JIN-143 -- Japan's Bluetooth Year

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news
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Issue No. 143
Wednesday, August 8, 2001
Tokyo

CONTENTS

+++ Viewpoint: Japan's Bluetooth Year
+++ Noteworthy news
- ADSL Price Wars
- E-Marketplaces Face Turning Point
- Can a Brand be a Bank?
- Who are you Downgrading, Buster?

+++ VIEWPOINT

Japan's Bluetooth Year

Bluetooth-based device-to-device networking has been talked up big in
Japan, and we're finally starting to see some hardware that makes the
theory a reality. Bluetooth, of course, is the short-range wireless
networking technology that enables intelligent devices to
communicate. Bluetooth's promoters are positioning it as the
technology for the PAN (personal area network), and the sweet spot
should be devices that don't require a whole lot of data flow, like
printers, game devices, and mobile phones.

Last week, NTT East and West announced the launch of a Bluetooth-
enabled terminal adapter system for home use (the INS Mate FT80bt).
The system consists of a base station (connected to the Internet via
ISDN) that communicates using the Bluetooth wireless protocol with a
remote adapter plugged into another computer's USB port. Data moves
over the air interface at about 128Kbps. Note that NTT's system
employs the latest Bluetooth 1.1 standard, which allows multipoint
connections. Last year's version 1.1 devices could only connect to
one other Bluetooth-compatible device at a time.

Also this month, Widcomm, Oki Software, and Tomen Electronics said
they would reinforce sales in Japan of software needed to develop
Bluetooth-compatible gear. The trio intend to boost sales of
Widcomm's Bluetooth protocol stack, and jointly offer reference
designs, transceiver modules, and a development kit (Widcomm counts
Sony among its Bluetooth customer base). Foreigners are also
targeting Japanese electronic manufacturers and developers, and next
week we're expecting to hear news of a tie-up between Uppsala,
Sweden-based Pocit Labs (which has developed a Bluetooth development
platform/communications product), and an as yet-unnamed Japanese
software partner.

In July, Matsushita said it would launch two new digital camcorder
models that would be Bluetooth-enabled, KDDI started selling its
C413S (Sony) Bluetooth-enabled celly, and in a June story covering
the summer boom in PC and notebook sales, the Nikkei said that "more
products are [being] equipped with Bluetooth communications." Looks
like the device-to-device, personal area networking future predicted
by the pundits has come to pass.

Well, not quite. While Japan is well on its way to putting Bluetooth
capability into notebooks, PCs, cellphones, PDAs, and other devices
(NTT and Sweden's Axis Communications have already set up access
points in the underground shopping areas in downtown Osaka), there
has yet to be much movement on the content and services side of the
equation.

In other words, even if Bluetoothers can create their own personal
area networks, and log onto an access point, there isn't much to
access (other than the Net itself). Do we really need to search
Google or browse CNN.com while waiting in line to pay for two
portions of soba and a six-pack of Kirin lager? Do I really care if
my printer can talk to yours?

But we think Japan will rapidly move ahead on Bluetooth-based
PAN-accessible content and services because there's already an
analogous system in place that is attracting third-party service
providers, and it's called L-mode. L-mode is the landline version of
i-mode, and was launched in June. It provides highly location-focused
content (weather for your neighborhood, for example) and services
(sale on at the shop up the street) from 170 providers.

It's a simple exercise, we think, to port that content to shops,
cafes, restaurants, and other venues where the PDA-toting,
Bluetooth-using public gathers. Further, when the game makers get
their hands on Bluetooth (and they already have), massive multiplayer
gaming will become, well, massive. i-mode browser maker Access has
developed Bluetooth-compatible middleware for game devices, and
vendors Capcom, Taito, and Bandai are working on "multi-matching"
game titles.

Looks to us like 2001 is the Bluetooth year in Japan, although
ironically, there's no reason to be blue and every reason to smile.

