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Unlike U.S., Japanese Push Fiber Over Profit

It is reported that nearly 8 million Japanese have a fiber-optic line at home that is as much as 30 times speedier than a typical DSL line. But while that speed is a boon for Japanese users, industry analysts and some companies question whether the push to install fiber is worth the effort, given the high cost of installation, affordable alternatives and lack of services that take advantage of the fast connections.

Indeed, the stock price of Nippon Telegraph and Telephone, which has two-thirds of the FTTH market, has sunk because of concerns about heavy investments and the deep discounts it has showered on customers. Other carriers have gotten out of the business entirely, even though it is supported by government tax breaks and other incentives.

The heavy spending on fiber networks, analysts say, is typical in Japan, where big companies disregard short-term profit and plow billions into projects in the belief that something good will necessarily follow.

"The Japanese think long-term," Mr. Bortesi added. "If they think they will benefit in 100 years, they will invest for their grandkids. There's a bit of national pride we don't see in the West."

But even without Japan's tax incentives, NTT and some other Japanese companies say that selling fiber lines makes sense because their older copper networks need to be replaced anyway, and because they have to develop services to offset the decline in revenue from traditional phone lines.

And while acknowledging that initial investments are expensive, NTT and KDDI, the second-largest phone company, expect to recoup some of their money by selling additional products, like Internet phone and television services, that are delivered over fiber lines. They also expect electronics companies to produce an array of products that rely on fiber networks, including high-definition videoconferencing equipment and medical devices that can instantly relay X-rays between hospitals.

"The cost of installing the service will continue to go down by leaps and bounds," said Kazuhiko Ogawa, general manager of the network strategy section at NTT. "In the future, we will establish a lot of alliances and applications that will combine stability and reliability."

But while millions of users have signed up for fiber connections, far fewer have bought additional services.
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