Two Japanese companies in talks to challenge NTT

Two Japanese network service operators, Internet Initiative Japan Inc. (IIJ) and Powered Com Inc., are in talks that could lead to a merger or a joint venture aimed at competing against Nippon Telegraph and Telephone Corp. (NTT), IIJ and Powered Com said at a news conference Thursday.

IIJ, known for advanced technologies and skilled engineers, currently offers services such as broadband Internet, Ethernet, IPv6 (Internet Protocol Version 6), optical fiber and wide-area LAN for corporations and consumers. The company was one of the first to start Internet service in Japan nine years ago.

Powered Com is a newly established company founded in October 2001. Tokyo Electric Power Co. Inc. (TEPCO) is a lead shareholder and nine other of Japan's major electric power companies have invested in Powered Com. Because of that backing, Powered Com has a strong optical fiber networks backbone throughout Japan and offers similar services to IIJ for corporate users.

"By combining electric power companies' strong (optical fiber) backbones with IIJ's technologies, we can establish a leadership in the industry," said Takeshi Taneichi, president and chief executive officer (CEO) of Powered Com.

As of Thursday, the two companies started discussions on how to integrate their businesses and reach a final agreement by the end of this year, said Taneichi and Koichi Suzuki, the president and CEO of IIJ.

The privatized telecommunication giant NTT, which owns telecommunication network infrastructure all over Japan, dominates the industry by providing network services, using its infrastructure and leasing it to other companies.

"NTT has been operating the Internet businesses using infrastructures, which are meant for telecommunication," IIJ's Suzuki said. However, as users demand greater capacity and faster Internet speed and the data network market is growing now, IIJ and Powered Com think the time has come to establish new network services, using Powered Com's optical fiber infrastructure to compete with NTT, he said.

"Since the foundation of IIJ, our theme has been how to compete with NTT when it launches Internet businesses."

IIJ lost almost all of its market share, which used to be 100 percent, to NTT, he said. "But we did welcome NTT's entering the market, because the Internet industry should've not been operated only by a small company like IIJ."

"We decided to tie up with Powered Com, in order to become NTT's fair opponent," Suzuki said.

This business integration of IIJ and Powered Com would also involve other companies -- Powered Com is also in talks with Tokyo Telecommunication Network Co. Ltd. (TTNet), another telecommunication and Internet service provider owned by TEPCO, for a possible merger in April next year.

The businesses of Crosswave Communications Inc., a data network service provider founded by IIJ, Sony Corp. and Toyota Motor Corp., will be included in that integration, too, Suzuki said.

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