Interesting People mailing list archives
the Japanese NII
From: Dave Farber <farber () central cis upenn edu>
Date: Sat, 18 Mar 1995 12:12:05 -0500
Dr. David K. Kahaner
Asian Technology Information Program (ATIP)
Harks Roppongi Building 1F
6-15-21 Roppongi
Minato-ku, Tokyo 106
Tel: +81 3 5411-6670; Fax: +81 3 5411-6671
ATIP: A collaboration between
US National Institute of Standards and Technology (NIST)
University of New Mexico (UNM)
------------------------------------------------------------------------
ABSTRACT. Summary of the NII debate in Japan.
My circulation of CRITO report abstracts (10 Mar 1995 File: crito.95)
omitted some recent material. Joel West pointed out to me that a recent
report of his on Japanese NII activities was not included, and he
graciously sent me a complete copy. Much of the factual material has
already been reported, but West's report synthesizes it very nicely.
----------------------------------------------------------------
Building Japan's Information Superhighway
By Joel West (for CRITO)
February 1995
If you want to know about U.S. plans for an "information
superhighway," one of the best places to find out is Japan.
Seemingly obscure U.S. proposals that are little-noticed here
are cited in Japanese newspapers, magazines, books and
speeches on Japan's own plans to build a nationwide digital
communications network.
Such a network -- usually referred to as a National
Information Infrastructure (NII) -- would be Japan's largest
public works project since the construction of the shinkansen
in the 1960's, so the possibilities are being debated by
leading industrial companies, corporate think tanks, academia
and several government ministries. The debate seems to have
little to do with the questions of how or why such a network
would be used, but instead-largely reacting to the recent
U.S. NII plans -- is driven by technological competitiveness
and a desire by electronics manufacturers to find new large
and as yet untapped markets.
As with all important issues involving national policy
in Japan, bureaucratic rivalry is central to both the process
and likely end result of the NII debate. Also involved is the
mutual dependence and rivalry between ministries and industry
as they seek to gain both support and wrest leadership from
each other.
This brief paper summarizes the policy-making processes
at work in the contemporary Japanese NII debate. Because much
of the debate is an explicit reaction to U.S. NII plans, it
also highlights a few of the major contrasts between those plans.
Key Elements of the Process
===========================
The discussion of Japan's digital communications future
is actually framed in terms of three inseparable code
phrases: multimedia, information infrastructure and fiber
optics. At one end, "multimedia"- the anticipated convergence
of audio, video and computing-has been the great anticipated
growth market for Japan's large electronics companies for
many years. They have developed both new products- such as
Sony's handheld Data Discman and Fujitsu's home PC series FM
Towns-and hyped existing products as part of an anticipated
"multimedia revolution."
The link from multimedia to an information
infrastructure is straightforward. Only multimedia content-
home movies (video on demand), interactive video games,
interactive education, and so on-requires the bandwidth to
justify a nationwide digital telecommunications network
supplanting the existing telephone network. Such a network
is the cornerstone of the plans of Japan (and other nations)
for an "information society" in which information is conveyed
digitally between citizens, business and government, rather
than via mail, fax, telephone or television.
Meanwhile, Japan has already decided that this
multimedia system will be delivered via a fiber optic
network. In the U.S., current plans call for a hybrid system
for itself based on fiber optics and coaxial cable, because
existing coaxial cable TV lines serve the vast majority of
U.S. homes.
In Japan, expensive, tightly-regulated cable TV has not
caught on, available to only around 20% of all TV households
and subscribed to by a mere 5%. So Japan has chosen the more
expensive route of building a pure fiber optic system from
scratch. Although such an all fiber-optics system would have
a greater theoretical bandwidth than the U.S.'s hybrid
system, there may be little practical difference for many
years.
One similarity to the U.S. is that the system is being
planned despite any demonstrable public demand for such a
system. This huge task is nonetheless likely to foster the
competitiveness of Japanese fiber-optic cable manufacturers.
Let me now briefly outline three key aspects of the
Japanese NII debate. Together with the familiar issue of
bureaucratic rivalry, they constitute the main elements of
the policy discussion as it has played out thus far.
The "Catch Up" Mentality
------------------------
Although elements of what is now considered NII have
been discussed in Japan for many years, the rhetoric in the last
two years seems to be driven by a "catch up" mentality-the view that
Japan is behind in both plans for an information infrastructure, and key
technologies such as networking and software.
