In the second part of his two-part series, Bob Johnstone uncovers the bureaucratic infighting behind Japan's failure to create its own coherent information infrastructure strategy.
Outside the station in the small Tokyo Bay town where I live are two of the most sophisticated public telephones in the world. Encased in cool gray plastic, the phones feature on-hook dialing, volume controls, and LCD screens that give instructions on how to make international calls – in English as well as Japanese. Most beguiling of all are the two jacks near the bottom of the phones, which can accept both analog and digital input from a personal computer.
What I often wonder is, for whom are these phones intended? Almost the only people who ever use them are salarimen calling their wives to come and pick them up late at night. In the past year or so, Integrated Service Digital Network (ISDN) phones have sprung up all over the Tokyo area. The joke is that the only people who ever jack into them are visiting American engineers who cannot resist the opportunity to log onto the Net remotely from a public phone (and have their photo taken doing it). But even they only use the analog jack.
ISDN phones are symbolic of the way things are done in Japan. Government bureaucrats decided that the public needed digital phones, so we got digital phones, with little thought given to how we would use them. Positioned as an extension of the traditional phone system, Japan's narrowband (64Kbps over copper) ISDN has been a commercial flop, having attracted fewer than 200,000 subscribers in the six years since the service went into operation.
Today, the Japanese are debating the construction of a much more ambitious broadband digital network that is intended to lay optical fiber to every home and office in the country. But again, as commentator Kazuhisa Maeno of the Mainichi newspaper writes, "the issue of how the communications circuits should be used is being completely ignored."
Though nominally a Western-style democracy, Japan is actually run by bureaucrats, not politicians. Japanese bureaucrats are selected on merit from among graduates of top universities. These are the ultimate products of what is probably the most competitive education system in the world. They bring their razor-sharp competitive instincts to their new positions. But whom to compete against? Why, bureaucrats at other ministries, of course. "Young bureaucrats are like yakuza," comments one government source, referring to the Japanese mafia. "They develop muscles by fighting against each other – that's the style of their society."
Japan's rulers inhabit a cluster of office buildings in Tokyo's central Kasumigaseki district, just down the hill from the Diet (parliament) building and across the moat from the Imperial Palace, where Emperor Akihito lives in splendid isolation. Dominating the cluster is a thirteen-story tower that houses the notorious MITI, the Ministry of International Trade and Industry. For ambitious young bureaucrats, International Trade and Industry used to be the ministry of choice. But the ministry's glory days – when it had control over allocation of precious foreign exchange, hence the power to decide who could import what – are long gone.
Today, pride of place goes to the bean counters at the Ministry of Finance, whose stronghold is the undistinguished squat gray building across the road. To MITI's right is its archrival, the Ministry of Posts and Telecommunications. Prominently displayed in the lobby of the Posts and Telecommunications building are demos of the various unsuccessful projects that the ministry has promoted over the past decade. In addition to narrowband ISDN, these include Captain, a teletext system that, unlike the French Minitel, never found a popular application; CATV, as cable television is called in Japan, which until very recently has been too tightly bound in red tape to grow; satellite TV, which has been hobbled by the high cost of transponders (Posts and Telecommunications permit required); and Hi-Vision, Japan's obsolete version of high-definition television, which sputters on in the form of eight-hour daily broadcasts on one channel that are unwatched by all but a tiny minority (see related story on page 68).
Over the way from the Ministry of Posts and Telecommunications is the Ministry of Education, Science, and Culture (Mombusho), which sets the national school curriculum and administers Japan's universities. Mombusho bureaucrats live in a brown brick doughnut of a building which, to judge by its art deco flourishes, was built before World War II. This is entirely appropriate, since the education ministry spends much of its time making decisions about how unsavory incidents involving the Imperial Japanese Army during World War II – most notably the Rape of Nanking – are presented, or not presented, in history textbooks. MITI may have its visionaries and radicals, but the Mombusho is dominated by conservatives who guard their prerogatives with particular zeal.
The education ministry discourages fraternization between its vassals – university faculty, for example – and researchers at institutes run by other ministries, let alone their corporate counterparts. The Mombusho has the power to punish those that disobey it by cutting off their funding. Its goal is to maintain as much control as possible over the university nodes of Japan's computer network. The funny thing is, the ministry's bureaucrats seem to have little idea what networks are used for. "Even when we explain it to them, they still don't understand," laments Haruhisa Ishida, of the University of Tokyo's Computer Centre, who is secretary of the Japanese branch of the Internet Society.
