Hidehiko Yuzaki

Back to Contents of Issue: May 2001

Taking advantage of deregulation, the founder of telecom carrier ACCA Networks aims to bring DSL broadband to the masses.

by Kyoko Fujimoto

YuzakiGraduated from Tokyo University, worked for MITI, got an MBA from Stanford. Sounds like a typical career path for a member of the Japanese elite. But what isn't typical about Hidehiko Yuzaki is that he left MITI after 10 years to became an entrepreneur. The entrepreneurial seeds were planted in his brain while he was a student at Stanford (1993-95), where he experienced flat-rate phone and Net service. Marvelous! In 1998, MITI sent him to Silicon Valley's IGNITE Group (a VC firm focusing on IT investments) as a trainee, and he got a taste of true broadband Net access. Fantastic! When the MPT announced the deregulation of Japan's telecom industry in 1999, he jumped at the chance, establishing ACCA Networks (www.acca.ne.jp), a telecom carrier that provides broadband access solutions, in March 2000. He was a little later than competitors Tokyo Metallic and eAccess, but earlier than NTT East and West, who announced their ADSL services at the end of last year. The number of ADSL subscribers in Japan is currently small, but Yuzaki's timing seems about right: It took more than a year after ADSL services started in Japan to get 10,000 subscribers, but as of late February 2001 that number had jumped to more than 30,000. Associate Editor Kyoko Fujimoto met up with Yuzaki in Tokyo.

What made you decide to become an entrepreneur?
Up until mid-1999, when the plan was announced to open up NTT facilities to allow others to offer xDSL services, competition in telecommunications usually centered on long distance or backbone service, and NTT held a monopoly in local areas. The collapse of a monopoly doesn't happen so often, and it means a big, big chance. I'd seen the Telecommunications Act of 1996 in the US -- it was a great chance for many telecom companies in the US -- and I thought this deregulation in Japan was as big a chance as that in the US. I'd always insisted on the importance of deregulation in telecom while I was in MITI, so when I saw it happening, I thought the window of opportunity had opened and the time had come.

Didn't you think about staying in MITI to advocate further deregulation?
Yes, I did. I made the business plan while I was at IGNITE in late 1999, just around the time xDSL companies like Tokyo Metallic Communications started to appear. I was just about to go back to MITI at that time, and I thought I could achieve something if I could find the right management team to execute my plan. That's what VCs usually do, right? But it was tough finding people or companies who wanted to do exactly what I did. So I decided to do it myself.

What exactly do you want to do?
What's most important for me is not the xDSL technology itself, but how to operate the whole system. Take Toyota, for example. I was once in the automobiles division in MITI so I'm quite familiar with their technology, but it is nothing so amazingly special. They seem to have cutting-edge technology in painting, which they don't show anybody outside, but otherwise there's not much new. Their strength comes from how they operate the system and control the quality. I think the same can be said for xDSL and network service. The technology is almost the same anywhere. It's not the technology that we sell, but the service; I wanted to focus on operations, including customer service and such. And I couldn't find any other xDSL companies that had the same concept. I don't mean to criticize our competitors, but I get the feeling they are focusing more on xDSL technology itself.

You have a partnership with Covad Communications in the US and got the exclusive right to use their Operation Support System (OSS -- a system that automatically processes everything from customers' orders to construction requests). I guess that's based on the concept you just mentioned.
Yes. I felt from the beginning that Covad had the same philosophy as my plan. They also think the operation -- meaning system and procedure -- is the most important part of network service. I also knew their OSS had a good reputation, so I thought if we could use their system, we could start from one position higher even though we were not the first broadband company in Japan.

What about the partnership with NTT Communications?
Being a telecommunications company in Japan is tough. We'd like to offer stable service, but we are a new company and it's hard for people to trust a venture company that has no brand name. By tying up with NTT Communications, we can get the branding.

I've seen many startup companies in Silicon Valley, and I felt that the important thing is not to establish a company, but to run the company in a proper way. There are several essential elements in doing so -- recruiting good people is one, technology is one, and branding is another. When you don't have those elements, you have to try to build them up yourself or get them from somewhere else. But establishing a good brand name takes such a long time, so we decided to take it from somewhere, just like we took the operational know-how from Covad.

So, was inviting a non-founder (Mr. Yoshio Sakata from NTT Communications) to be the president also part of your strategy?
Yes. I think it's important to know what you can do and what you can't. I am still young [35 -- young compared to other telecom executives] and don't have the experience in this industry. So we wanted to get someone who was experienced in this industry from the beginning. Fortunately, we found the right person.

Usen Broad Networks just announced an affordable broadband service via fiber optics. What do you think about that service? Are you planning to offer the same kind of service?
As I said, we are a network service provider, and xDSL service is just a part of that. Right now I think xDSL technology is ripe and affordable, and that's why we are doing it. Fiber optic service by Usen does sound quite affordable to consumers, but considering the construction cost and such, it may take decades to become profitable. And there is not so much content out there that needs 100 Mbps of speed. But when the time comes, we will certainly offer the service using fiber optics, maybe within a few years, and probably wireless service as well.

Do you think broadband will catch on in Japan? How do you think it will change people's lives?
I'm sure it'll catch on. The cost of construction is becoming more affordable, and "do-it-yourself" modem installation service started this February, so users don't have to pay extra for installation. And what's best is that it's a flat-rate service. Japan needed this for a long time. When flat-rate and broadband become more widely used, I'm sure e-commerce will become more common. The reason American people shop online is because they can spend a long time online without worrying about connection charges. This is important -- actually I don't care much about the telecommunications industry itself. Telecommunications is just a tool; what I'm interested in is the kind of business that can be done using telecom services. I think telecommunications is the reason Japan's IT industry is said to be slower than other countries. If that part becomes easier, then I'm sure the way people do business and their way of life will drastically change.

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