A visit to a Tokyo bookstore will reveal dozes of books
on multimedia, NII and the coming revolution in the
information industries. Many examine technological issues,
while others examine U.S. policies or explicitly paint an
imminent economic rivalry with the U.S. As an example, Glen
Fukushima in his January Tokyo Business Today column cited
the recent book Joho Superhighway no Kyoi: Nihon Joho Sangyo
Kaimetsu no Kiki ("The Threat of the Superhighway: The Crisis
of the Annihilation of the Japanese Information Industry").
In the words of Teruyasu Murakami, a prominent Japanese
multimedia expert at the Nomura Research Institute:
"Last year [1993], we had a new social infrastructure
boom (shin shakai shihon seibi). The argument suddenly
erupted around March. The point was [made] that in the
Japanese budgeting system, only hardware investments such as
[in] construction of bridges or highways or airports are the
subject of construction bonds (kensetsu kokusai). [It was
argued] that bonds should be able to fund software
development, including communication development.
This argument was made by [those in] politics and
industries from mid-1992. Throughout the year 1992 there
wasn't any enthusiasm [for it], but in Feb.-March of 1993,
suddenly this argument came to the surface in mass
communications, TV, newspapers. A very important reason was
the Clinton administration's manifesto of the information
superhighway development. That was the starting point of the
whole information infrastructure in Japan.
Gore's superhighway idea triggered the whole argument
about a national information infrastructure in Japan....It's
a sort of artificial social phenomenon, not driven by
Japanese society's national indigenous needs." (Interview,
August 29, 1994)
Murakami cited a very concrete reason why Japanese
politicians and businessmen were concerned about the U.S.'s
NII plans. In May 1993, the Council on Competitiveness in the
U.S. published a report ("Vision for a 21st Century
Information Infrastructure") stating that U.S. NII plans
could boost the competitiveness of U.S. industries.
This report was taken very seriously in Japan, according
to Murakami, because an earlier commission, headed by retired
Hewlett-Packard CEO John Young, published a report (Global
Competition: The New Reality) in 1985 that also "dramatically
changed" (in Murakami's words) U.S. science and technology
policy toward Japan.
But here we have one of the curious points of the
Japanese examination of U.S policy discussions: many of the
proposals cited are taken far more seriously in Tokyo than
New York or Silicon Valley. Except for the Washington Post,
which did two major articles, the 1985 Young commission
report was limited to small stories buried on the business
pages of the major newspapers. At least this group --
formally the President's Commission on Industrial
Competitiveness -- got one-day coverage. Eight years later,
its successor, the industry-run Council on Competitiveness
issued the 12-page NII report cited by Murakami. Despite
Young's prominent role, the report was ignored by newspapers
(and leading university libraries) and only briefly covered
by trade magazines.
One explanation that must be considered is that the
competitive threat is being used in Japan as a tool. It is
well understood within Japan that government and industry do
better when competing with an external economic rival,
because it provides the external pressure necessary to speed
up the decision-making process and force things to a
conclusion. A crisis of competitiveness-real or imagined-
seems to have moved the Japanese closer to an information
revolution in the last two years than anything in the
preceding twenty.
Others (mainly in the U.S.) have suggested that Japan
lacks the creativity or other elements necessary for
technological leadership, and thus need to have a model to
emulate. According to John Stern, the vice-president for
Asian Affairs of the American Electronics Association, "The
Japanese catch up better than they lead. . . .This is a
nation that got rich following the taillights of America."
(Interview, Sept. 1. 1994)
Despite the "catch-up" rhetoric, there is little sense
among Japan's business and government leaders that the
country is irretrievably behind. They face a number of
problem areas in their NII plans, but, according to
telecommunications executive Teiichi Aruga, "If these issues
are resolved, playing rapid catch-up is Japan's forte." One
of these issues, Aruga notes, is the emphasis in existing NII
tests and discussions on producer rather than user
motivations ("Japan's Current Status: The Formation of a
Next-Generation Social System," presentation at The Future of
Japan's National Information Infrastructure conference, Palo
Alto, Calif., Oct. 5, 1994.)
And most recently, voicing of Japanese strengths and
American weakness has become more open. The January 2 issue
of the gaijin-oriented Nikkei Weekly contained a lengthy (if
often inaccurate) critique entitled "Piecemeal nature putting
potholes in the U.S. info highway" from a Kobe university
professor. Such outward criticism may be intended to
rebuild Japanese self-confidence after excesses of "catch-up"
rhetoric, or it may be intended to focus Japanese energies on
building within the country, rather than constantly watching
outside. [In this context, see my report, "mm.95" 5 March 1995, DKK]
Producer Motivations
--------------------
Much of the debate about the Japanese NII has been
framed around the potential revenues and jobs it would
generate for many of Japan's struggling industries, which
have been pinched since the bursting of the "bubble economy"
led to the current recession and an end to four decades of
almost uninterrupted economic growth.
