Coming Soon, to the Internet Near You

by Forest Linton

• 1994 was the birth of the Web in Japan, and the beginning of the Web boom in the US
• 1995 was the year of investment, with new companies in Japan and IPOs (stock offerings) in the US
• 1996 was the year of access providers and software: clients, servers, and authoring tools
• 1997 is the year of building up the infrastructure in Japan, and of acquisitions in the US
• 1998 will be the year of commerce and content

Here are some of the reasons this is the year that the Japanese Internet industry is a fun place to be.

The new telco law will change the industry drastically
In June, both Houses of the Japanese Diet passed a wide, sweeping telco (telephone company) reform bill. This bill erases the distinction between international and domestic carriers, and it paves the way for the breakup of NTT. See http://www.nb-pacifica.com/ for more details.

There is a looming shakeup in the access market
The recently passed telco bill will have a big impact, of course, but there was already a strong trend toward falling prices with the appearance of low-priced leased line services, like NTT's OCN and DDI's newly announced DION. The telcos will start taking proactive measures; Japan Telecom and ITJ have already announced merger plans (effective October 1997).

The intranet boom has yet to hit
Corporate Japan lags behind other countries in network buildup. The client/server boom was just getting started when the Internet boom hit, and Japan's corporations did not have the networks in place to fully capitalize on the forthcoming intranet boom. A recent article in Edupage cites a survey that pegs Japan seventh in terms of the number of Internet-linked networks per million population. Interestingly, Canada leads with 192, while the US was in second place with 114, followed by Australia, France, Britain, Germany, and Japan (with 15 linked networks per million population). This indicates room for a lot of growth ahead for Japan.

Japan will lead in Internet access via TV
Microsoft's acquisition of WebTV, combined with strong Japanese hardware support (TV makers), will drive the growth of Internet-by-TV here, faster than overseas. Investments from foreign (mainly US) companies will continue A lot of US companies are already here: the major online services (CompuServe, MSN Japan, and AOL Japan), the major search engines (Yahoo, Infoseek, Inktomi, and AltaVista), some large US Internet service providers (AT&T, IBM, and PSI), and all the major Internet software vendors. These companies are pouring money into Japan's growing Internet industry, and most often partnering with Japanese companies in the process.

A content boom is coming
The new "push" technology introduced by Microsoft and Pointcast will revolutionize the publishing industry. Content providers will be able to easily create content channels that can be pushed to a client, providing the user with real-time news, stock quotes, sports scores, reference information, and more. True push contents will establish the Internet as the fourth media (after print, TV, and radio). Japan will not lag so far behind the US in the push category.

So how big is the Japanese
Internet? (revisited)
I just can't seem to write enough on this topic. A bunch more surveys have come out and, unless they all are making the same sampling errors, it is starting to look like there are more than 5 million Internet users in Japan. Estimates range up to 9 million. A new survey by IDC Japan has caught my attention: IDC Japan says there were 5.3 million Internet users (and 6.6 million connection contracts) at the end of 1996. It estimated 1.9 million dial-up access accounts, 4,500 local area network dial-up connections, 5,300 leased line IP connections, 1,800 UUCP connections, and 4.7 million connections via accounts with online services that offer Internet access. (The 4.7 million figure represents 80% of Japan's 5.9 million online service subscribers.)

IDC Japan estimates that 1.5 million of the total 5.3 million users are home users, 3.0 million are business users, and the remaining 800,000 are users from other segments (such as academia and government). For 1997, IDC Japan believes the number of Internet users will climb to 10.8 million. Even stronger growth is forecast for subsequent years; they predict 31.9 million users by the end of 2000.

End users have always been easier to calculate than corporate users. While it may be safe to say that Japan has the 2nd largest Internet population after the US, the corporate situation is much different.

If you have questions or comments about "The Digital Forest," you can contact Forest Linton at forest@gol.com

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