JIN-218 -- NTT Units to Regroup to Kill Off Broadband Competitors

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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. 218
Wednesday, March 12, 2003
Tokyo

CONTENTS

++ Viewpoint: NTT Units to Regroup to Kill Off Broadband Competitors

++ Noteworthy News
- Lawmakers Try to Prop Up Ailing Stock Market
- Sony's PlayStation 3 to Take Revolutionary Turn
- "Deloder" Virus Targets Easy Passwords

++ Viewpoint: NTT Units to Regroup to Kill Off Broadband Competitors

The Nikkei reported this morning that Nippon Telegraph and Telephone
is planning to join together units of its empire to form a more
cohesive broadband operation. If the report is true, NTT could quickly
have competitors in a stranglehold. Meanwhile, Softbank is scrambling
for cash in an attempt to be ready for the next phase of Japan's
broadband battle.

The Nikkei report said four NTT group firms -- the holding company,
NTT Communications, and NTT East and West -- would form a joint
venture as early as this year to compete in the broadband market. The
plan is to be included in the parent company's medium-term business
plan to be released next month.

With Japan establishing itself as one of the cheapest markets in the
world for broadband services, NTT has decided to try to strong-arm its
competitors. The joint venture would offer everything from Internet
access to ADSL connections to Internet protocol (IP) telephone
services, and the NTT infrastructure would make it very hard for
competitors like Softbank to compete. The only competitors large
enough to fight toe-to-toe with a reunited NTT would be Tepco and the
other electric utilities, which are wading into IP phone and
fiber-to-the-home services.

But Softbank is the main reason Japan has cheap ADSL connections. It
started the price war in 2001 and hasn't let up since. Most recently
it has sold shares of some of its US holdings, including Yahoo, to
raise money for the next phase of the battle and to pay down debt. AP
reported this week that the company plans to raise an additional $77
million by selling 8 million shares in UTStarcom, a US broadband
equipment maker, some time in April.

But how long can Son fight against the deep pockets of an NTT banded
together with the sole purpose of eliminating pesky price-cutters like
Softbank? Even Son would have a hard time fighting a unified NTT.
Isn't that why the empire was broken up four years ago? NTT is bound
to argue that it doesn't dominate broadband like it dominated
conventional phone services before its 1999 breakup. But the "chaos"
of the current broadband market in Japan has irked NTT for some time.
It doesn't like what it can't control. And this latest plan is all
about controlling the broadband market like it controls the regional
phone market. That would mean the slow death of competition, quiet
price hikes and an end to all the "chaos" that makes Japan's broadband
market one of the few dynamic markets in a lackluster economy.

-- Bruce Rutledge

Sources:
Nikkei Net (subscription required)
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20030311D11JFF03.htm

AP story on nj.com
http://www.nj.com/newsflash/business/index.ssf?/cgi-free/getstory_ssf.cg...

Links:
"Booming IP Telephony Challenges NTT's Telecom Empire" from our March
2003 issue (subscription required)
http://www.japaninc.com/inc/login.html?articleID=1035

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy to your browser.)

** Lawmakers Try to Prop Up Ailing Stock Market

In Brief: In what has become an annual ritual, lawmakers are floating
all sorts of ideas to prop up the anemic stock market before the end
of the fiscal year. Most of the proposals involve turning the clock
back on reforms, including delaying new laws that limit banks'
shareholdings and putting off plans to adopt asset-impairment
accounting and fair-value accounting practices. Prime minister
Junichiro Koizumi has voiced opposition to the last proposal.

Commentary: Darrel Whitten, author of our MoneyWatch newsletter, calls
this March exercise the "rites of spring" in his latest newsletter and
explains how most of the ideas floated in mid-March to prop up the
stock markets are never really meant to be adopted anyway. They are
usually shuffled off to committee meetings each April, where most of
them die ignobly. But this year's assortment of ideas seems
particularly weak. The Nikkei index is hitting 20-year lows and
markets are not likely to rally in the next couple of weeks. Whitten
argues that the North Korean threat is having more of a negative
effect on Japanese stock markets than people realize.

Sources:
Nikkei Net (subscription required)
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20030311D11JFF05.htm

Reuters
http://www.reuters.com/financeNewsArticle.jhtml?type=governmentFilings
News&storyID=2357875

Link:
"The Rites of Spring," MoneyWatch No. 19
http://www.japaninc.com/newsletters/index.html?list=mw

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** Sony's PlayStation 3 to Take Revolutionary Turn

In Brief: Sony's PlayStation 3, still two years from release, is
starting to attract media attention because of its "revolutionary
architecture," in the words of the San Jose Mercury News, that brings
the power of 100 PCs to its video console. Sony wants its
next-generation console to be a complete entertainment unit that can
tape TV shows, surf the Net and, of course, play increasingly
sophisticated video games.

Commentary: Interesting story here. On one side, critics say Sony is
overshooting, and its new console will suffer from trying to do too
much. On the other, some analysts believe Sony and its partners, IBM
and Toshiba, are on the right track in their quest to build a
universal cell-based chip and be at the front of the next wave of
computing.

Source:
Seattle Times
http://seattletimes.nwsource.com/html/businesstechnology/134649647_bts
onygamechip10.html

Link:
"Microsoft to Sony: This War Ain't Over Yet" from August 2002
http://www.japaninc.com/article.php?articleID=857

** "Deloder" Virus Targets Easy Passwords

In Brief: The computer virus WORM_DELODER.A had infected at least 45
computers in Japan as of 6pm Monday, according to Trend Micro, a
specialist in combating computer viruses. The Asahi Shimbun reported
that the virus targets users of Windows 2000 and XP who have easy
passwords like "abc" or "123." Trend Micro said danger of infection in
Japan and China is especially high right now.

Commentary: The Trend Micro link below can walk people through the
procedures for clearing your computer of the virus.

Sources:
Trend Micro (in Japanese)
http://www.trendmicro.co.jp/vinfo/virusencyclo/default5.asp?VName=WORM_D...

Asahi Shimbun (in Japanese)
http://www.asahi.com/tech/asahinews/TKY200303100155.html

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STAFF
Written and edited by J@pan Inc staff (editors@japaninc.com)

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