Adding to weak domestic demand, exports of Japanese-made
goods are also declining due to endaka, or the strong yen.
The large Japanese electronics firms are cutting back
production in the home islands, moving manufacturing to China
and Southeast Asia and are searching desperately for new products
to manufacture in Japan to sustain both the health of their
companies and, by providing jobs, their standing in Japanese
political debates.
It is no coincidence that the "catch up" panic came in
1993, in the middle of a 10% two-year decline Japan's
industrial production. Advocates of NII investment have used
job creation as a justification: take the oft-cited report by
the Telecommunications Advisory Council (denshi tsushin
shingikai) to the Ministry of Post and Telecommunications,
which includes a table that explicitly equates NII with jobs
[emphasis in the original]:
Multimedia Markets (approximate values at 2010 prices)
New markets related to the fiber-optic network Y56 trillion
Existing multimedia markets Y67 trillion
Total Y123 trillion
Jobs created through the construction of the fiber-optic
network: Approximately 2.43 million
Source: "Reforms toward the Intellectually Creative Society
of the 21st Century," May 1994
This emphasis on domestic job creation is consistent
with Japan's postwar economic policies, but sustaining this
attitude into the 1990's could potentially cause two sources
of trade friction. At the high end, Japanese industries are
at par with U.S. rivals in some areas, and at a disadvantage
in others. Nonetheless, the implication that all the jobs
created by the Japanese NII will be in Japan suggests a
continuing policy of favoring Japanese products over imports.
This, in turn, would create new sources of potential trade
friction with the United States.
At the low end, both Japan and the U.S. are at an
economic disadvantage compared to low-cost producers in the
rest of East Asia, so it is natural to assume that (absent
explicit governmental policy) many of the jobs involved in
manufacturing mass-market consumer electronics products (such
as the "set-top box" that will be the digital interface for
TVs) will be created in other East Asian nations, and not in
Japan.
As the wealthiest country in East Asia, Japan's
potential for political leadership in the region lies in its
using that wealth to promote regional economic growth. Some
Asian specialists believe that Japan should absorb the
manufactured exports from other Asian countries, the way the
U.S. did in the 1960's, which would also improve the quality
of life of Japanese consumers.
But the tone of the current NII debate shows that any
shift from a producer-driven economy to a consumer-driven
economy has not yet begun.
Top-down, Not Bottom-Up
-----------------------
In fact, the consumer is noticeably absent from the NII
debate in Japan. The assumption seems to be "if we build it,
they (the consumers) will come," and the talk is almost
exclusively of the economic benefits accruing to the
producers, the influence gained by Japanese ministries, and
so on, rather than of any demonstrable consumer demand.
Of course, nominal consumer desires are postulated,
with video-on-demand and long-distance medical imaging being
the ubiquitous examples. But these are prototypical needs,
placeholders used to advance the discussion of the technology
until a real reason can be found. This problem is not unique
to the Japanese debate. As John King and Ken Kraemer note in
an article in the March 1995 issue of Informatization and the
Public Sector, the U.S. NII debate revolves around providing
wiring to homes even though initial market demand is likely
to be from business.
Such an approach is symptomatic of technology-driven
rather than market-driven thinking. The sharing of chest X-
rays with specialists 200 kilometers away could be done by
extending existing high-speed trunk lines to a few hundred
hospitals, without the expense of building the information
superhighway to the front door of each of 60 million households. And
postulating an interest in
video-on-demand ignores the ready availability of an
established, much lower-tech alternative: the corner video
store. (The presumed advantages of video-on-demand over the
corner video store include availability but not price:
forecasts all assume consumers will pay significantly more
for the marginal convenience.) Such an absence of market-
driven thinking does not bode well for the huge unanswered
question of the NII: the cost of wiring each of those 60
million households by the target date of 2010.
A few Japanese have framed their thinking on NII around
its potential benefits for individual members of the society,
rather than for producer companies. Shumpei Kumon, a social
economist who heads the Tokyo-based Center for Global
Communications, predicted that in addition to spawning a
"third industrial revolution" (he credits the phrase to the
American economist George Gilder), the developing information
infrastructure will also spawn a social revolution, creating
a new class of network-aware citizens, or "netizens":
Just as during the 17th, 18th, and 19th centuries
bourgeois citizens wanted to take part in their societies,
[netizens] will demand something different from mass
democracy in the 20th century. They will demand a freedom of
informational activities-just as the original bourgeoisies
demanded freedom of business activities as against the
chartered monopolies of their time. . . .
The netizens want to have much greater freedom in terms
of sending out information and having access to information.
