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Japan Won't Be the Same With Born-Again NTT

April 01, 1985|SAM JAMESON | Times Staff Writer

TOKYO — Ending 105 years of government monopoly control of Japan's telecommunications industry, Nippon Telegraph & Telephone begins new life today as a private company. Three challengers are preparing to enter the telephone business, and more than 200 others are ready to launch telecommunications enterprises for the first time.

Although the historic transformation won't precipitate overnight the massive changes wrought by the breakup of American Telephone & Telegraph, it has already aroused visions of a gold mine of opportunities.

Foreign--particularly American--expectations of sales of products and know-how have risen to unprecedented levels, so much so that the Reagan Administration has singled out the telecommunications field as "the litmus test" of whether overall U.S.-Japanese economic frictions will ease or explode.

Only in the basic telecommunications field, however, will foreign investment be restricted--to less than one-third ownership of NTT's new competitors in the primary telecommunications field and none at all in the new NTT.

U.S. firms, such as IBM, AT&T, GTE Telenet, General Electric Information Services, NCR (Japan) and Burroughs, have been preparing for more than a year to enter the large-scale "enhanced services" field, or what is called "value-added networks" (VAN, for short) in Japan. This field has now been opened to private business for the first time.

Will Lease Phone Lines

Fujitsu, NEC and Hitachi also are expected to launch large-scale VAN services. To date, such networks have been run only by NTT.

Using these networks, firms will lease phone lines to provide a "software interpreting service" among computers that could not otherwise communicate.

In the last five years, the value of data communications business here has increased 70%, according to NTT, whose own revenue in this field reached $1.4 billion in the fiscal year ended March 31, 1984.

Takuma Yamamoto, Fujitsu's president, announced last year that his company intended to provide not only computer-to-computer transmission services but also basic telephone, facsimile and TV conference services--and expected to achieve sales of $444 million within the first five years.

The reform gives firms leasing telephone lines here permission to go into all forms of the telecommunications business.

To Link 2,000 Drugstores

More than 200 other firms are reportedly planning to enter the VAN business on a smaller scale.

An NEC subsidiary, for example, is planning to begin operation in June of a value-added network linking about 2,000 drugstores throughout the country to take orders, divide them by variety and pharmaceutical maker, place orders, arrange delivery and send out bills--all automatically. Idemitsu Petroleum Co. plans to set up a VAN linking its retail gasoline stations.

The value-added networks will also offer manufacturers instant information on what products are selling well in what locations, valuable input for market research and new product development.

To date, the biggest value-added network in operation in Japan has been the one linking the country's banks, which allows branches to arrange cash transfers by computer. It has been operated by NTT for 16 years.

The opening of the telecommunications market will not hand U.S. firms the bonanza that Japanese electronics companies got when AT&T was split up, Akiyoshi Takada, a senior adviser in the telecommunications bureau of the Postal and Telecommunications Ministry, said in an interview.

Little Jump in U.S. Sales

"When local phone companies in the United States broke away from Western Electric (to buy equipment), Japanese exports rose. That is true. But we will not see anything equal to that in American sales to Japan in the next two or three years," he said.

"American frustrations over the imbalance in (telecommunications) trade won't be eased."

Last year, the United States sold only about $110 million worth of telecommunications products here, while Japan sold about $1.5 billion worth in the United States.

John W. Cusick, head of AT&T International in Japan, offered one reason for the trouble in selling here when he told a symposium last Friday that most American telecommunications equipment doesn't come up to Japanese standards.

"Because of NTT's procurement requirements, everything AT&T sells here must be modified," he said.

Heavy modification expenditures drive down profits--which he said American executives are forced to consider in short-range terms "because they are judged quarter by quarter by the profits they make."

'Won't Spend the Money

"It really hurts me to turn down NTT tenders because I know my own company won't spend the money to make the modifications," Cusick said.

Another reason the trade imbalance won't be eased overnight is that it will take time for big changes in the system to occur.

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