24 Firms Invest in usen Broadband Venture

[ASIA] Japan’s largest cable music provider, usen Corp., announced this week that 24 top
firms have bought shares in its Internet subsidiary in advance of a planned spring launch of
broadband Net access services.

The two dozen firms, which include Compaq, Hitachi, NEC, and Sony, have invested a total of 7
billion yen (US $60 million) in return for a combined 30 percent stake in u’s Communications.

The allocation of new shares, which occurred on December 23, leaves usen with a controlling 70
percent stake of the subsidiary.

u’s Communications, established by usen in July 2000, has been conducting broadband FTTH
(fiber-to-the-home) trials in Tokyo’s Setagaya ward since October. Those trials are scheduled to
continue until the end of March.

Commercial high-speed services are slated to start in five wards of Tokyo (Meguro, Ota,
Setagaya, Shibuya, and Suginami) from April, expanding to cover all of Tokyo’s 23 wards by
October and major cities nationwide within two years.

u’s Communications will offer access speeds of 10 megabits and 100 megabits per second.

Although details will not be announced until later this month, the 10-mbps service is expected to
be priced at about 5,000 yen (US $43) per month–less than half of what NTT regional carriers
plan to charge for a similar service, and only slightly more than NTT’s ISDN (64K-bps) Net
connection fee.

u’s Communications is said to be aiming to sign 2,000 to 3,000 subscribers per month initially, and
hopes to reach at least a half-million subscribers within two years.

Since a broadband connection opens the door to a wide range of services, such as high-quality
video- and music-on-demand, networked games, and multimedia-enhanced e-commerce, many of
the 24 investors–among them advertising agencies Dentsu and Hakuhodo, music distributor Avex,
and Tokyo FM Broadcasting–are likely to use the opportunity to further develop their own
businesses.

One Japanese media report suggests that usen sought the partnership of so many big-name firms
not so much for the infusion of funds, or even for their particular expertise, but rather as a quick
means of enhancing the “respectability” of its ambitious broadband venture.

usen has a slightly tainted reputation because of a one-time (now abandoned) practice of stringing
its cables from city utility poles without first obtaining permission or paying for the privilege.

The company has since agreed to pay appropriate pole-usage fees, as well as penalties, for the
cables already in place, and with a Tokyo Electric Power Co. affiliate as an investor, u’s
Communication usen should face no problem in laying stringing its fiber-optic cables alongside
usen’s current coaxial network.

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