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March 21, 1988


By CBR Staff Writer

We have never encountered a closed market for our products in Japan declared Edmund Fitzgerald, chairman of Northern Telecom Ltd: People who complain that the Japanese market is closed have simply been unwilling to put sufficient investment into developing the market. Northern Telecom has invested $15m to gear its products to the Japanese market, and Fitzgerald was in Tokyo for the commissioning of first DMS-10 rural area telephone exchange which has been installed by Nippon Telegraph & Telephone Corp in Kashiwa, outside Tokyo. The exchange is the first to be installed under the contract to Northern Telecom for 1.5m subscriber lines, equivalent to 750 exchanges. The contract with Nippon Telegraph was signed two years ago, and makes the Canadian company the largest non-Japanese supplier to NTT. But underlining the investment needed to break into the market, it took Northern Telecom four years to win the contract, and the exchanges are still undergoing testing with NTT, but from 1989, Northern expects to be shipping switches at rate of one every other day. According to Fitzgerald, NTT has the edge with its larger D-70 70,000-line switch, widely used in the Tokyo phone system; he also says that it was tough competing against entrenched Japanese suppliers such as Fujitsu Ltd and NEC Corp. Asked whether the threat of trade sanctions by foreign trading partners had helped Northern to win the contract, Fitzgerald came back with You’ll have to ask NTT that. But overall, he sees Japan as a very promising market now for foreign companies to enter, because of the rapid change currently taking place in the world – new technologies where foreigners can compete on equal terms with local companies, regulatory changes such as the flotation of NTT as a commercial company, introduction of competition into markets that were previously monopolies. Nippon Telephone is currently making a technological leap itself, converting directly from electromechanical cross-bar switches to digital electronic switches, having missed out on the analogue electronic switching generation of equipment – and as a result will have surplus properties all over Tokyo because modern exchanges are so much smaller than those clainking relays. Northern Telecom has committed to upgrade the DMS-10s to ISDN: the switches will be made at its 2,200-employee plant in Malaysia. Fitzgerald looks for a shake-out in the telecom market leaving five or six players, two of them to be Japanese.

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