. . . Today, broadcasting is monopolized, chartered to a
chosen few of society. Netizens are demanding that anyone
should have access. (Interview, August 30, 1994)
While a national information infrastructure has been
conceived of since the early 1970s, when the slogan joho-ka
(always translated by the quasi-English word
"informatization") came into fashion, Kumon's social
revolution does not appear to be among the stated goals of
big business and the bureaucracy, which have been leading the
NII debate. Nor do any of them, including Kumon, anticipate
as an outcome the transformation of Japan into a "consumer
economy," as is so often postulated by American economists.
Bureaucratic Rivalry
--------------------
Given the central role of the Japanese bureaucracy in
the nation's economic miracle over the past 50 years, it is
not surprising that business and the media eagerly await each
new glimpse into the plans of the unelected officialdom. But
despite its spectacular successes with Japan's auto and
electronics industries, the Ministry of International Trade
and Industry seems consigned to play a consultative- if not
subordinate-role in developing Japan's digital communications
industries.
MITI's problem is, in fact, summed up by the two words,
"digital" and "communications." Regulation of industries in
digital technology (i.e., computers) is under MITI's
authority-except when they involve communications, which are
governed by the Ministry of Post and Telecommunications. As
Murakami put it: "In the past, industrial policy was
masterminded by MITI. Now you have to think about the
Ministry of Post and Telecommunications." (Interview, August
29,1994)
The debate is not limited to MITI and MPT. Because the
information infrastructure represents the first major new
industry for Japan in 30 years, various ministries and
independent agencies are jockeying for a piece of the action.
So participants in NII conferences are treated to a parade of
representatives from Japanese ministries, always including
MITI and MPT but often featuring the Science and Technology
Agency and other groups. Each speaker presents a "Vision of a
Multimedia Society" that differs more in who is saying it in
than the details of how the vision would be implemented.
Similarly, various ministries have demonstration projects for
the city of the future (MITI calls them "new media
communities," whereas MPT sponsors "teletopias," and the
Ministry of Agriculture has its own "greentopias").
Various ministries are also sponsoring competing private
or quasi-private nationwide fiber optic communications
networks. MPT, of course, has strong ties to Nihon Telephone
and Telegraph (NTT). Among the three new common carriers
(NCC's) that are NTT's long-distance competitors, MPT favors
DDI (Daini Denden Inc., or "2nd phone company"), co-founded
by a former NTT executive; the Ministry of Construction
favors Teleway, whose lines are buried alongside of the
ministry's national highways, and the Ministry of
Transportation has encouraged Japan Telecom, a spin-off of
Japan Railways, which built its fiber optic lines along JR
tracks-much as Sprint used the track of the Southern Pacific
Railroad in the U.S. Meanwhile, MITI favors various regional
carriers tied to MITI-regulated electric power companies,
such as Tokyo Electric Power (TEPCO) affiliate TTNET.
Such diffusion of interests has its price. As Teresa
Watanabe of the Los Angeles Times noted in a recent article
("Tide Turns on Mighty Tokyo Elite", Dec. 25), many Japanese
feel that these turf wars jeopardize the nation's multimedia
future.
Nonetheless, the jockeying for influence-primarily the
rivalry between MITI and MPT-permeates the NII debate. The
recent clash between these two ministries has reopened the
"VAN wars" of the early 1980's, in which they fought for
jurisdiction over Value-Added-Networks that provide on-line
information and digital communication services. Aided by the
Keidanren, MPT won that battle in the Diet, and the net
result was a liberalization of the VAN's to permit
competition for NTT. But, as Steve Vogel has concluded in a
forthcoming study, it also led to a net increase in
regulatory power for MPT.
As in the earlier turf battle, MPT is again holding the
high cards. In the final analysis, it is hard to see how a
national information infrastructure that replaces analog
voice circuits to each home with digital data circuits could
be considered anything but a telecommunications, and thus
MPT, affair. If it wins major control, MPT will guide both
the nature of the network itself, as well as the
specifications for the equipment to be manufactured for use
in homes, offices and switching stations throughout the
nation. For this reason, reports from MPT and its allies,
such as the Telecommunications Advisory Council, offer the
clearest glimpse into the future of Japan's NII.
Despite liberalization, MPT's continuing bias toward
regulation will continue to impede the diffusion of network
services. For example, because of MPT regulatory
restrictions on certain Type II carriers, approximately 30%
of the Internet sites in Japan today cannot receive E-mail
from international destinations. In the U.S., where no state
or federal permits are required to provide worldwide E-mail
services and service providers are sprouting up weekly.
