@Home, the leading cable modem service, will announce tomorrow that it has formed a joint venture with the Asian nation's largest cable operator to bring @Home Japan to as many as 5.1 million homes, or nearly one-third of the Japanese cable television market.
The service, which uses broadband cable television networks to deliver Internet and data traffic at high speeds, is expected to launch commercially within about nine months--during the first quarter of 2000--although trials will begin soon, executives said. @Home Japan is expected to cost consumers about 6,000 yen, or roughly $50, per month, according to John O'Farrell, @Home's international senior vice president.
The new online unit gives @Home a foothold in the second-largest Internet market in the world and continues the company's international expansion. @Home now has 21 cable affiliates in four countries including the United States, Canada, the Netherlands, and Japan.
Under the terms of the agreement, @Home will own a 43 percent stake in the Japanese venture, Jupiter Telecommunications (Japan's No. 1 cable TV company) will hold 36 percent, while financial services giant Sumitomo will claim 21 percent ownership. Sumitomo owns about 40 percent of Jupiter, which is also known as J-COM.
The company did not release the revenue split terms of the deal or the size of its financial investment in the new venture, but executives characterized it as "in the tens of millions of dollars."
Strong international demand
@Home has seen some of its strongest subscriber growth with its Canadian cable partners and recently added a fourth partner north of the border. In February the company beefed up its foreign content development efforts, and executives expect international markets to be a large source of revenue for the company, especially for its @Work business unit and future interactive TV service.
Executives said the Japanese market represents a good opportunity because there is not yet a dominant ISP and the market continues to expand. Japan claims about 15 million Internet users.
"[The Japanese Internet market is] growing very rapidly even in a time of economic slowdown for the rest of the country as a whole," O'Farrell said.
J-COM currently reaches about 1 million homes with the necessary two-way coaxial cables, a prerequisite for sending and receiving data. The cable operator is upgrading its networks and plans to reach 3 million homes by the end of the year and 4.5 million homes by the end of 2002.
In the meantime, executives said @Home will explore digital subscriber lines (DSL) and satellite technology and will try to add additional Japanese cable affiliates. Due to old communications regulations, Japan's cable market is highly fragmented; the No. 2 operator is Titus Communications, with fewer than 1 million homes.
O'Farrell declined to comment on where @Home might roll out its next international service, but the company previously confirmed that it is in negotiations in the United Kingdom and other European and Asian nations.
The company's Dutch subsidiary @Home Nederland, its first effort outside North America, remains on track to launch during the second quarter, he said.
@Home has yet to select a transoceanic telecommunications carrier to connect @Home Japan with its U.S. and other services, but AT&T will carry transatlantic data for @Home Nederland when it launches and @Home's domestic network by August.
A new ad campaign
Separately, @Home is planning its first national advertising campaign in the United States. The company is expected to announce details tomorrow.
The campaign, a joint marketing effort with Motorola, will include television commercials, radio spots, print magazine ads, direct mailers, and telemarketing calls.
The ads also will tout Motorola's CyberSURFR cable modems. Standards-based cable modems are expected to reach retail stores later this year, allowing consumers to purchase the equipment and install it themselves.
The ads will run through May 31. The estimated cost to companies was not disclosed.