Nor is the situation any different at the other ministries which see networking as their business. Only one of the half-dozen bureaucrats interviewed for this article (a MITI man, naturally) had an e-mail address, and even that was at a research institute, not at the ministry itself.
Nonetheless, when Vice President Al Gore presented his National Information Infrastructure proposal to Congress, Japanese bureaucrats were quick to formulate a response. Their opportunity came in the form of a Yen1.3 trillion (US$13 billion) supplementary budget announced in mid-1993 by Japan's government. This money was intended to stimulate Japan's sluggish economy. Some 10 percent of it was earmarked for "new social infrastructure," a vague phrase that could be understood to mean information superhighways. Certainly, that was how MITI chose to interpret it, proposing the construction of a nationwide network of optical fiber to the home.
The gambit by MITI stung the Ministry of Posts and Telecommunications into rushing out a counterproposal. In the old days, the boundaries between the two ministries were well demarcated: MITI looked after computers, while the Ministry of Posts and Telecommunications took charge of communications. The arrangement worked well so long as computers were stand-alone devices, but the coming of networking has given MITI the perfect excuse to poach on Ministry of Posts and Telecommunications territory. (A second blow to the Ministry of Posts and Telecommunications was the loss of control over Nippon Telegraph and Telephone Corp. (NTT) following the partial privatization of the giant corporation in 1985.)
Posts and Telecommunications bureaucrats saw new social infrastructure as a chance to regain some lost ground. They argued that, since the US government was committed to providing fiber to the home, Japan should embark on a similar project in order not to be left behind. (This, as several Japanese commentators have pointed out, was "a deliberate misunderstanding," the Clinton-Gore administration's intention being to stimulate the construction of a nationwide network, not to lay the fiber itself.) The bureaucrats proposed that construction of the network should be entrusted to a new public corporation which would, of course, be managed by the Ministry of Posts and Telecommunications.
At this point, NTT threw its hat into the ring, announcing that it could handle building the network. Bringing fiber to every home would take twenty years and cost Yen41 trillion (US$400 billion), but the corporation could do it. Where would the money come from? From raising the price of local phone calls, the corporation answered, bringing up an increase for which it has long lobbied the Ministry of Posts and Telecommunications. The Ministry of Finance, the ultimate arbiter in the debate, is known to favor NTT's plan, not least because the Ministry of Finance wants the corporation's stock price to rise so it can sell off the 66 percent of NTT shares that the government still holds.
As it makes the difficult transition from public corporation to full- fledged private company, NTT has begun to slough off its old, bureaucratic ways. In the past, says Kaoru Kubo, vice president in charge of NTT's strategy planning office, NTT would present its customers with a network interface and tell them to adapt their systems accordingly. These days, Kubo says, "The world is changing. De facto standards like PC, video, and TCP/IP were not determined by network vendors." The lesson, he adds, is that "we have to change our attitude. These different guys tell us what they require, then it is up to us to try and accommodate them."
This customer-friendly attitude is coupled with a newfound aggressiveness in forming alliances with partners to develop multimedia services. In March, NTT announced that it would join Tokyo-based software publisher Softbank in a venture to provide video on demand over the telephone company's data communication lines. The same month, NTT president Masashi Kojima shocked local firms by appearing on the same platform with Microsoft Chairman Bill Gates to announce that the two firms would work together to develop multimedia-related services. Earlier in the year, the corporation had demonstrated its recognition of US superiority in communications software by joining the General Magic alliance.
What NTT would like to see most of all now is deregulation, especially in Japan's archaic tariff system. When the corporation wants to introduce a new service, it must figure out how much it would cost to implement the system nationwide, then charge accordingly. Not surprisingly, the result is high costs for everybody. This is particularly true in the case of leased lines, the sine qua non of networking, where costs range anywhere from five to eight times as much as in the US. But since Japan's new common carriers – DDI Corp., Japan Telecom, and Teleway Japan, the local equivalents of Sprint and MCI – depend on leased-line sales for much of their revenue, the Ministry of Posts and Telecommunications is reluctant to let NTT drop its prices too much.
At the same time, a challenge to NTT's assumption that it will have sole charge of creating Japan's information infrastructure has emerged in the shape of a heavyweight alliance called Tokyo Telecommunication Network Co. Among partners in this grouping is Tokyo Electric Power Co., which for several years has been quietly laying a fiber network alongside its power transmission lines. Though it has yet to begin trials of interactive services, Tokyo Telecommunication Network is already talking of hooking up with regional power companies and cable operators throughout Japan to form a nationwide network.