--Daniel Scuka

See J@pan Inc story on P2P:
"P2P: The Japanese Angle"
http://www.japaninc.com/mag/comp/2001/04/apr01_p2p.html

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+++ NOTEWORTHY NEWS

** ADSL Price Wars

Extract: Not to be outdone by Softbank subsidiary Yahoo (Japan's
newest ADSL provider -- See JIN No. 142), other ISPs are rushing to
lower their monthly charges for ADSL service. The moves are designed
to counter Yahoo's JPY2,280 per month price (set to start on Sep. 1).
KDDI announced Tuesday it will reduce its monthly usage fee by 30% to
JPY3,880. Nifty and Japan Telecom are also expected to announce new
pricing plans by the end of the week, while smaller ISPs, including
CSK Network Systems (which has announced plans to halve its ADSL
connection fee to JPY2,950 from Sept. 1), are entering the price war
to gain a slice of the emerging market.

Commentary: There were 291,333 DSL subscribers at the end of May, so
there are likely 300,00-plus now. The lower prices will likely boost
the number of people opting for DSL, and, since NTT is unlikely to
lower the fees it charges ISPs to access its local switches, most
ADSL providers will see lower profit margins. Uh-oh. Looks like the
industry could be headed for consolidations, mergers, or outright
failures (Tokyo Metallic almost crashed in June).

Source: "Price War Heats Up as Japan ISPs Cut ADSL Fees," Nikkei
http://sg.biz.yahoo.com/010807/15/1aj26.html

** E-Marketplaces Face Turning Point

Extract: Transaction volumes at e-marketplaces have been dropping.
Most of the e-marketplaces set up by major Japanese trading houses
and manufacturers have been confronted with less-than-initially-
forecast trading volumes. Nonetheless, IDC Japan forecasts that
transactions via e-marketplaces will grow to about 36 percent of all
B-to-B e-com transactions in Japan in 2005. Japanese e-marketplaces
face issues of supplier incompatibility with B2B e-commerce
transactions, limited product offerings, and unreliability. However,
even after solving these problems, e-marketplaces still have to
contend with business practices unique to Japan.

Commentary: This report also says that the gap between the ideal
(Web-implemented) and the actual business model, as well as business
practices unique to Japan (such as transactions within affiliation
and complex distribution structures), complicate the matter. Last
year, Broadview compiled a report on Japan's B2B vertical markets.

In September 2000, there were some 63 markets up and running or in
the works. E-marketplaces existed in chemicals, autos, agriculture,
construction, electronics, energy, food, financial services,
healthcare, advertising, oil/gas, and real estate, among others.
Some of these don't appear to be doing so well (PolyesterChip.com,
ePower), while some are at least surviving (e-Kensetsu.com,
e-zaiko.com). (At least one of them, AlphaBrain, an online estimation
service for buyers and suppliers of made-to-order parts, appears to
be doing really well for a raw startup, and picked up JPY300 million
in venture funding from Softbank in March this year. See link to
J@pan Inc story below.)

Overall, it looks like the e-marketplace business won't see as much
destruction as occurred in the US, but it will be a couple of years
yet before they become generally profitable. Integrating information
held across a number of cooperating corporations -- traditionally
highly secretive where any business data is concerned -- will be one
big challenge.

Source: "E-Marketplaces Face Turning Point," Nikkei NetBusiness
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/fw/137004

J@pan Inc story on AlphaBrain:
"Made-to-Order Restructuring"
http://www.japaninc.com/mag/comp/2000/12/dec00_investor_rest.html

** Can a Brand be a Bank?

Extract: Sony's new online bank bears a name well known to consumers,
but they may not trust it enough to handle their life savings.
Shigeru Ishii, president of Sony's new online bank, says he'll have
little trouble snatching business away from Japan's bricks-and-mortar
financial institutions. "We don't need pretty girls to greet
customers," he says, taking a swipe at more established competitors'
practice of seeding bank branches with comely concierges. Ishii may
be right.

When SonyBank opened on June 11, its Web site was swamped with more
than a million visitors, twice the number its computer systems could
handle. In its first month, SonyBank landed 21,000 accounts and
nearly $66 million in deposits, exceeding company projections. One
thing in SonyBank's favor: average consumers are so dissatisfied
with Japan's debt-ridden big banks that they may put aside their
qualms about online banks and hand over their nest eggs. But for
decades workers have been expected to place personal accounts with
their employer's bank, a practice that spawned a retail banking
system that took its customers for granted. Few banks have offered
investment or financial management services; interest rates paid on
savings deposits hover near zero. "It is really no use having money
in a bank," says Tokyo pensioner Toshio Yamagi. But until recently
depositors had nowhere else to turn.

