During the 1980s, when Americans started to get freaked out about Japan again, we heard a great deal about Japanese corporations' patient, long-term approach to R&D and how vastly superior it was to American companies' stupid, short-term approach. Since American news media are at least as stupid and short-term as the big corporations they like to bitch about, we have heard very little follow-up to such stories in recent years, which is kind of disappointing because I was sort of wondering how it was all going to turn out. But now the formerly long-term is about to come due.
By the beginning of the 1980s, the generation of cable-savvy KDD men who had cut their teeth at Ninomiya had reached the level where they could begin diverting corporate resources into R&D programs. Tohru Ohta, who today is the executive vice president of KDD, managed to pry some money loose and get it into the hands of a protégé, Dr. Yasuhiko Niiro, who launched one of those vaunted far-sighted Japanese R&D programs at Ninomiya. The terminal building for TPC-1, which had been the center of the Japanese international telecommunications network in 1964, was relegated to a laboratory for Niiro. The goal was to make KDD a player in the optical-fiber submarine cable manufacturing business.
Such a move was not without controversy in the senior ranks of KDD, who had devoted themselves to a very different corporate mission. In 1949, when Japan was still being run by Douglas MacArthur and the country was trying to dig out from the rubble of the war, Nippon Telephone & Telegraph (NT&T) split off its international department into a new company called Kokusai Denshin Denwa Co., Ltd. (KDD), which means International Telegraph & Telephone. KDD was much smaller and more focused than NT&T, and this was for a reason: Japan's international communications system was a shambles, and nothing was more important to the country's economic recovery than that it be rehabilitated as quickly as possible. The hope was that KDD would be more nimble and agile than its lumbering parent and get the job done faster.
This strategy seems to have more or less worked. Obviously, Japan has succeeded in the world of international business. It is connected to the United States by numerous transpacific cables; lines to the outside world are plentiful. Of course, since KDD enjoyed monopoly status for a long time, the fact that these lines are plentiful has never led to their being cheap. Still, the system worked. Like much else that worked in Japan's postwar economy, it succeeded, in those early years, precisely insofar as it worked hand-in-glove with American companies and institutions. AT&T, in other words.
Unlike the United States or France or Great Britain, Japan was never much of a player in the submarine cable business back in the prewar days, and so Ohta's and Niiro's notion of going into head-to-head competition against AT&T, its postwar sugar daddy, might have seemed audacious. KDD had customarily been so close to AT&T that many Japanese mocked it cruelly. AT&T is the sumo champion, they said, and KDD is its koshi-ginchaku, its belt-holding assistant. The word literally means waist purse but seems to have rude connotations along the lines of jockstrap carrier.
Against all of that, the only thing that Ohta and Niiro had to go on was the fact that their idea was a really, really good one. Building cables is just the kind of thing that Japanese industry is good at: a highly advanced form of manufacturing that requires the very best quality control. Cables and repeaters have to work for at least 25 years under some really unpleasant conditions.
KDD Submarine Cable Systems (KDD-SCS) built its first optical fiber submarine cable system, TPC-3, in 1989 and will soon have more than 100,000 kilometers of cable in service worldwide. It designs and holds the patents on the terminal equipment that we saw at Ninomiya, though the equipment itself is manufactured by electronics giants like Toshiba and NEC. KDD-SCS is building some of the cable and repeaters that make up FLAG, and AT&T-SSI is building the rest. A problem has already surfaced in the AT&T repeaters - they switched to a different soldering technique which turns out to be not such a good idea. Eleven of the repeaters that AT&T made for FLAG have this problem, and all of them are lying on the bottom of oceans with bits running through them - for now. FLAG and AT&T are still studying this problem and trying to decide how to resolve it. Still, everyone in the cable business knows what happened - it has to be considered a major win for KDD-SCS.
So when KDD threw some of its resources into one of those famous far-sighted long-range Japanese R&D programs, it paid off beautifully. In the field of submarine cable systems, the lowly assistant has taught the sumo champion a lesson and sent him reeling back - not quite out of the ring, but certainly enough to get his attention. How, you might ask, is the rest of KDD doing?
The answer is that, like most other PTTs, it's showing its age. Even the tactful Japanese are willing to admit that they have performed poorly in the world of international telecommunications compared to other countries. Non-Japanese will tell you the same thing more enthusiastically.
The telco deregulation wars have begun in Japan as they have almost everywhere else, and KDD now has competitors in the form of International Digital Communications Inc. (IDC), which owns the Miura station, the other FLAG landing spot. In order to succeed in this competition, KDD needs to invest a lot of money, but the very smallness that made it such a good idea in 1949 puts it at a disadvantage when large amounts of capital are needed.
Just as Ninomiya is a generic cable landing, so KDD is something of a generic PTT, facing many of the same troubles that others do. For example: the Japanese telecommunications ministry continues to set rates at an artificially high level. At first blush, this would seem to help KDD by making it much more difficult for upstarts like IDC to compete with them. But in fact it has opened the door to an unexpected form of competition: callback.
Callback and Kallback are registered trademarks of Seattle-based International Telcom Ltd. (ITL), but, like band-aid and kleenex, tend to be used in a generic way by people overseas. The callback concept is based on the fact that it's much cheaper to call Japan from the US than it is to call the US from Japan. Subscribers to a callback service are given a phone number in the US. When they want to make a call, they dial that number, wait for it to ring once, and then hang up so they won't be charged for the call. In the jargon of the callback world, this is the trigger call. A system in the US then calls them back, giving them a cheap international line, and once that is accomplished, it's an easy matter to shunt the call elsewhere: to a number in the States or in any other country in the world.
Any phone call made between two countries is subject to a so-called settlement charge, which is assessed on a per-minute basis. The amount of the settlement charged is fixed by an agreement between the two countries' PTTs and generally provides a barometer of their relative size and power. So, for example, when working out the deal with Denmark, Pakistan might say, "Hey, Danes are rich, and we don't really care whether they call us or not, and they have no particular leverage over us - so POW!" and insist on a high settlement charge - say $4 per minute. But when negotiating against AT&T, Pakistan might agree to a lower settlement charge - say $1 per minute.