National information infrastructure


An artificial schedule without financing



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An artificial schedule without financing


The minimum cost for extending fiber optic lines to every business and individual neighborhood is put at ¥33 trillion; with associated switching systems, extending a line to every home and undergrounding the entire system, the total could be as high as ¥95 trillion (Telecommunications Council, 1994c, p. 5). Most of this cost will have to be advanced ahead of actual revenues, because the development model is not based on pay-as-you-go market-driven development, and because of an ambitious deadline of 2010; not coincidentally, 2010 is five years ahead of the Clinton Administration’s target date for the U.S.

To prime the pump, MPT in January announced a FY 1995 ¥32.3 billion loan program for building fiber optic networks, with the money offered to NTT, other Type I carriers, and cable TV operators. Of that, ¥30 billion will be loaned through the Japan Development Bank, and ¥2.3 billion will come from the MPT general account; an unspecified additional amount will be provided by local governments from existing regional development loan programs. Further financing proposal will be made by MPT, the Ministry of Finance and the Ministry of Home Affairs by March 1995 (“MPT Establishes,” 1995).

MPT and MITI are now both launching spending sprees to develop NII projects. Each has budgeted close to US$1 billion for the present fiscal year for a variety of projects, including video-on-demand, education, telemedicine and local government networks. MPT's projects focus more on communications infrastructure, while MITI concentrates on applications development. The two ministries are operating independently rather than cooperating, as each competes to encompass NII and multimedia under its jurisdiction. In addition, NTT is running its own test-bed projects as it implements its own NII vision.

But where will the other trillions come from? One possibility is raising rates for existing NTT subscribers, another is government financing: both face potentially crippling political and practical obstacles. NTT customers already pay more for their services than consumers in many industrialized countries, so the impracticality of raising rates is clearly recognized by NTT president Masashi Kojima:


Financing is the real challenge. Here, the “if we build it they will come” model may no longer work. Most customers are satisfied with conventional telephony; they don’t want advanced services to be funded by their telephone bill (Aizu 1994, p. 164).

Much of the pressure for financing stems from the artificial schedule. Given that the financing mechanism (and basic consumer demand) is completely unresolved, the dates announced for completion of the NII reflect more the pride, power ambitions, and national competitiveness of the sponsors than realistic projections of Japan’s information future. As an example, at a June 1994 conference in Tokyo, the NTT representative anticipated completion of the national network by 2015, but the MPT representative used the deadline of 2010 contained in its report (Telecommunications Council 1994a); thus, subsequent NTT presentations used the 2010 date. While Japan’s “catching up” mentality is second to none, until the details become more concrete, such announced dates must be considered goals rather than predictions.

Also unknown is the impact of the January 17 Hanshin Earthquake. All government budgets prior to that date are called into question by the unanticipated ¥10 trillion or more to be spent rebuilding the Kansai region. The painful vulnerability of Japan’s urban areas to inevitable quakes has rekindled talk of decentralization, which would be greatly aided by a NII — as will temporary telecommuting during the Kobe’s reconstruction. At the same time, the Internet showed a small fraction of its potential, with real-time eyewitness reports, photographs and casualty lists posted on-line at Kobe University and elsewhere for readers throughout Japan and the world.

Limited user experience


Japan faces even more serious problems than the U.S. in gaining end-user acceptance for the NII: Japanese homes and businesses have relatively limited experience with public networks in particular (e.g., the Internet) and computers in general. Japan ranks only 17th worldwide in per capita computer installations (Stern, 1994), although the recent boom in PC sales is changing that situation. Even though visionaries in Japanese industry, government and academia may be able to look beyond their immediate experience, such limited experience will make both accurate market research and demonstration projects far more difficult to implement.

According to MPT (Telecommunications Council, 1994b, p. 31), Japan has a third the rate of PC penetration and one-sixth the rate of Local Area Network connectivity of the U.S.; similar measures of Japan’s perceived disadvantage were circulated by a MITI-affiliated non-governmental organization (See Table 2). A major reason for this was the long delay in developing usable computer representations of the complex Japanese language, in terms of both the input and display of more than 6,000 characters in common use (Choy 1989; Snellen 1991; Cottrell 1994).

Mechanical or electro-mechanical solutions of such made typewriters prohibitively expensive, so the lack of a solution prior to the refinement of personal word processors in the 1980s means that relatively few men over the age of 30 have the keyboard skills necessary to type Japanese for E-mail messages, while the huge popularity of faxes has made the adoption of E-mail more difficult (Negroponte, 1994). Many Japanese are concerned because electronic mail has been rarely used (“Industry leaders,” 1994), even in the most beneficial applications such as submitting documents for typesetting (Noguchi, 1994). In the long run, the availability of graphical user interfaces and the development of voice and character recognition software are likely to minimize the difficulties imposed by the Japanese language.

[Insert Table 2 here.]

While the U.S. may have an advantage in starting its infrastructure, early in this century Veblen (1915) pointed out that such advantages may not only be temporary, but that first-moving countries may actually have a disadvantage by going first and letting others learn from their mistakes. Though Veblen was talking about English railroads rather than U.S. information highways, Florida and Keeney (1990) specifically argue that the U.S. has a habit of breakthrough innovation while failing to commercialize those inventions, and that Japan in particular benefits from more consistent follow-through in product development.

In the meantime, one approach is for Japanese firms to place significant marketing and R&D resources in a market which has the more experienced user base — i.e., the United States. Such an approach has already begun, with the three largest “Den-den” (New Common Carrier) firms selling Asynchronous Transfer Mode (ATM) telecommunications switches to U.S. NII demonstration projects and telephone companies, and plans to establish ATM manufacturing plants in the U.S. because they “want to get closer to their large customers” (Valigra, 1994).




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