Fujitsu Merger Creates Japan's Largest ISP

Fujitsu Ltd. will merge its online service and 'Net access business to create an Internet service operation with the largest number of customers in Japan, the company said today.

The Japanese vendor hopes to complete the merger of the NiftyServe online service with InfoWeb by November, it said in a statement issued today. NiftyServe, Japan's oldest online service, has 2.73 million [M] subscribers, while an additional 620,000 Fujitsu customers access the Internet via InfoWeb.

The new service, to be called @nifty, will be Japan's largest Internet service business with 3.5 million [M] users, edging past Japan's second largest 'Net operation, Big Globe, which is owned by Fujitsu rival NEC Corp.

NEC merged its Mesh and PC-Van Internet businesses in July 1996 to create Big Globe. That Internet service business today has 2.71 million [M] customers.

The merger will allow InfoWeb users to access NiftyServe's 766 user communities and forums in addition to its 219 online shops, according to a Fujitsu spokesman in Tokyo. Users will tap into the @nifty service through a single Web site. An address for the site has not been determined, the spokesman said.

Internet service companies across the board are ramping up their businesses as the number of Japanese tapping into the Internet begins to show strong growth for the first time.

Market research firm Access Media reported recently that the number of Internet users in Japan topped 15.1 million [M] in February, and should reach 18.5 million [M] by the end of the year. That is 50 percent higher than the year before.

But while 12.9 percent of all Japanese households had online access in February, Internet usage here still lags many other industrialized countries. Some 36.2 percent of American households were online at the end of 1998, according to a recent study from Dataquest Inc, part of market research company Gartner Group Inc. Scandinavian countries have the highest rates of 'Net saturation at between 70 and 80 percent.

Access costs and PC use are two factors widely singled out to explain the apparent Internet gap between Japan and much of the rest of the world.

In general, Internet access charges in Japan remain high. The local call needed to dial up to an ISP (Internet service provider) costs 10 yen (US$0.08) for three minutes in Japan compared to the free call U.S. users enjoy.

Japan's low level of home PC penetration -- only 19.1 percent of Japanese have PCs at home -- is also restraining Internet absorption, according to the Access Media report. The report indicates that the number of Internet users in Japan has closely followed the number of PCs in people's homes.

Costs could be on their way down, though, and PC usage on the way up.

Japan's largest telecom, Nippon Telegraph & Telephone Corp. (NTT), has hinted that it is considering a flat-rate access fee for Internet users, instead of the pay-by-minute system now in place.

Furthermore, in the wake of NTT's reorganization into three separate companies, effective July 1, new competitors are entering the telecom market. Crosswave Communications, a joint venture between Sony Corp. and Toyota Motor Corp., began providing cut-rate network services in Japan in April and Sony then announced in June that it would built a wireless network to bring Internet access to customers.

PC shipments in Japan are surging, up 36 percent in the second quarter of this year from the same period last year, in large part due to rising consumer interest in the Internet, according to market research firm International Data Corp. (IDC). Also, more and more users are accessing the Internet through their mobile phones and PDAs (personal digital assistants).

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