Meanwhile, back in Kasumigaseki, the turf war for control over construction of the next-generation network rages on. Thus far, all that has been agreed upon is the construction over the next three years, at a cost of Yen4.1 trillion to Yen5.2 trillion (US$40 million to $50 million), of a new, interministerial 6Mbps fiber network connecting 50 or 60 government research laboratories. Responsibility for running this network nominally belongs to the Science and Technology Agency. But the agency is a lesser player in Japan's great bureaucratic game, and has little practical experience with networks and few qualified personnel. Behind the scenes, the National Center for Science Information Systems, an institute belonging to the education ministry, is maneuvering to gain control.
But in the heat of battle, the bureaucrats appear to have lost sight of what matters most. That is, the creation of new services and the development of applications. "If you look at the US National Information Infrastructure initiative," NTT's Kubo says, "in addition to conduit, the government also gave budget for libraries, universities, and medical centers – to promote the development of applications and to encourage the spread of online databases to give people easy access. But the Ministry of Posts and Telecommunications doesn't understand – they ignore this kind of key issue."
The Japanese are acutely aware of the problems caused by an unaccountable bureaucracy that puts the short-term interests of individual ministries ahead of those of the nation. Bringing the bureaucrats back into line was a high priority of the reformist government led, until April, by Morihiro Hosokawa, though success ultimately eluded him. A major problem is that many of the government's new representatives are still wet behind the ears, and even senior coalition politicians have no previous government experience. So, paradoxically, the effect of the new government has been to strengthen the hand of the bureaucrats. Japanese politicians appear to know even less about networking than Japanese bureaucrats. There used to be one Diet member who used a computer bulletin board to communicate with his constituents. Unfortunately, he lost his seat in the last election. And it is doubtful whether even he jacked into an ISDN phone.
Sidebar: The Posts and Telecommunications Ministry admits defeat. Twice.
Everybody, including the Ministry of Posts and Telecommunications, knows that Hi-Vision – Japan's hybrid analog HDTV standard – is dead as a dodo. But when in late February Akimasa Egawa, director general of the ministry's broadcasting bureau, admitted as much, he sparked outrage from broadcasters and equipment makers alike.
Egawa said the Ministry of Posts and Telecommunications was considering shifting its support from Hi-Vision to an all-digital system like the one proposed in the US. In Japan, it is customary before announcing such a radical policy shift to make the rounds of concerned parties to explain your position. In this case, however, the announcement came out of the blue. The bureaucrats evidently concluded that shock treatment was the only way to deal with the recalcitrant firms.
Egawa's bluntness backfired on him. A storm of protest blew in from senior executives at Sony and other leading Japanese electronics companies. After all, they wanted to know, was it not under guidance from the ministry that they had adopted the standard in the first place? The hapless bureaucrat was forced to eat his own words. It now looks as if Hi-Vision will be allowed to limp on into obscurity.
A second Ministry of Posts and Telecommunications initiative, the deregulation of cable television, has been more favorably received. Not that the bureaucrats are in favor of deregulation in principle, mind you. Rather, the criticism blaming their restrictive policies for Japan's backwardness in advanced communications had grown too loud to ignore any longer. At the end of 1993, the ministry agreed to allow up to 33 percent foreign ownership in cable TV firms. Then in April, the Ministry of Posts and Telecommunications indicated that it would permit cable operators in different areas to connect to each other.
(Government restrictions on the size of the areas that cable companies can serve have been a major factor in preventing firms from achieving sufficient economies of scale to operate at a profit. Lack of capital has in turn prevented cable companies from expanding, with the result that today only about 3 percent of Japanese homes are wired for cable versus 63 percent in the US.)
Several powerful corporate groups are gearing up to get serious about providing cable to the Japanese domestic market. Typically, these cluster around a giant trading company, with a US partner providing operating expertise and programming and a Japanese affiliate supplying hardware. One such affiliate is Itochu, which has reportedly teamed up with Time Warner, US West, and Toshiba; others possibly involving US giant TCI, are in the works.
Still more deregulation is in the works. The Ministry of Posts and Telecommunications is currently conducting a sweeping review of laws and policies affecting communications and broadcasting. These are currently administered by separate fiefs within the ministry. But bowing to the march of digital technology, the bureaucrats are likely to recommend that in the future a single set of regulations will suffice for both.
