Back to Contents of Issue: November 1999
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by Tanya Clark |
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![]() There aren't many individuals - in any country -- who can claim to have "been there" at the beginning. In Tokyo, in 1993, Boisvert was. His story, and the parallel story of his two Internet startups, ISPs Global OnLine Japan K.K. and Intercon International K.K., captures the magnitude of Japan's intensifying assault on the Internet world. Japan, of course, is a laggard. The U.S., Europe, Australia, and even some Asian nations grabbed on to the Net's potential long before Japan's first bureaucratic government clerk mastered basic HTML. This reluctance has walked hand in hand with Japan's continued recession. The nation's unwillingness to face drastic change in the way it does business is often hailed as the main cause of Japan's failure to kick-start its economy. Nevertheless, behind the keiretsu, mega-corporations, and the dithering, scandal-ridden government and bureaucracy, individuals in Japan have struck out and built new businesses and new ideas on the back of the technological revolution. Masayoshi Son of Softbank Corp. and Kazuhiko Nishi of ASCII Corp. are two to have made their mark. In Roger Boisvert's field, Japan now boasts more than 3,000 Internet service providers, up 50% over last year. The nation is getting wired. As of August 1 this year, Japan had nearly 82,150 connected domains, including over 64,000 commercial (.co.jp) sites, hundreds of ISPs, and (depending on whose statistics you use) somewhere between 8 and 18 million users. Many expect NTT's decision to introduce fixed access pricing is going to light the needed fire under Japan's Net. The market, analysts say, is set to explode. Japan's commercial Internet
is born Kurt Baumann, the president of Intercon Co. in the U.S., approached Boisvert to start the commercial Internet in Japan. "The market should logically exist, but no one had found a way," related Boisvert. Baumann wanted him to "break through the government barriers . . . It seemed so hard to do I turned the offer down three times. Here I was coming out of straight-laced McKinsey in my white shirts and all, and here is a guy with hair down to here, six earrings, a beard down to there, and other rings that weren't so apparent," exclaims Boisvert, describing the hirsute Baumann. "It was an important decision, I spent a lot of time thinking about it." He asked his wife and future business partner, Yuriko Hiraguri, to meet Baumann. "My wife tends to be a pretty good judge of character," adds Boisvert. "I thought she would hate him because she is also kind of straight- laced-extremely so-but there was extreme intelligence in his eyes that you could feel." Boisvert bit the bullet the fourth time Baumann asked. The problems began immediately. To start a company, a kabushiki kaisha, in Japan, you need ¥10 million ($92,600). Boisvert had half that. To get around the rules he borrowed the remainder, returning it after ten days. So now he had only ¥5 million to find office space, equipment, and personnel. In short, almost everything had to be scavenged. Computer parts were picked up anywhere they could be found, friends in the U.S. would cart bits and pieces over. Boisvert's first monitor had no screws. Office space was another story. In this, Joichi Itoh, the
owner of Digital Garage, another successful Japan Net venture, "comes out as a
star," says Boisvert. "Jo was trying to help me out, he felt this was very important."
Itoh said he knew someone with empty office space. Continues Boisvert: "Only problem
is, this guy absolutely hates foreigners. He's like a right-wing nationalist type.
So, we were walking over to his office, we made an appointment to meet the guy,
and Joey is saying, Ôlet me do all the talking. You just explain this is good
for Japan, Japan needs this.' I was pretty nervous walking up the stairs. We walked
in and the guy opens the door, takes one look at me, looks at Joey and says, 'what
the hell are you bringing this white trash for?' And Jo says Ôlisten to what he
has to say.' I said we are trying to make this thing called the commercial Internet
in Japan. It's really good for the country, the country needs it, has got to have
it, if you don't have it, you know, Japan will backslide into the dark ages compared
with the rest of the world." Within 15 minutes, IIKK had its first office, an
"old karaoke bar on the sixth floor of a building in Myogadani," recalls Robert
Seastrom, IIKK's engineer. "We literally didn't buy any equipment for the first
office, for the first commercial Internet," says Boisvert. "It was all leftover
parts." Tanya Clark, a Tokyo-based freelance writer, has been-like the managing editor of J@pan Inc.-a satisfied GOL user for several years. Contact her at tclark@gol.com. (Editor's Note: GOL provides free Web-hosting services to several Tokyo-area non-profit organizations, including Japan Webgrrls and International Women in Communications. Tanya Clark recently became president of IWIC.) Meanwhile, Boisvert was meeting with the government ministries, whose approval he needed to start the Internet connection. The biggest task, says Boisvert, was educating the bureaucrats. "The government wasn't ready to give approval yet. They were interested. They were curious, but they didn't know what it was. They were asking intelligent questions: why should we do it? what is the impact on the country? What if we don't do it? Gee, the government was asking the questions they should be asking," says Boisvert. "They also wanted to do it the least risky way possible, and for someone who did not understand it, it was difficult to find a way to do so without risk." Boisvert was new to