Japan's big bandwidth giveaway

The Japanese government this month thought it had a really hot ticket: a giveaway of the kind of new wireless licences that other countries sell for billions of dollars. But when the application deadline arrived, surprisingly few takers had lined up for the free offer.

The government is giving three companies the right to build separate national networks using third-generation, or 3G, wireless technology. The advent of 3G has aroused a great deal of international interest because it promises to make websites available through a variety of mobile phones and other handheld devices.

Executives at five international telcos got so excited about the wireless prospect in Britain last month that they paid an average of $US7 billion each to provide wireless services in that country. Japan also appears to be a good market: it is on the leading edge of wireless technology, and its number of mobile phone customers -- 58 million -- is about the same as the entire population of Britain.

But Japan's Ministry of Post and Telecommunications received only three submissions for three wireless licences before the application window closed on May 12. Not surprisingly, the proposals came from the cellular units of Japan's three big carrier groups: Nippon Telegraph and Telephone (NTT) , Japan Telecom and DDI.

Where were the foreigners? They skipped the party, raising the question of whether it was a foregone conclusion that the three Japanese groups would walk away as winners. At least one Japanese firm's leaders thought so. A few weeks ago, NTT DoCoMo president Keiji Tachikawa confidently stated that next year his company would launch a 3G service, although it didn't have a licence yet, and applications were still being accepted.

"It's not that we have lost interest in Japan's market," says Kaoru Kihara, an MCI WorldCom representative in Tokyo. Kihara says the company's lack of experience in Japan's mobile market and fierce competition from powerful local carriers led the company to not apply this time. (It passed on the UK auctions but is preparing a wireless bid in Germany.)Montreal-based Telesystem International Wireless, which paid $6.6 billion for a UK licence, passed on Japan because it wouldn't have had enough control over its operations in the country. "Our strategy is to look at investing in an existing operator where we could exercise a significant management influence," says Mark Boutet, director of communications. Other Asian markets, he says, offer better prospects.

US-based Qualcomm managed to slip in the back door when partner DDI announced that it would use the US company's underlying technology for its new wireless service. Just hours before the wireless applications were due, it appeared DDI was going to go with a rival system from NTT DoCoMo, but Qualcomm swayed the company through some last-minute lobbying. "It was almost a done deal," Qualcomm Japan CEO Ted Matsumoto says of NTT DoCoMo and DDI.

Partnerships with local carriers are one way foreign companies are likely to play in Japan's new wireless market for now. Both British Telecom and Vodafone AirTouch have minority holdings in J-Phone Communications, an affiliate of Japan Telecom. AT&T has a modest investment in Japan Telecom.

Eventually, international telcos may have another chance to participate directly in Japan's wireless market. "There is an expectation that the MPT will grant one more licence within a year or so," says MCI WorldCom's Kihara. Japanese companies might have the inside track again, but international telcos can't cry foul if they aren't in the game.

Michele Yamada is Tokyo Correspondent for The Industry Standard.

Join the newsletter!

Error: Please check your email address.

More about ADVENTAT&TBT AustralasiaDDiDoCoMoJapan TelecomJ-PhoneMCIMCI WorldComNippon Telegraph and TelephoneNTT AustraliaQualcommTelesystem International WirelessVodafoneWorldCom

Show Comments

Market Place