Internet in Japan in Asian Context

November 1998


Izumi Aizu
Principal, Asia Network Research Sdn. Bhd.
izumi@anr.org




History
The Internet was first introduced to Japan in the mid 1980s. Like many other countries, it was originally developed as an experimental network project among computer scientists to share their computer resources as well as information, knowledge and ideas. It was called JUNET that linked three universities in Tokyo and interconnected to USENET in the United States. Gradually, scientists in physics, biology, astronomy or other natural science fields started to use it.

In 1988, a grass-root research project called WIDE (Widely Integrated Distributed Environment) spearheaded by Jun Murai, then research assistant at the Computer Center of University of Tokyo, started to connect their own domestic network to US Internet (NSFNet) with direct IP (Internet Protocol) connectivity using through international leased line circuit. This marked the real beginning of Internet in Japan.

In terms of academic network, there was a more legitimate national project have been carried out by NACSIS (National Center for Scientific Information System), under the Ministry of Education. However, they were pushing the use of legacy X.25 packet network, not IP, focused only on bibliographic database and sharing mainframe computer resources within pure university faculty people. For them, 'Internet' then looked dirty, insecure, unreliable patchwork of networks and thus they did not think it worth to consider. Similarly, most of established telecommunications experts in Japan treated Internet as nothing but 'toys' for computer nerds. This rather unfortunate situation ended much later than it should have been thus delaying the development of Internet in Japan considerably.

WIDE gradually captured some quarters of corporate people, first with R&D people in technology companies, who want direct access to US Internet as well as to have e-mail facility to communicate with their counterparts overseas. But the major portion of the Internet at that time in the united states was the NSF Net, which certain restrictions on the purpose of its use. In its 'Accepted Use Policy (AUP), the purpose of the use of the NSF network was limited to the ones that support the American scientific research with non-commercial purposes. This principle was also applied to the use from outside the NSF Net including that of WIDE. Since it was difficult or almost impossible to actually enforce this AUP policy, and more and more corporate members started to ask for Internet connectivity for their commercial and non-commercial activities, WIDE people saw the vast potential for legitimate commercial use of the Internet. That was around early 90's.

In June 1992, a very significant event took place. INET '92, the second international meeting of the global Internet community, hosted by newly established Internet Society, was held in Kobe, Japan, and WIDE played a major role for the organization of this conference. There came more than 600 people from almost all over the world, from more than 60 countries, not only from most developed countries, but also many developing countries from Africa, former Soviet, Latin and South American countries. Since ISOC had a tradition of organizing hand-on training program from the developing countries of the world to invite to INET, financially poor countries could participate this global conference and thus were able to obtain very basic and essential skills to start and run Internet in their home.

It became clear that Internet was one of the easiest and most efficient and cost-effective ways of sharing knowledge and information across geographic borders and social boundaries especially for the people trying to improve their quality of life in developing countries. Although much of the subjects discussed at INET '92 was of highly technical nature, naturally, some dealt with social issues, such as how to help agricultural development in Africa, or how to help fight against diseases in poor Asian country. It was almost the first time for many Japanese Internet people to see the potential of Internet beyond technical realm.

At the same time, the global Internet community itself was just starting to 'commercialize' then mostly research and education networks into general public and corporate use, in developed parts of the world. And Japan was following this trend. The first commercial Internet Service Providers started in Japan was TWICS (Two-Way Information and Communications System), originally a PC-based computer network service in Tokyo co-founded in 1985 by Jeffry Shapard, an English teacher who came to Japan, and Joichi Ito, a college drop-out born and educated mostly in U.S. TWICS started to offer uucp based e-mail connection service in 1990. At that time, ordinary Japanese people outside the academic networks such as WIDE and NACSIS were unable to send or receive e-mail to the global Internet directly. TWICS was connected to WIDE, thus allowing its commercially subscribing individuals to send and receive Internet-based e-mail freely, for the first time in Japan.

In 1992, AT&T JENS, a small subsidiary of US giant telecommunications company in Japan started to provide leased line Internet connection service in Japan. And through this AT&T's service, a small start-up company called IIKK became the first ISP in Japan that provided Internet connectivity service to individual and corporate users on commercial basis including TWICS.

WIDE people was also trying to spin-off an ISP service on their own, after failing to persuade a large data communications company to launch the ISP service. Yet the NACSIS took it as a formidable challenge to their authority, with almost religious zest and started to interfere the launch of new entrepreneur ISP provision out of WIDE. They used connections with the Government agencies such as with Ministry of Post and Telecommunications (MPT) which has authority to approve license for international value added services, and Ministry of International Trade and Industry (MITI) who is in charge for policy supervision of computer industry. It took almost two years for Internet Initiative of Japan (IIJ), the start-up ISP initiated by WIDE members, to obtain official license to run full-scale international Internet.