the Net himself. At the same time, "I was actually paying someone to educate me rapidly, someone in the U.S. was sending me notes every day," he says. Authorization came by being thorough and persistent. The first task was to identify which government agency had the ultimate authority. In 1993, competition to control Japan's telecommunication policy had already begun among key ministries, including the Ministry of International Trade and Industry and the Construction Ministry. Nevertheless, Boisvert determined that the Ministry of Posts and Telecommunications (MPT) maintained licensing rights granting authority to companies to conduct telecommunications businesses. It was there that he targeted his forces-himself and a young Japanese speaker. "I hired a good-looking Japanese female, very polite, and brought her to the Ministry every day for a week, 9Ð5 basically." But, where companies had failed by going to the top brass of the Ministry, Boisvert tried a different tack. "I went to the bottom," he says, to a 25-year-old lower-rung bureaucrat. "The clerk has the time," explains Boisvert. "The clerk doesn't give you the solutions, but the clerk will answer your questions. So we were talking to the clerk every day. Can we do this? No. Can we do this? No. How about this? No. How about this? No, you can't do that either. How about this? No. No, you can't do this. So we went through four days of 'No,' to every question we asked. But although he answered 'No,' he didn't discourage us from asking more questions, he allowed it. It was his job to respond to the questions. The answers he didn't know, he found out." The key, says Boisvert, was that the government didn't want head-to-head competition. They wanted co-operative competition. "I believe the phrase is co-opetition now," he adds wryly. IIKK got authority to go ahead on a trial basis because it was small and, says Boisvert, a foreign company that knows when to keep its mouth shut. Authorizing a trial run for a large Japanese company could have been riskier, concludes Boisvert. If the trial had failed and the government had tried to yank authorization, "the Japanese company is going to make life very uncomfortable for the Japanese bureaucrats," adds Boisvert. Internet wars The awkward age Global OnLine consumes Roger, says Laurence Hewitt, manager of GOL's Web design division, NVision. "It consumes him, all of his energy, all of his thoughts and dreams." But it was still only 1994, and very few people in Japan even knew of e-mail or the Internet. Boisvert began recruiting customers among friends, offering free dial-up e-mail accounts. "We were providing services to about 300 people before we even opened an office." Boisvert and Hiraguri installed eight phone lines in the study of their typically small Japanese apartment, the phone wires coming through the window. Some wanted to start paying, says Boisvert, "but we still couldn't charge for it. It wasn't good enough. I was bleeding cash badly." Commitment to quality is, Boisvert hopes, Global OnLine Japan K.K.'s hallmark. From the end of January
1995, Boisvert was confident enough to start charging. By then, 1,000 customers
had signed up. But financing was still a challenge. This was an independent startup,
without any kind of corporate backing. That made financing nearly impossible,
as startup venture capital in Japan was virtually unknown. "We pursued one firm,"
says Boisvert's wife, who was by now full-time at the company, having quit her
job teaching at an English-language school for children, "but the VC firm wouldn't
invest. Instead, our contact there put his own money into GOL on the condition
that other individuals followed suit." They did, and one of the other investors
later became GOL's chairman, Yuji Suzuki. The magic of the Internet lured others.
"I don't know exactly when, but a lot of people started helping," says Hiraguri.
Friends would bring in friends, bring their own computers, printers, even furniture.
"That was a lot of fun. Lots of people were helping us for nothing. Without their
help, I don't think GOL could exist today," Hiraguri says.
Working for an Internet company in Japan creates opportunities for people who can deal with change, says Christopher Phelan. Most of GOL's staff and customers are Japanese nationals, although it is still hard to know whether to describe GOL as a Japanese company or a foreign company in Japan. Boisvert prefers to describe GOL as a Japanese company run by a Canadian. In fact, Boisvert is a tad touchy on the subject, from the days when the company was called Gaijin Online (gaijin is Japanese slang for foreigner). Many of the first customers were the "gaijin" friends of Roger and the staff. But this emphasis did help GOL forge a strong niche in an increasingly competitive market. To house the now 70, and growing, staff serving the 20,000-plus customer base, GOL recently leased four floors in a West Shinjuku high-rise. Stone blue carpets and white walls dominate. Work desks are clustered together, somewhat swamped by open space. When Boisvert moved to these offices, he was determined to ensure there was more than enough space to expand. Notably, the sixth floor is awash in more empty space than equipment. "There is plenty of room for telcos to co-locate," explains Boisvert, touting a business possibility he has been pursuing for some time-if he can find partners with the right fit. The yen starts to flow This is certainly a start,
but the type of growth GOL may need to pursue will require much higher amounts,
according to many analysts. The question is, will this be enough? "Either you
are a niche player or right at the top," says Mahendra Negi, first vice president
at Merrill Lynch's Tokyo office and their software and Internet industries analyst.
