Battle for the High-Speed Access Market

Tokyo Metallic president Kobayashi Hiroaki says, "We will attract more than 1,000 users in the first year, of whom 95% will be individuals." Upstream providers such as IIJ will receive connections at 10 to 20 Mbps, while individual customers will be able to buy full-time high-speed connections-640K to 1.5 Mbps-for ¥5,500 a month. Service for corporate customers would be priced at ¥90,000 a month. There would also be a sign-up fee of ¥30,000 for individuals and ¥90,000 for corporations. Tokyo Metallic would rent out the modems needed for this service. "We hope to be able to deliver transmission speeds of 6 Mbps in the future," Kobayashi notes.

Solving the ADSL situation
But the barriers to achieving that vision are higher than the partners had thought. Tokyo Metallic and NTT, which owns the lines, are now squared off to maneuver over a range of issues. One is the number of lines per exchange. NTT says it will allow up to 250 subscriber lines per exchange to be used for ADSL, but Tokyo Metallic's Kobayashi says, "We can't do business on that basis. Our initial request is 750 lines, and we'd like to expand to 1,500."

NTT's proposed restriction on lines per exchange poses a serious threat, since Tokyo Metallic must secure 30,000 subscribers to be commercially viable. Even if it did attract them under NTT's restrictions, having relatively few lines per exchange would raise its costs. The NTT plan, by putting a lid on the number of users within a given area, would also force Internet users to go through the "no capacity at the exchange, you can't subscribe" experience many had at the start of the ISDN boom.

Furthermore, two potentially fatal problems have emerged in developing a commercial version of the test service: Interaction between other Internet access lines affects ADSL circuit quality, and, while it is positioned as a temporary solution to allow the existing technology to scrape by until Japan achieves fiber to the home nationwide, the target date (now 2005) for having all NTT phone lines converted to optical fiber may well recede in the coming years. (The cost of installing optical fiber is unlikely to decline; some industry figures assert that a policy shift is needed, from exclusive focus on optical fiber to a variety of means to improve bandwidth.)

ISDN's interference with ADSL is the bigger headache. If an ADSL user's neighbor has an ISDN line, ADSL service is degraded, so that the user can't be assured of receiving the transmission speed and reliability ADSL is all about. And the problem will probably grow: NTT is planning to double the number of ISDN subscribers, from 5 to 10 million.

According to Tojo Iwao, chairman of Tokyo Metallic, "Domestic phone lines are polluted by ISDN." ADSL and ISDN, in fact, seem to fight like cats and dogs; if a solution can't be found, Tokyo Metallic may be in trouble. Moreover, the prospects for carriers who were considering entering the Japanese market and roping in customers by offering ADSL would be dim-unless the U.S. experience applies. There, ADSL services are growing swiftly, and ISDN is fading away.

All this is now a fairly discreet tug of war over ADSL, but it's likely to explode in full-scale warfare by next summer. ADSL has the advantage of being an easily implemented means of achieving broadband data transmission using plain old telephone service lines. If it is available in only limited areas, it will have a hard time becoming the standard for Internet connections, but it is an attractive option. But only one option: Speednet-the joint venture between Softbank, Tokyo Electric Power, and Microsoft-has begun testing toward launching its comparable service in the autumn of 2000, and Sony is also starting a wireless Net connection operation. The competition to win that "first mile" in Internet service is likely to become serious in 2000.