Jiro Kokuryo is crazy about the Internet. As a student at the University of Tokyo, he was fascinated by computers. Later, at Harvard Business School, he wrote his doctoral dissertation on how information technology revolutionized American retailing. Now, as a professor of business management at Japan's Keio University, he lectures on Internet start-ups and e-commerce.
But on his personal computer at home, Kokuryo dreads logging on. He waits until he has at least a dozen e-mail messages to send before he gets online. He has barred his 9-year-old daughter from downloading Japanese pop songs from the Internet. Why so cautious?
"The phone bills!" he exclaims. "Tens of thousands of yen per month -- it's incredible!"
Millions of other Japanese Netizens feel Kokuryo's pain. In contrast to U.S. phone companies, which typically charge customers a flat monthly rate of about $20 for unlimited local calls, Nippon Telegraph & Telephone Corp., which controls 95 percent of the phone lines here, socks customers about 9 cents for every three minutes of daytime local calls. For frequent World Wide Web surfers, it adds up fast. A connection habit of two hours a day costs more than $100 a month. In large households with multiple cybernauts, the bills sometimes run several times that. Customers who want high-speed phone lines have to shell out hundreds of dollars extra in installation fees.
Japan's high cost of connecting echoes the situation in Europe, where only in recent weeks have a few flat-rate alternatives been introduced -- some by entrepreneurs, one by the French telephone monopoly -- to replace the high per-minute charges that discourage Internet use. But the cost clearly is hobbling the world's second-largest economy as it struggles to keep pace with America in the fast-changing digital age. And it is only one of many impediments to development of Internet businesses here.
Fledgling entrepreneurs in this nation of prodigious savers complain that Japan's financial system, with its heavy reliance on big banks, entrenched manufacturers and long-term lending relationships, is ill-suited to the free-wheeling nature of Internet businesses. Business and government leaders fret that the nation's educational system, with its emphasis on discipline and communal harmony, fails to turn out graduates with the creative skills and entrepreneurial drive animating the founders of Silicon Valley's pioneers.
Yet a core of Japanese Internet experts insist the picture is changing quickly. Just last week, U.S. software giant Microsoft Corp. and Japan's big Internet investor Softbank Co. announced a venture aimed at circumventing NTT's near monopoly to offer lower-cost online access. Japanese consumers have rushed to embrace a type of cell phone that allows limited Internet services. And a "citizens coalition" of Web fans is gathering signatures nationwide on a petition demanding low-cost Internet connections for every Japanese citizen.
"There are still a lot of things we'll have to work on. But we've reached the critical level," said Kokuryo, who formed the coalition he calls Internet for All. "This is the way Japan works. It takes a long time for things to get started, but when we do start, things move quickly."
Still, by nearly every measure of online progress, Japan lags the United States by three or four years. Only about 17 million Japanese, or 13 percent of the population, have Internet accounts, according to a recent survey by Japan's Ministry of Posts & Telecommunications. That's far below the 32 percent of the U.S. population that uses the Web, according to Commerce Department estimates. In Europe, the market research firm Dataquest predicts 17 percent Internet penetration by the end of 1999, with Scandinavian countries already much higher.
The U.S. population is more than double that of Japan's, but American consumers spent more than 33 times as much on online purchases in 1998 -- about $19 billion, compared with the $565 million spent by Japanese consumers. And 70 times as many U.S. investors have online trading accounts.
But many experts see great untapped potential enthusiasm for the Internet in Japan and online commerce. Its consumers are affluent, highly literate and gadget-crazy, and they delight in building personal networks. And, to hear Kokuryo tell it, Japan's business establishment is finally catching on.
"There's been a huge shift in perceptions here in just the past few months," he argues. Some of the movement has come in response to foreign prodding. Microsoft, already active in Britain, and Softbank announced an agreement with Tokyo Electric Power Co. to create a company that would bypass phone lines controlled by NTT.
