more on revolution in Japan

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Alex Salkever <alex_salkever () businessweek com>
Date: Tue, 04 Feb 2003 12:23:15 -1000
To: dave () farber net
Subject: Re: [IP] revolution in Japan

Just FYI, Dave, I published a quick analysis of how broadband in Asia has
moved ahead of BB in the U.S.

http://www.businessweek.com/technology/content/feb2003/tc2003024_5123_tc103.
htm 


------ End of Forwarded Message

Eating Asia's Broadband Dust
 
Unlike the halting and financially crippling rollout of high-speed access in
the U.S., in the Far East it has gone much faster and cheaper
 Sachio Semmoto, CEO of Japanese broadband provider eAccess, is a rare
example of entrepreneurial success in the battered telecom business. A
voluble man with a quick grin, a fondness for aloha shirts, and a bold
manner, Semmoto launched his company in late 1999, right before the telecom
bubble burst in the U.S. Where most of the independent carriers that
challenged the Bell phone companies failed, Semmoto is succeeding: By March,
he expects to have signed up his millionth digital subscriber line (DSL)
customer. 
The story of broadband provides a telling contrast between what has gone
wrong in the U.S. telecommunications business since the passage of the 1996
Telecommunications Act -- and what has gone right in Asia. In the U.S., the
Bells invested billions in broadband just as venture capitalists funded
numerous DSL startups -- creating huge excess capacity. The Bells' debt
ballooned, in part because of their broadband investments, and most DSL
startups hit the skids: Even the largest independent DSL provider in the
U.S. -- Covad Communcations -- had to endure a restructuring while in
bankruptcy protection, which it exited in 2001. U.S. consumers have borne
the brunt of such miscalculations: The average American household with
broadband now pays $45 a month -- expensive enough to slow growth in
sign-ups. 
Asian telecom companies, by contrast, arrived at the party relatively late,
and partly by luck avoided most of the excesses that have vexed their U.S.
counterparts. Thus, established carriers in Asia have cashed in on the
broadband craze without blowing through nearly as much money as the Bells
did -- even as broadband entrepreneurs have done well enough that some have
a chance to prosper. For instance, eAccess is profitable on the basis of
EBTIDA -- earnings before taxes, interest, depreciation, and ammortization.
"We are the first competitive local exchange carrier (CLEC) in the world to
hit that mark," Semmoto boasts.
GOOD TIMING.  The biggest winners, though, may be Asian consumers. In many
instances, they get DSL access that's 10 to 20 times as fast as that in the
U.S. -- for as little as $20 a month. And they've jumped at the bargain:
South Korea boasts the highest broadband penetration of any nation, at 58%
of households. 
Asia's good timing will probably pay off for years to come. By the time
Asian companies got serious about broadband they could buy much better gear
for as little as 20% of what their U.S. counterparts paid. That accounts for
their faster Net access and lower prices -- and quicker adoption by Asian
consumers. That in turn has spurred online gaming, which has caught on
faster in Asia than in the U.S. -- and helped carriers recoup their
infrastructure investments. High urban densities helped hold down those
investments, since high-rise networks are cheaper to build than those that
span U.S. suburbs. 
In many instances, regulation in Asia has also been friendlier to
entrepreneurs -- and kept the big state monopolies honest. In South Korea,
owners of the large apartment blocks that house 40% of the population also
control the telecom equipment in their buildings. That has given upstart
carriers an opening, since they can negotiate deals directly with landlords
instead of going through Korea Telecom. Thus, the country's leading
independent DSL provider -- Hanaro -- has been able so far to compete
head-to-head with both Korea Telecom and cable-TV providers. And unlike in
the U.S., the big companies aren't hurting. Of the 10 most profitable major
telecoms worldwide in 2002, seven were in Asia, according to the
International Telecommunications Union.
TORRID SIGN-UPS.  In Japan, Semmoto says, the government has enforced
regulations that require incumbent phone companies to give new competitors
such as eAccess capacity in their central switching facilities at reasonable
rates. In the U.S., by contrast, the Bells and upstart carriers traded
lawsuits over such arrangements -- and companies such as Covad (COVD) now
accuse the Bells of throwing up roadblocks that impaired their businesses.
The most telling evidence of Asia's advantage may be what happens next. In
the U.S., broadband subscriber growth logged 59% last year as carriers have
kept prices high to turn a profit. In Asia, where household incomes are
significantly lower, the sign-up rate remains torrid (though from a much
lower base). As of last June, China had well under 1 million DSL
subscribers. By January, 2003, it had close to 3 million, making it the
fastest-growing broadband sector of any country in the world. In Japan, the
tally has reached 6 million after only four years of serious marketing --
and may reach 12 million by 2004, according to Yankee Group.
Better technology also means bigger revenue opportunities than online
gaming. Korea Telecom serves Net-based software for a fee via broadband
links to small businesses, an idea that so far has failed in the U.S. "We
have enough people on the systems and fast enough networks that the
application-service-provider model works even though it didn't in the U.S.,"
says Sang-Hoon Lee, Korea Telecom's chief technology officer.
"VERY THREATENED."  Of course, Asia's phone carriers could still face big
problems. The broadband companies have started to offer Internet phone
service, for example, forcing the incumbents to face a Faustian choice of
ultimately embracing that technology and cannibalizing their still-lucrative
phone monopolies or mounting a rear-guard action. "Nippon Telephone &
Telegraph in Japan is very threatened with the introduction of Internet
telephony," says Izumi Aizu, a principal at Tokyo-based consulting firm Asia
Network Research. "They know that the good old days are gone."
No one said the transition to a broadband world would be painless, however.
And the situation could be a lot worse: Had they been just a little faster
on their feet, Asian companies might have landed on the same treadmill as
their U.S. cousins.


-------------------------------------
You are subscribed as interesting-people () lists elistx com
To unsubscribe or update your address, click
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/