New Japanese Telecom JV Launches Low-Cost Data Lines

Crosswave Communications Inc. (CWC), a telecommunications joint venture formed in October 1998 by Internet Initiative Japan Inc. (IIJ),
Toyota Motor Corp., and Sony Corp., will begin providing low-cost, high-performance backbone services later this month.

As its first commercial service, CWC will offer 1.5M-bps (megabits per second), 45M-bps, 150M-bps, and 600M-bps point-to-point data line connections.

The monthly fee for a 1.5M-bps data line starts at 200,000 yen (US$1,660) for distances of less than 200 km, while a 150M-bps line covering the same distance is 4.8 million yen (US$40,000) per month.

The rates announced by CWC are one-third to one-half those of comparable services currently offered by established telecommunications carriers.

For example, a corporation would be able to lease a 1.5M-bps line between CWC’s Tokyo and Osaka access points for 300,000 yen (US$2,500) per month.

It would cost the corporation roughly the same amount to connect its Tokyo and Osaka offices to the two CWC access points via local high-speed NTT lines, for a total monthly expense of about 600,000 yen (US$5,000).

This compares with about 1.5 million yen (US$12,500) per month for a 1.5M-bps NTT digital line extending door-to-door between those same Tokyo and Osaka offices.

CWC’s target customers are telecommunications carriers, Internet service providers, broadcasters, and other large bandwidth users.

The company also hopes that, over time, its lower prices will induce corporate users to upgrade their existing connections.

CWC’s initial service area will cover 25 access points in the Tokyo-Nagoya-Osaka corridor and the Hokuriku region.

The company will expand its service area to include 45 access points stretching from Hokkaido to Kyushu in October, and plans to have 80 relay points nationwide (in every prefecture except Okinawa) by March 2000.

CWC acquired its optical-fiber infrastructure through a long-term lease from Teleway Japan prior to that company’s December 1998 merger with KDD Corp.

To maximize fiber capacity in anticipation of future demand, CWC in March ordered over 2 billion yen (US$16.7 million) of wavelength division multiplexing equipment from Nissho Electronics that will boost a single fiber’s capacity by 10 times, to 100 gigabits per second.

Toyota and Sony, each of whom hold a 30 percent stake in CWC, have announced they intend to use its services for their key in-house networks.

IIJ, holder of the other 40 percent share, will eventually use CWC lines for its Internet backbone network.

But as Koichi Suzuki, president of both CWC and IIJ, noted, “Since IIJ currently has [other] leased line contracts, when, where, and to what extent we will use [CWC’s services] remains undecided.”

By making high-bandwidth connections more affordable, CWC and IIJ’s new services could lead to a faster roll-out of multimedia services in Japan.

At the least, it will likely force traditional domestic telecommunications service providers to adopt similar technologies and reduce their own leased
line rates.

CWC said that the company “will respond to the amazing increase in demand for telecommunication traffic brought about by the widespread use of the Internet, and offer innovative services in terms of format, bandwidth, and fees.”

CWC plans to eventually offer multipoint network services, with charges based on the number of connection points and volume of data rather than distance, and will introduce dial-up port, collocation, and network monitoring services.

CWC is targeting revenues of 6 billion yen (US$50 million) for its fiscal year 1999 operations, rising to 15 billion yen (US$125 million) in FY2001.

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