Yahoo BB: the model IP telco? - News Analysis - Brief Article

Telecom Asia, Nov, 2003 by Robert Clark

Softbank-owned broadband upstart Yahoo BB has not only shaken up Japan's telecoms sector and made broadband a household item, it has also blossomed into a textbook case for the flexibility of IP as an all-purpose service platform in an increasingly packetized world.

Led by entrepreneur Masayoshi Son, Yahoo BB now has 3.3 million DSL customers but also 3 million voice customers, who are paying 7.5 yen (69 cents) and 2.5 yen for an international call.

This is on an $800 million investment in a backbone, plus $30 million spent on VoIP infrastructure. On this investment, Son explained to an audience at ITU Telecom World 2003 in Geneva last month, he had the business platform to "go after" broadcast TV, and other markets.

"All we had to do was a basic IP-based network. Everything else is just a marginal investment, so small, and we can go after them one by," he said.

In the voice market, Yahoo BB's voice customers pay 7.5 yen (69 cents) for three minutes for a domestic call. For international destinations, such as North America, it's 2.5 yen.

The voice quality, Son says, is equal to standard circuit-switched voice.

"The only difference that you see at the end of the month is the bill. The average monthly cost of you telephone goes down 75%."

Analysys chairman David Cleevely says Son's success shows that the "revenue generation that has been sustaining this business for the last 100 years is no longer growing and could perhaps be shrinking.

"We are on the brink of an extreme change in the structure of this business," he warns.

"[There are] people who don't understand, who are living still in the old era," said Son. "We can go for the TV broadcasting industry. They have invested $30 billion to $40 billion dollars in 50 years. We are going after that market with $30 million."