4 June 2008

Japan's NTT shows the way forward

Just got back from a week in Langkawi, where NetEvents held two conferences back to back.

We were billeted in The Andaman, a large, low-rise hotel snuggled down between the rain-forest and the beach adjoining the bath-warm Andaman Sea. It’s almost invisible until you’re on top of it, and the location, the local wildlife and, above all, the incomparable desire of the people to make your stay a memorable one combine to make it a great venue. Oh yes, and the warm tropical weather...

The first of the two conferences was the company’s inaugural summit meeting for service providers in the Asia Pacific region, which allowed SPs to meet each other to share best practices. It’s an event without parallel, according to the SPs, who were glad of an opportunity to talk to each other without the paraphernalia of a big exhibition.

NetEvents is all about meeting and talking, and that’s what happened at both events, the second being all about the more familiar meeting of vendors and press.

Service providers are often difficult to get in touch with, and I learnt a lot from this valuable opportunity to listen and talk to them. Among the most interesting presentations both to me and to most of the 60 or so attendees I spoke to was the one by Hiromichi Shinohara, from Japan’s biggest telco, NTT.

Here we learnt more about the company’s launch of its award-winning next-generation network or NGN -- alleged to be the first of its kind in the world. It’s analogous to BT’s 21st century network (universally known as 21CN), which has just been officially launched, and offers fibre to the home, which of course enables high-speed broadband access. However, BT's 21CN doesn’t enable fibre to the home but is instead an IP-based backbone network that in the main connects exchanges.

To give you an idea of how advanced NTT's network is, compare most western countries’ ADSL profile, and you’ll find that it’s growing. In the UK, for example, over half the country’s homes now have ADSL-provided broadband access to the Internet. Incumbent telco BT routinely dishes out press releases trumpeting another half-million homes connected -- see here for an example.

By comparison, NTT is way ahead. For example, numbers of Japanese users of ADSL technology, which was once described as an interim technology until we get to universal fibre-connectivity, have been declining. Instead, users are switching to fibre as an access mechanism.

This means NTT reckons it can deliver richer services, for which it can charge more. For example, it plans to offer videophone services, HDTV, video-conferencing and a range of both consumer and enterprise-focused multimedia services. As a result, NTT has been able to increase its average revenue per user or ARPU, a common metric for measuring a telco’s financial performance.

It’s routine for industry observers and analysts to argue that telcos such as BT and NTT ought to add more value to their fat pipes by providing services if they’re to remain profitable in a world where broadband prices fall as demand sky-rockets. If you look at the agenda for the service provider summit, that’s the issue which recurs throughout the event. However, the telcos have not, broadly speaking, been very successful at doing so, often because their networks cannot yet support services such as video on demand. NTT appears to be an exception to this long-standing industry mantra.

While NTT may be first to launch an NGN, depending on how you define “first”, what most at the NetEvents SP summit found interesting is the way that NTT is opening up its network for others to build on by providing a service delivery platform. as part of this process, it set up a forum for third party service providers. In this way, it helps to ensure that service providers help generate revenue for NTT, as well as for themselves. This kind of double-sided business model is one that many telcos are looking at -- and an issue, incidentally, that NetEvents TV will be examining in a future feature.

I hasten to add that I haven’t tasted NTT’s NGN, so have only Shinohara-san’s words to go on. But if the words are translated into reality, then NTT’s model is one that telcos elsewhere might do well to emulate.

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