The new venture would offer access to the Internet via a communications network combining wireless technologies, fiber-optic cables and conventional phone lines. The main scaffolding for that network would be Tokyo Electric's nationwide grid of utility poles, electric cables and phone lines.
At a press conference here, Softbank founder Masayoshi Son boasted that the new company would deliver high-speed access to the Internet at a monthly rate well below $86, the monthly fee that NTT has said it will charge subscribers for high-speed connection lines later this year.
"This is clearly a positive for Internet providers and users in Japan," said Mehendra Negi, an Internet expert at Merrill Lynch & Co. in Tokyo. "Low-cost flat-rate access at high speeds will make a lot more businesses viable. . . . For now, this is a flea bite [to NTT]. But little flea bites have the power to cause big infections over time."
Should the giant phone conglomerate fall ill, executives such as Satoru Kikugawa won't be shedding any tears. His company, Gala Synaptic Network, uses online chat rooms and bulletin boards to conduct market research. NTT's high connect charges are "killing us," he declared.
At Gala Synaptic, like many other online companies, usage surges after 11 p.m., when NTT allows unlimited local calls until morning for those who pay an additional fee of about $15.50 month. For many Japanese Web ventures, customer traffic peaks between midnight and 1 a.m., then spikes again during lunch hour, when legions of office workers can surf secretly at their employers' expense.
Another sign of the Internet's potential appeal here is the spectacular success of "i-mode," a new service that allows callers to trade e-mail messages, receive news bulletins, make travel reservations and perform basic banking transactions through their cellular phones.
Ironically, i-mode was developed by NTT Mobile Communications Network, an NTT subsidiary better known as DoCoMo. Thanks in part to a slick ad campaign starring a popular teenage singer, DoCoMo has sold more than 1 million i-mode phones since the service was introduced in February. Already, i-mode users can reach more than 100 Web sites through their phones, and the race is on to expand their choices.
Many think cell phones offer Japan's best hope for joining the online revolution. Nearly 40 percent of all Japanese households own a cell phone of some type -- a far higher percentage than in the America.
Merrill Lynch's Negi thinks Japan's affinity for cell phones eventually could give Japanese Internet firms a competitive edge over U.S. rivals. "There's a tremendous potential for leapfrogging with these technologies," he said.
Kokuryo, however, fears cell phone technology cannot be adapted for widespread Internet use soon enough to keep Japan in the game. "Japan needs cheap access to the Web immediately," he insists. "Four or five years from now will be too late."
And so, in league with other prominent academics and Internet executives, Kokuryo has forged the coalition now circulating the petition, described on the coalition's Web site, as a Bill of Rights for the Information Age. Every Japanese resident, it proclaims, should be guaranteed access to the Web at 64 kilobits a second for less than $86 a month, including phone charges and Internet service provider fees.
NTT, which claims its rates reflect the high fixed costs of providing local phone service, won't be budged easily. With a payroll of 147,000, the company is Japan's largest corporate employer and is protected by a coterie of friendly legislators.
If the Internet industry is to realize its full potential in Japan, there also will have to be big changes in the nation's capital markets. One crucial stumbling block, say executives of Internet companies here, is that Japanese venture capital funds loathe investing in start-ups that have yet to show a profit.
"Japanese investors don't get the whole concept of venture capitalism," scoffs 25-year old Taiga Matsuyama, a former Andersen consultant now representing foreign venture capitalists looking for Internet opportunities in Japan. "They think growth is supposed to be incremental. They want to see monthly balance statements, and if your company can't stay in the black, they say, `Go borrow from a bank.' "
Those attitudes have been reinforced on Japan's stock exchanges, where cumbersome listing requirements make it difficult for Japanese tech start-ups to get quick access to public funds. If the Nasdaq Stock Market in the United States had applied the listing criteria used by Japan's over-the-counter stock market, many of America's best-known ".com" dynamos would never have gotten off the ground.
Special correspondent Akiko Kashiwagi contributed to this report.