TT-674 -- What Future for eAccess? Ebiz news from Japan.

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *

A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, August 12, 2012, Issue No. 674


- What's New -- What Future for eAccess?
- News -- Beer consumption down almost 10%
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Izu Tatadohama Beach & Yakushima
- News Credits

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On Thursday, the shares of Japan's fourth largest telco,
eAccess, fell 8.1% to JPY13,110, after Nomura Securities
cut its rating for the stock. Nomura reckons that eAccess'
fixed-line ADSL business is declining -- not hard to
imagine, as indicated by the fall in subscribers to the
service. eAccess of course also has a large mobile
business, thus providing balance to the fixed line business
shrinkage. However, Nomura appears to be of the opinion
that the mobile business is not going to make up the slack.

It is true that the mobile sector in general is under
tremendous pressure, led by Softbank setting the benchmarks
for low pricing and unrestricted data volumes, AU the
benchmark for service quality, and eAccess/NTT DoCoMo for
speed. As Number Four, eAccess has found that it has to
compete on all levels, being at least as cheap as Softbank,
at least as technically competent as AU and at least as
ubiquitous as NTT DoCoMo -- making it tough for the much
smaller company to make money. Without any more hit
products like their high-speed wireless routers, it might be
hard for them to survive.

What makes eAccess special is its leadership, Dr. Sachio
Semmoto, a telco industry pioneer and well-known
entrepreneur, and his meticulous partner, President Eric
Gan. Both of these gentlemen know the industry and consumer
markets well, and have a solid relationship that has
withstood the test of time. Back in the good old days, of
2005, Semmoto was able to raise a staggering JPY363bn
(US$4.5bn) in private equity and loans for the mobile
business, even though it was a start-up with no
infrastructure and no brand. This was really quite an
awesome feat and remains probably the
highest-funded start-up (versus a spin-off of an existing
company) in history. Even Facebook's pre-IPO funding
came in at half this amount. His success in raising this
cash speaks to Semmoto's willingness to take risks and
get others to believe in his vision. With a person like that,
you can never count him or his company down and out.

[Continued below...]

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[...Article continues]

As of late, though, eAccess seems to have been a bit
aimless in terms of strategy. The company's profits are in
geek-friendly devices, but it seems determined to spend
lots of cash so it can look like a regular phone company as
well -- complete with female celebrities and bill-boards
and stores. However, their problem is that they have
nothing to compare with Apple's iphone, and what they do
have is pretty pallid. Furthermore, while a 75Mbps mobile
connection is pretty cool, DoCoMo has a similar product,
and besides there comes a point which higher speeds are
not as important to users as functionality and
value-for-money. So unless there is a radical new
must-have direct-to-cloud application that becomes available
on Android, then how fast is fast enough? Probably eAccess
is already finding out.

What does a smaller-sized cell phone company have to do to
compete for customers in a shrinking market? It seems to
us that there are only two possibilities: slug it out over
price and technology so as to win point-by-point market
share from the other carriers -- something which is hard to
see when the other players are willing to spend their way
to success, or otherwise expand beyond the infrastructure
business and get into value-added services -- sort of a
variation of what Apple is doing combining hardware with

OK, Apple is so far ahead on consumer apps that eAccess has
little chance on that front, and both DoCoMo and AU are
investing strongly in user content such as mobile TV and
music, so that segment is done to death as well. But it seems
to us that the "native" customer for eAccess is businesses,
which most highly value speed and good infrastructure, and for
this segment, there is still lots of opportunity.

Therefore, we think that eAccess should seriously look at
building a domestic and international B2B developer
network, and have those partner software firms produce a
series of business-related apps to run only on an eAccess
specific Cloud service. The focus should be on apps which
are already available from Microsoft and others on PCs, but
which haven't quite made it to mobile yet. Google and others
are headed in this direction, but so far here in Japan apart
from email and storage, no one has succeeded in doing
anything meaningful on a major scale direct to mobile
devices. If these business-essential apps were priced at,
say, JPY500/month/user, and if they were any good, then
with eAccess' corporate sales capability and penetration,
the company and its partners could quickly build a large
following of users.

Apps that would work particularly well in this scenario
would be salesforce automation, inventory control,
accounting systems, ID systems, restaurant and hotel POS
(lite) systems, and any other functionality that typically
costs millions of yen to licence a year.