Commentary: Can a brand be a bank? You bet it can -- particularly in
Japan! This country's consumers have to be some of the world's most
brand-conscious shoppers. Unfortunately, many have been hoodwinked
into thinking that high price equals high quality. As a result,
consumer brandname owners have long enjoyed embarrassingly high
margins.

Along come one or two discount retailers, however, and so long as
actual quality can be maintained, look what happens: long-fleeced
shoppers flock to the lower prices, sending entire industries into
"price destruction" mode. Did someone say Uniqlo? We think the effect
on the banking industry of Sony's cheaper prices and enhanced
services will be no less startling. Good for Sony, and good for
anyone else with the kiryoku (guts) to just do it (Sorry, Nike...).

Source: "Can a Brand be a Bank?" Asiaweek
http://www.asiaweek.com/asiaweek/magazine/Enterprise/0,8782,169838,00.html

J@pan Inc story on new Japanese e-banks:
"Consumer Banking Undergoing a Facelift"
http://www.japaninc.com/mag/sub/2001/08/aug01_investor_bank.html
(Accessible to subscribers only until mid-Oct.)

** Who are you Downgrading, Buster?

Extract: Fears about the economic health of Japan's banks have
re-emerged. Two of the world's leading credit rating agencies have
downgraded several Japanese banks, raising questions about their
economic stability. Fitch IBCA, one of the world's leading rating
agencies, says the global economic downturn is set to hit the already
struggling Japanese banks hard. The rating agency downgraded 19
banks, including the Bank of Tokyo-Mitsubishi and the Industrial Bank
of Japan.

Commentary: Yeah? So what! Japan is positively swimming in cash, and
a few more banks tumbling one way or the other won't affect that
much. Most of the banks' debt is owed by Japanese to other Japanese.
Foreign reserve holdings at the end of July were $US367.68 billion --
that's enough to buy most of Canada's total governmental debt, for
example, and still have change left over to bail out a couple of
banana republics. According to Fortune, labor productivity among
Japan's export-driven manufacturers (think Toyota and Sony) is the
best in the world and 20 percent better than America's. Japan's
population owns $14 trillion worth of personal financial assets
(according to McKinsey), much of it cash or cash-convertible savings,
and this mountain is growing by $600 billion each year -- a sum equal
to all the personal savings of all South Koreans. In other words,
Japan is arguably the richest country in the world. Every so often, a
debt rating agency picks up a sexy headline (created by sycophantic
media) by downgrading Japan's bank, government, or other debt. Ignore
them.

Source: "Fresh Blow to Japanese Banks," BBC
http://news.bbc.co.uk/hi/english/business/newsid_1477000/1477954.stm

+++ EVENTS (ADVERTISEMENT)

** MCF Mobile Developers Conference 2001 (mobidec 2001) to be held in
Tokyo
mobidec 2001 provides you with everything you need to know about the
latest in mobile application and content technology. The three
Japanese carriers -- NTT DoCoMo, KDDI and J-Phone -- will be coming
together for the first time ever at this conference, and are sure to
showcase their new Java-based mobile applications. These and other
major industry leaders will bring you up-to-date information on
innovative technologies. The conference will be held August 29-30 at
the Hotel Nikko in Odaiba, Tokyo, and will feature 14 technical
sessions (fee required), 9 open sessions (free admission), plus an
exhibition.

For further information please visit
http://www.shoeisha.com/event/mobidec/

** Next Generation Mobile Content Strategies
11-13 September 2001- London, UK
Next Generation Mobile Content Strategies goes straight to the heart
of mobile content development. By examining case studies from
industry leaders, delegates will gain invaluable insight into the
mobile market today.
http://www.metelecoms.com/mobilecontent6.htm

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STAFF
Written by Daniel Scuka (daniel@japaninc.net)
Assistance with news compilation:
Richard Ochero (richard@japaninc.com)

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