This represents a very typical picture of early days of Internet in many countries. The traditional academic community had very narrow-minded and authoritarian thinking, thus hated young computer nerds and geeks, or hackers, whose ideas are radical brains are bright and whose technical knowledge and skills on computer networking are often superior to senior professors and scientists in the ivory tower yet their attitudes, behaviors and even the T-shirts and Jeans fashions were totally unaccepted. The regulatory authority also had similar tendency. Internet was not based on internationally coordinated and accepted technical standard as the de jur one. Orthodox international inter-governmental organizations such as ITU or ISO did not recognize the Internet Protocol as the legitimate technical standard until recently. Nor most of PTTs (Public Telephone and Telegraph operators), mostly monopolies in their own country, the telecos, did not recognize or appreciate IP based network at all.

And Japan was no exception. It was only after United States Government started to fully support Internet, after President Clinton and Vice President Gore started their first term with 'Information Super Highway' banners and subsequent technology policy such as 'National Information Infrastructure', the Japanese status-quo began to wonder: maybe Internet could have some future.


Penetration
Today, it is estimated that some 13 million people in Japan are using the Internet, not only from academia, but from all walks of life. It is estimated that the number of users will reach 20 million in the year 2000 (Fig. 1).@

[Fig.1 Internet Users in Japan 1995-1999] --Click to enlarge!--


Source: Interne White Book 1998 by Internet Association of Japan & Access Media International


With the population of 126 million, the penetration ratio of Internet is reaching just about 10% of the population. While the total number of users are high, the number of host computers per population is 22nd in the world, falling behind Singapore and Hong Kong. Compared with per capita GDP, too, the Internet penetration in Japan is noticeably lower than most Asian countries, not to mention that of United States and many European countries (Fig.2). These factors indicate that Japan is rather slow to accept Internet to her entire population despite its massive economic strength.


[Fig. 2 Internet Users per population and GDP per capita ]


Source: Asia Network Research 1998


This trend is also confirmed by comparing the ratio between the number of host computers connected on the Internet and the size of economy represented by GNP (Fig.3). As shown below, although Japan earns second largest GNP just behind the United States, the number ratio of its more than 1 million computers to GNP, it fall to 38th out of 73 countries and economies in the table. Not only it fall behind many European countries and Australia and New Zealand, such Asian countries as Singapore (18th), Malaysia(23rd), and Korea(35th) were ranked above Japan.


[Fig.3 Number of Host Computers and GNP]