Developing these apps could be done in a collaborative
manner, where eAccess would offer guidance/control, and,
say, dollar-matching funds up to JPY20m per product.
Actually, DoCoMo has been funding app development
companies for some years now, so this is not a new
concept, and some of the results are showing up in their
service line-up. We think their problem is that they haven't
spent enough time helping the developers shape the
applications, preferring instead to take more of a
conventional hands-off VC approach.

OK, yes, there are already 1,000,000 apps combined
published for both iPhone and Android already, but
before you shoot down our idea, remember that 99%
of them are not commercial grade and of those that are,
few are available for JPY500/month/user.

We think that talented Apple and Android developers could
be attracted by being selected as a specific partner,
especially if coupled with development subsidies. For
eAccess, the experiment would be cheaper than running more
somewhat lame consumer advertising. For JPY500m they
could fund 25 starters and would surely land at least 5
winning apps, using those as a platform to build a new
business on.

The problem is: can an telco reconfigure itself to create a
software business? Well, a similar radical move was done
once before, when visionary Steve Jobs took Apple as a
computer company down the new path of mobile and
software/content. Perhaps eAccess' Semmoto needs to take
an adventurous page from his own book and move his company
from where bandwidth is the be-all, end-all of the business to
where it is just another part of the solution. To do this, he needs
to make the handsets virtually free (oh, wait, they already are),
the bandwidth needs to be priced below the competition (it
generally is), AND he needs a source of profits that the
competition don't already have...


A quick note that we're taking the weekend off next week,
one of our four weeks off a year. Have a good Obon, don't
get too frustrated with the traffic jams, and we'll be back
on August 26th.

...The information janitors/


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+++ NEWS

- Beer consumption down almost 10%
- Strange weather to stay for at least 6 more months
- Goldman exits Fujita investment
- HK baby formula recall response
- New book on survival and handling snakes

=> Beer consumption down almost 10%

While most of us are thankful that this summer is cooler
than usual and thus electricity demand is manageable, the
beer companies on the other hand are unhappy. Beer shipments
are down 9.3% to 42.96m cases (1 case = 20x633ml bottles).
In fact, by beer type, ordinary beer shipments fell by
10.1%, low-malt (and thus cheaper) beers fell by 15%, and
only beer-substitutes held to a 5.5% dip. ***Ed: Of course
more than just a cooler summer is going on here. The
government's illogical tax policies on beer, forcing people
to move to beer-like drinks, will eventually hurt the beer
industry much more than the weather. Once people get used
to beer-like drinks, which typically contain little or no
alcohol -- perfect for older people -- they are unlikely to
want to go back to the real thing.** (Source: TT commentary
from, Aug 11, 2012)

=> Strange weather to stay for at least 6 more months

The rainy season couldn't decide whether to end or not
until almost August, and now we're having Hawaiian-style
almost daily rain showers. The reason is because we are in
the middle of an El Nino period in the weather cycle, which
is caused by higher than normal warming of the sea surface
in the equatorial Pacific. El Nino usually means droughts
in the southern hemisphere and wet warm winters in the
northern hemisphere. ***Ed: This could well mean that there
will be damage to the Australian wheat harvest, which
coming on top of the US drought and the corn/wheat shortage
arising from that, would not be good.** (Source: TT
commentary from, Aug 11, 2012)

=> Goldman exits Fujita investment

In a continuing stream of divestments by Goldman Sachs from
Japan, the company has given up on its Fujita construction
company investment, selling the firm to Daiwa House for
JPY50bn. Goldman bought Fujita in several stages through to
2008 for JPY45bn. So while they didn't lose any money on
the deal, a 10% return over 4 years indicates to us that
Goldman couldn't see Fujita improving its situation any
time soon without a lot more investment. ***Ed: Daiwa House
on the other hand has deep pockets (JPY65bn in pre-tax
profits last year) and unlimited patience, making it an
ideal new owner.**

