysts say Softbank will go bankrupt. That's fine, I don't care. I want to have this discussion 12 months or 24 months from now. Right now, the number of Internet users is 25 million, and the number of Yahoo users is 20 million. Three years from now we'll have 35 million users, and Yahoo will have 30 million.
If we have 30 million users and we offer ADSL at one-third or one-fourth the current narrowband charge and we can increase the speed by 100 times, who would stay on narrowband three years from now? He'd be an idiot. If I make a business model based not on thousands of users but millions, they can still call me crazy. But I look at things my way.
Q: You expect Yahoo Japan to charge for broadband content. What will they offer?
A: There are 40 committed content providers, and another 40 are interested [in working with us]. We'll offer movies, online games, video chat, and many other things. For online advertisements, when you click on a banner today, you get a little cartoon Java character. With broadband, you can get flashy videos. It's a much interactive experience and will be a much more effective way of marketing than traditional television.
Q: You reportedly will spend $815 million rolling out this ADSL service out.
A: I didn't say that number, but the costs will be absorbed mostly by Softbank. Yahoo Japan is taking care of the front end, while the whole back end is Softbank's initiative. Yahoo Japan is the portal, contents gathering, and Yahoo BB is the broadband backbone.
Q: Do you think NTT will drop its prices, and are you afraid of a price war?
A: They should. The consumer will be the winner.