"Anyone in between will find it difficult." GOL, argues Negi, could survive in
the strong niche it found, providing bilingual and high-quality service to the
foreign community and some Japanese users in Tokyo. But GOL has moved into the
corporate market, which places it in direct competition with entrenched players.
"It is not clear how they will do," Negi concludes. GOL "can use $100 million
in cash [and] a quick listing on the market." GOL needs brand building, to buy
market share, he says. In fact, the company is talking about an IPO on the American
market (NASDAQ), possibly in 2000 or 2001. Negi argues any listing would have
to be before the end of 2000 to take advantage of the opportunities about to be
unleashed by fixed pricing.
Fixed pricing for Japan
Net access But where does this leave
local ISPs-especially smaller ones like Global OnLine that are shifting focus
away from their niches and onto the larger market? Many analysts and Internet
market players in Japan have a soft spot for Global OnLine. Outright criticism
of the company is rare. Yet, there are some obvious strategy questions. For instance,
what chances does a company with a subscriber base of around 20,000-including
up to 3,000 corporate customers-stand in a market set to be swamped by well-backed
corporate behemoths, like AOL Japan and Sony Corp.'s So-Net? If the market follows
the same patterns of development as in the U.S. and Europe (likely, but perhaps
at higher speed), is GOL agile enough, flexible enough, and adequately financed
to survive? Will Japan Internet connection costs fall to almost zero, as some
analysts predict, leaving many ISPs up the creek with no paddle? How will ISPs
need to evolve to survive in this new market? Is GOL ready? Roger Boisvert would
vehemently challenge any critical judgments of his life's work, but the company
does face severe challenges.
"GOL's people must be terribly
smart to play this game straight out in the next few years in Japan," says Heidrick
& Struggles' Satoh. Satoh believes only the big will survive the shakeout, saying
GOL's task is to increase its subscription base to 200,000 in the short term-and
one million soon after that. "They don't have much time," Satoh says, "the market
is really catching up." Satoh argues that the difference this time around, in
Japan, will be the pace of technological development. In the U.S., and to some
extent Europe, a lot of the necessary technology-for Web surfing, e-commerce,
networking, and the more sophisticated websites-was still in development during
the Internet's early years. That, he argues, helped hold back the pace of development.
"Technology-wise, there was still a bit of room." Today, the only thing holding
Japan back is fixed pricing, and once that barrier is released "everything will
go boom," Satoh says, arguing that what took six to seven years to develop in
the U.S. may only take three years in Japan. To survive, Internet companies will
need to be very agile, have a very aggressive growth plan, and the ability to
sustain it. And that will take money. GOL argues that they have their business
plan in place. Boisvert calls it the five legs: network integration, website development,
e-commerce, Internet access, and the telco plan. Again, the question, is this
enough?
But GOL has heard all this
before-at every step of its relatively short history, someone has been predicting
the demise of the small ISP-and GOL is still here. Boisvert's goal is to stick
to the game plan, increase the focus on corporate customers, and rely on his team.
And the company's "gaijin" connections may provide another, hidden, advantage.
Providing content in exchange for free access requires companies-Japanese companies-to
understand the concept of providing a loss-leading product. "I refuse to believe
that there is a Japanese company, aside from the media conglomerates, that understands
content and advertising adequately enough to even come close to that kind of business
model," says Dresdner's Rodes. GOL's foreign management is not bound by the same
type of rigid thinking that could be the cause of Rodes' frustration with Japanese
commercial creativity. It may also provide GOL, and other firms, with the breathing
space for flexible development that the U.S. and Europe found through technological
development delays.
Boisvert has built up a
surprisingly loyal following for a company so small. GOL provides a lot of services-including
e-mail accounts and websites for no charge to community groups throughout Japan.
This kind of goodwill is another big advantage for Boisvert as the firm moves
from the scrag-end beginnings of Japan's commercial Internet to creating his vision
of success. When asked about the future, Boisvert laughs and adds, "Just watch
us-you'll enjoy it when it happens." Eventually, Boisvert says, he can see the
name "Global OnLine" on billboards throughout Asia. |
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