Asia Times: Internet Asia: The free-for-all is on



	February 3, 2000	atimes.com

Editorials

Internet Asia: The free-for-all is on

It's getting dangerous to walk on Hong Kong streets. Every other person you encounter is gabbing on a hand-phone, paying little attention to where he or she is walking, and pedestrian collisions have become commonplace and a definite hazard. Mobile phone penetration is at a rate second only to Finland's, the home of Nokia, producer of Hong Kong's favorite gadget. There are no reliable statistics on Internet usage in the city. But with computers cheap and usage fees low (at about US$10 per month roughly the same as in the US), Hong Kong is likely well up there and certainly growing rapidly.

In Singapore, the competition between ISPs has led to essentially free Internet access. Only local phone call charges are assessed. As fees for those go down and computers cost no more than in Hong Kong and thousands are given away by ISPs for promotional purposes, Singapore is getting plugged in big time. And now that the city state has entirely deregulated its telecoms industry and Singapore Telecoms is ready to forge an alliance with Cable & Wireless HKT of Hong Kong to create the largest telecoms company in Asia outside Japan, Japan is getting worried about being left behind in the dust by those two economies in the rush to the Net.

Japan should be worried and the Obuchi government should do a great deal more than just pay lip service to joining the Internet revolution. For starters, government-owned NTT, the principal phone service provider, might simply be prompted to give in to American pressure for lowering call rates which are at an outrageous world-high. ISPs have lowered access rates over the past year; but at 5,000 yen per month, getting connected still costs five times as much in Tokyo as in New York or Hong Kong. Just as costly are PCs and less than 2 million households own one with Internet access, compared to over 30 million in the US. As it stands, Japan is pricing itself out of the market - its own. But that, of course, has been the story of the past decade of economic misery as over-regulation and monopoly concessions limit competition and create arbitrary cost structures which in turn limit investment opportunities which in turn stifles innovation which in turn . . . and so on.

As Singapore and Hong Kong lead the way in telecoms deregulation in Asia (Hong Kong has just given out some 25 new licenses for cable and satellite-based external gateways) and with the expected marriage of SingTel and HKT creating new efficiencies, is someone in Japan going to wake up and face the new challenges? Not very likely - at least on the government side - on Obuchi's watch. Japan's current coalition government is happy to represent farmers and sake merchants, constructors of bridges to nowhere, and shopkeepers selling ten dollar mellons in your friendly neighborhood mom&pop rip-off joint - the mainstay of Japanese culture, as an LDP deregulation opponent recently called such monuments to Japanese distribution system inefficiency. Those folks don't need the Internet; it is, if anything, their mortal enemy.

But happily, even in Japan there are a few who put capitalist greed and crass profit considerations above hallowed traditional culture and revered institutions. Naturally, it would be Sony, never hugely respectful of Japanese values when it comes to making money, that has announced the unthinkable: it will sell its wares online, directly, no middlemen. And naturally, wholesale retail dealers are up in arms and are threatening to pull all Sony products off the shelves if the direct e-commerce plan goes through. Well, perhaps they should; it would greatly speed up Sony's e-commerce development and money spent on advertising is money spent better any day than money spent on useless middlemen.

Here's the irony: precisely because the Japanese distribution system is so horribly inefficient and expensive, e-commerce probably has larger opportunities in Japan than even in the United States. Nikko Salomon Smith Barney (those bloody investment firm names are getting longer by the day as they throw in their lots together) said in a recent report that business-to-business e-commerce would reach 67 trillion yen by 2003 while business-to-consumer Net sales would be at 27 trillion by then. If anything, it will likely be considerably larger than that if somehow the current government of record deficit-spending, maximum protection of backward industries persuasion can be thrown out on its heels. Voters will have the chance to do that no later than October. Let's hope, for Japan's sake, they do that and dismantle the world's worst phone company, NTT, at the same time.