@

@

Country

GNP

iBN US$j

Hosts

Ratio

1

Finland

105.2

450,044

4,278.0

2

New Zealand

51.7

169,264

3,274.0

3

USA

7,100.0

20,623,322

2,904.7

4

Norway

136.1

286,338

2,103.9

5

Australia

337.9

665,403

1,969.2

6

Sweden

209.7

319,065

1,521.5

7

Canada

573.7

839,141

1,462.7

8

Check

40.0

52,498

1,312.5

9

Hungary

42.1

46,082

1,094.6

10

Netherlands

371.0

381,172

1,027.4

11

Denmark

156.0

159,358

1,021.5

12

Slovenia

16.3

15,432

946.7

13

South Africa

130.9

122,025

932.2

14

United Kingdom

1,094.7

987,774

902.3

15

Slovakia

15.8

11,836

749.1

16

Israel

87.9

64,233

730.8

17

Ireland

52.8

38,406

727.4

18

Singapore

79.8

57,605

721.9

19

Poland

107.8

77,594

719.8

20

Uruguay

16.5

10,295

623.9

21

Austria

216.5

109,154

504.2

22

Germany

2,252.3

994,926

441.7

23

Dominica

11.4

4,853

425.7

24

Croatia

15.5

6,509

419.9

25

Malaysia

78.3

32,269

412.1

26

Portugal

96.7

39,533

408.8

27

Switzerland

286.0

114,816

401.5

28

Bulgaria

11.2

4,140

369.6

29

Belgium

250.7

87,938

350.8

30

Costa Rica

8.9

2,965

333.1

31

Spain

532.3

168,913

317.3

32

Greece

85.9

26,917

313.4

33

Chile

59.2

17,821

301.0

34

Russia

331.9

94,137

283.6

35

Korea

435.1

121,932

280.2

36

Romania

33.5

9,335

278.7

37

Luxembourg

16.9

4,273

252.8

38

Japan

4,963.6

1,168,956

235.5

39

France

1,451.1

333,306

229.7

40

Italy

1,088.1

243,250

223.6

41

Brazil

579.8

117,200

202.1

42

Turkey

169.5

24,786

146.2

43

Columbia

70.3

10,173

144.7

44

Kuwait

28.9

4,057

140.4

45

Mexico

304.6

41,659

136.8

46

Yugoslavia

29.5

4,020

136.3

47

Ukraine

84.1

9,179

109.1

48

Lebanon

10.7

1,134

106.0

49

Thailand

159.6

14,378

90.1

50

Argentine

278.4

19,982

71.8

51

Ecuador

16.0

1,036

64.8

52

Oman

10.6

670

63.2

53

Peru

55.0

3,415

62.1

54

Philippines

71.9

4,313

60.0

55

Venezuela

65.4

3,869

59.2

56

Kazakhstan

22.1

1,209

54.7

57

Sri Lanka

12.6

680

54.0

58

Indonesia

190.1

9,603

50.5

59

Guatemala

14.3

665

46.5

60

UAE

42.8

1,940

45.3

61

Egypt

45.5

2,013

44.2

62

Cote d'Ivoire

9.2

253

27.5

63

India

319.7

7,175

22.4

64

China

744.9

16,322

21.9

65

Belarus

21.4

464

21.7

66

Pakistan

60.0

1,291

21.5

67

El Salvador

9.1

195

21.4

68

Moloch

29.5

431

14.6

69

Uzbekistan

22.0

98

4.5

70

Tunisia

16.4

69

4.2

71

Nigeria

28.4

49

1.7

72

Algeria

44.6

16

0.4

73

Saudi Arabia

133.5

37

0.3


Source: Host computers, from Network Wizard, As of Feb. 1998 and GDP from World Bank Atlas 1997
Edited by Interne White Book 1998 by Internet Association of Japan & Access Media International


Still the Internet has shown significant growth in Japan, especially in terms of the overall size of the market and the users. One indication is the very rapid growth of ISP (Internet Service Provider). It is very easy to become an ISP in Japan. All you need is basic technical skills, sufficient initial funding, and some marketing plan. Most startup ISPs are requested to register to MPT (Ministry of Post and Telecommunication) office, but criteria is minimal, say name and address of the entity, unless large-scale international connectivity is planned to operate. This very loose regulatory policy gave huge opportunity for ISP business in Japan to bloom unlike most other Asian countries where strict government regulation and controls are enforced.

There are about 2,600 ISPs officially registered in Japan, of which some 40% of are offering public services and others are either closed the operation or offering service to only selected private customers. There are many small ISPs scattered around the country, and many are based in the local community, not offering nation-wide service of their own, but just providing the IP connectivity inside their region, and connectivity to upstream national back-bone provider. This 'tier' structure allows small entity to start ISP business in relative ease.

Obstacles
One of the largest obstacles for the Internet to grown in Japan was relative high cost of telecommunications, especially that of high speed digital leased lines. Compared with that of the United States, the 64k to 1.5 M bit per second digital leased line price in Japan have been at least 5 to 10 times more expensive. One factor was that NTT had been enjoying the monopoly status up until mid 80s, and another factor was that the leased line prices are under heavy government regulation and tariffed, that meant that you must provide equal pricing to all the customers, sounds equitable but ends up in protecting the highest possible level of price and not allowing volume discount or any business negotiations nor market competition at all.

It was also noted that, again unlike US, the tariff structure was designed around distance-sensitive pricing, the long-distance leased line price have been prohibitively expensive. With growing criticisms from the Internet community, corporate users, as well as growing competition pressure from the market, the leased line pricing started to drop thus help stimulate the ISPs as well as large corporate users. It also triggered to lower the IP connectivity charges by the ISPs to the end-users.


Community Networking
Another significant factor for Japan's Internet is the exsistence of strong Community Networking initiatives. Roughly speaking Japan can be divided into two separate socio-geogrphic arenas. One is large metropolitan cities: Kanto (Tokyo-Yokohama-Chiba-Saitama), Kansai (Osaka-Kobe-Kyoto) and another is the rest. For convenience, the former can be called The City and the latter can be called The Remote.

There are strong concern among the residence of The Remote. Since most of the civilization, wealth and modern culture are produced in The City, as well as most of commercial, economic forces, the City people earn much higher income, enjoy high-level quality of life and leaving The Remote people in relatively unsophisticated, poorer state of life. This trend has been spurred by the massive concentration of population, social capital and economic activities towards the city in the '70s and '80s. In summary, very heavy centralization have occurred.

To counter this trend, The Remote people have tried to devise many movements. One of them is called 'informatization'. Originally, informatization was defined as to promote the use of modern medium such as Television, newspaper and books, to obtain as much content as in The Cities. That was later extended to such services as Cable and Satellite TVs. Later, starting from mid-80s, with the advancement of the information technology, 'informatization' is referred to promote the use of computerized networks, such as information database and teletexts as well as PC-based online services. Many local governments have adopted national government policy of this informatization promotion, and many local projects were carried out. Yet with very few exception, many did not achieve their original goals.

Now there comes the Internet. In the mid-90s, with the boom of Internet emerged, The Remote people started to see its potential. To have global connectivity from their own local sphere.


(To be filled)
Individual Use

Corporate use

Government policy


Izumi Aizu
Principal, Asia Network Research Sdn. Bhd.
Manager, Research & Planning, Institute for HyperNetwork Society
Research Fellow, GLOCOM (Center for Global Communications, International University of Japan)
Secretary General, Asia & Pacific Internet Association





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