Other Factors
=============
In addition to the four major factors framing the
Japanese NII debate--the "catch up" mentality, producer
motivations, the top-down approach and bureaucratic rivalry-a
number of additional factors must be considered in examining the
NII policy-making process.
* Centrality of NTT: As noted above, all existing NII
plans assume that NTT will be building the information
infrastructure to the consumer's door. There are no cable TV
franchises or Regional Bell Operating Companies (RBOCs) to
rival NTT's claim to power, and the NCC's are too small and
weak to seriously challenge NTT. And NTT was until 1985 a
government agency, part of MPT; today, in terms of both
equity (after stock sales from 1986 to 1988, the Ministry of
Finance still holds about 65% of the shares of NTT) and MPT
influence, NTT has become at best a quasi-private
corporation. MPT has used the threat of an AT&T-style break-
up of NTT to assert its control over NTT, but NTT uses its
central role in the NII future to enlist support in resisting
such a break-up.
* Financing: The minimum cost for extending fiber optic
lines to every business and individual neighborhood is put at
Y16 trillion; with associated switching systems, extending a
line to every home and undergrounding the entire system, the
total could be as high as Y95 trillion. Because the
development model is not based on pay-as-you-go market-driven
development, and because of an ambitious deadline of 2010
(not coincidentally, 2010 is 5 years ahead of the Clinton
Administration's target date for the U.S.), most of this cost
will have to be advanced ahead of actual revenues. To prime
the pump, MPT last month announced a FY 1995 Y32.3 billion
loan program via the Japan Development Bank for building
fiber optic networks, with the money offered to NTT, other
Type I carriers, and cable TV operators. But where will the
other trillions come from? One possibility is government
financing, another is raising rates for existing NTT
subscribers, who already pay far more than consumers in many
industrialized countries: both face potentially crippling
political and practical obstacles. A third possibility, of
course, is for the Japanese to reinvest the profits from
their huge foreign trade surplus.
* Artificial schedule: Given that the financing mechanism
(and basic consumer demand) is completely unresolved, the
dates announced for completion of the NII reflect more the
pride, power ambitions, and national competitiveness of the
sponsors than realistic projections of Japan's information
future. As an example, at a June 1994 conference in Tokyo,
the NTT representative anticipated completion of the national
network by 2015; but the MPT representative set a deadline of
2010; and all subsequent NTT presentations used the 2010
date. While Japan's "catching up" is second to none, until
the details become more concrete, the announced dates must be
considered goals rather than predictions.
* Perpetual joho-ka: The phrase "joho-ka"-meaning change
to an information-oriented society- has been a slogan of
government policy for at least two decades. Shumpei Kumon
attributes the phrase to Ugiro Hayashi of the Economic
Planning Agency in the 1960's, and Chalmers Johnson in MITI
and the Japanese Miracle dates MITI's first detailed vision
plan of a "knowledge-intensive industrial structure" to 1974.
Since then the government has spawned many research and
demonstration projects in software and other information
technologies. However, public policy debates are still
dominated by considerations of manufacturing and selling
hardware-perhaps because the major electronics keiretsu still
have far more political influence than smaller software-only
firms.
* Limited consumer experience: Japanese homes and
businesses have relatively limited experience with public
networks in particular (e.g., the Internet) and computers in
general. Despite its leadership in many component
technologies, Japan ranks only 17th worldwide in per capita
computer installations. Even though visionaries in Japanese
industry, government and academia may be able to look beyond
immediate experience, this limited experience will make both
accurate market research and demonstration projects far more
difficult to implement.
* Impact of Great Hanshin Earthquake. All government
budgets prior to Jan. 25 are called into question by the
unanticipated Y10 trillion or more to be spent rebuilding the
Kansai region. The painful vulnerability of Japan's urban
areas to inevitable quakes has rekindled talk of
decentralization, which would be greatly aided by a NII-as
will temporary telecommuting during the Kobe's
reconstruction. Meanwhile, the Internet showed a small
fraction of its potential, with real-time eyewitness reports,
photographs and casualty lists posted online at Kobe
University and elsewhere for readers throughout Japan and the
world.
* Direct Influence of U.S. Policy: Japanese policy-makers
are intently studying the U.S. government's NII proposals,
and more people in Tokyo can recite Vice-President Gore's
"Five Points" (1. encourage private investment; 2. promote
competition; 3. quick regulatory response; 4. network access
for all information providers; and 5. universal service) than
in Silicon Valley or New York. Given past history in many
other fields of endeavor, even if the Japanese recognize the
stumbling blocks between rhetoric and reality, there is still
a good chance that White House policy will be more quickly
implemented in Tokyo than in Washington, D.C.
---------------------END OF REPORT--------------------------------------
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