=> HK baby formula recall response

Both Morinaga and Asahi have responded to HK authorities
who told them to recall their baby formulas on the basis
that the powdered products do not contain enough iodine to
meet WHO regulations. The companies shot back saying
that their products are safe and that since Japanese eat
seaweed, there is no need to add iodine to the formula.
***Ed: Yes, well, on the surface the seaweed eating may be
true, but unless the baby is suckling with its mother or
drinking miso soup with the family, how do they get that
seaweed intake? The HK authorities point out that lack of
iodine can retard infant brain development. Morinaga and
Asahi would do well to revise their formulations, and
furthermore to ask themselves if they shouldn't be
reformulating for Japanese infants as well.** (Source: TT
commentary from, Aug 9, 2012)

=> New book on survival and handling snakes

Totally not Japanese news, but, hey, it's Obon this coming
week... :-). The ABC has a nice little article promoting a
book by Bob Cooper, helping "townies" figure out how to
survive in the Australian Outback (desert) and also how to
handle snakes. According to Cooper, about 70% of people who
get lost in the Outback are Australians, not tourists, so
the book is primarily targeted at educating them how to be
prepared and how to do things like harvesting moisture from
trees with plastic bags, how not to wander away from your
current location while waiting for rescue, and other
basics. On the snake handling side of things, Cooper is
primarily targeting the many mining and energy workers who
have to deal with Australia's frequent venomous snakes,
such as the Taipan and the Banded Tree snake. (Source: TT
commentary from, Aug 3, 2012)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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Entrepreneur's Handbook Seminar 29th of September, 2012

If you have been considering setting up your own company,
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founder of over 17 start-up companies in Japan, will be
giving an English-language seminar and Q&A on starting up
a company in Japan.

This is an ideal opportunity to find out what is involved,
and to ask specific questions that are not normally
answered in business books. All materials are in English
and are Japan-focused.

For more details:


In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

=> A reader comments about our story last week on
over-policing by Japanese lifeguards at swimming pools and

*** Reader says: I suppose excessive rules about kids
swimming pools could have something to do with the
imbalance of silver and bronze over gold. However, I would
guess it is has more to do with applying scientific method
to training, and financial support. What was sufficient 4
or 8 years ago is not sufficient now.



=> Cool Off at Izu Tatadohama Beach, Shizuoka-ken

When you think of Japan, do you think about the beach? You
should. Japan is nothing but a collection islands. Get
outside of the big cities and Japan’s long stretches of
incredible coastline are yours for the finding and

To date, my favorite beach is Izu Tatadohama in Shimoda
City at the bottom of the Izu Peninsula. I’d heard about
the nearby Izu Shirahama Beach from friends and I’d seen
pictures of it on the internet but I wanted to see for
myself if the pictures really were true. I rented a
surfboard and scheduled a lesson with the first surf shop
that answered the phone, but I neglected to check the
store’s location until I arrived in Shimoda. Realizing my
mistake, I stored my luggage at my ryokan and made the
thirty-minute walk from Izukyu Shimoda Station to the
store’s location.

It was after 9 at night and the store was long closed but
I had to see if my mistake could be rectified. At the
storefront the sound of breaking waves reduced my concern
and a quick check of the beach itself eliminated it
completely. The moon-mirroring sand was fine and soft under
my feet. The water was warm and refreshing. The moon’s
light was only enough to illuminate the waves’ white water
when they broke so I couldn’t tell how large they were or
what they looked like, but I did know that surfing wouldn’t
be a problem the next day.

Yakushima - Jomon Sugi, Kagoshima-ken
Trek through a magical forest to Japan's oldest tree

Yakushima is an island south of Kyushu that can be reached
within a couple of hours by boat from Kagoshima. The star
of the island, the main draw is undoubtedly Jomon Sugi.

Jomon Sugi is Japan's oldest Cedar. With age estimates
anywhere between 2000 and 7000 years old, it is also one of
the World's oldest trees. The path to the tree is fairly
long, with the recommended time being around 9 -10 hours.
My friends and I managed it in around 8, but we maintained
quite a pace to beat the crowds.

Beating the crowds is something to bear in mind. Under the
advice of the owner of our hotel, we set off around 4 in
the morning and were on the trail around 5. At the start of
the trail you follow train tracks, reminiscent of Indiana
Jones. I wondered why they were there and began to feel
like one of Snow White's seven dwarfs as the train tracks
seem to go on forever. [Ed: Read the article to find out
what these train tracks were for.]



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