Finally, Japan's Netizens May Be Able To Afford The Net

Sky-high access fees in Japan start to fall

Like many Japanese, Yasushi Nakajima has one eye glued to the clock as he races through cyberspace on his home PC. If he doesn't, there's a hefty telephone bill to reckon with. One recent night, Nakajima forgot to log off the Net until the next morning--a mere nine hours later. That added $30 to his phone bill. "It's outrageous," complains Nakajima, 48, a manager at a Tokyo TV production company. "We need cheap, flat fees like they have in the U.S."

It's a lament heard across Japan's Net-scape. About 65% of the country's 20 million Internet users access the Net through the phone network controlled by Nippon Telegraph & Telephone Corp., the former government monopoly. Giant NTT, which owns the "last mile" that connects homes to the local switch, hasn't lowered local access fees in 23 years. Most local calls cost 10 cents per three minutes, or $2 an hour, compared with flat, per-call rates in other countries. So cybernauts tend to curtail their Web excursions. Data transmission costs are high as well--40 times those in the U.S. It's little wonder that Japanese lag behind Americans in Internet use and electronic commerce. "If the phone rates come down, e-commerce could explode," says Hiroshi Mikitani, founder of Rakuten Inc., a big Japanese cybermall.

Well, there's hope at last. NTT has just started testing a flat-rate Internet service in selected pockets of Tokyo and Osaka. For a monthly fee of $75, individuals and offices can sign up for unlimited phone time with a cooperating Internet service provider. Demand is so pent up that NTT exceeded its 1,000- subscriber target in a week.

There's one catch: Customers must subscribe to ISDN (integrated services digital network), a relatively inexpensive digital local loop that NTT hopes to establish as Japan's main Internet access technology. The flat-rate fee will likely come down when NTT rolls out the service in major cities a year from now. "We'll lower the fee, even if we have to operate in the red," pledges Tetsuo Koga, executive marketing manager for NTT East, which covers Tokyo and eastern regions. "That's the price we're willing to pay to stay ahead."

That's the kind of talk spurred by competition. And NTT's Net rivals are real gorillas. One is mogul Masayoshi Son, founder of Softbank, which owns stakes in Yahoo!, E*Trade Group, and others. Son has persuaded Microsoft Corp. and Tokyo Electric Power Co. to launch a new venture, SpeedNet. The company will build a network combining wireless technology and Tokyo Electric's nationwide fiber-optic network. When it launches in major cities next year, subscribers will get unlimited monthly Net access for $48. Better yet, SpeedNet will offer high-speed transmission comparable to broadband in the U.S.

Consumer electronics giant Sony Corp. is also taking on NTT. Over the next three years, it plans to build a wireless local loop to provide low-cost, high-speed Internet access in big cities. It will target heavy users and small businesses. Fees will likely be cheaper than NTT's.

Even the government, once NTT's prime protector, is pushing for competition. In September, it scrapped a rule prohibiting companies from accessing a subscriber phone line without going through NTT's switchboard. As a result, Tokyo Metallic Communication tied up with long-distance carrier KDD to offer a direct link via ADSL (asymmetric digital subscriber line). Starting later this month, Tokyo Metallic will offer the service in parts of Tokyo for $52 a month at speeds 10 times those of ISDN.

That's prompted NTT to strike back. It, too, is planning ADSL, and in the next few years will introduce flat fees outside the main cities. That doesn't help Masayoshi Nakane--yet. The father of two in Shizuoka, west of Tokyo, restricts his family to 15 hours of Net time a month. Combined with his wife's long-distance calls to Tokyo, he often shells out about $150 monthly to NTT. Would he like cheaper Internet access? "Of course," he exclaims. "Phone rates here are way too expensive." Just wait, Mr. Nakane. Just wait.

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