NTT influences the telecommunications industry in large part through its three-track open tender bidding process whereby it makes known to suppliers its needs for products of all types. Track I of NTT's open tender bidding process includes non-telecommunications products (office supplies and equipment, R&D equipment, uniforms, etc.); Track II includes telecommunications equipment available on the market without modification; and Track III includes telecommunications equipment to be developed jointly by NTT and its suppliers. For Tracks II and III, notices are published in Kampo (Japan's official gazette), Commerce Business Daily (USDC), and the Official Journal of the European Communities. Figure 2.1 depicts a flowchart of the Track II and III stages of NTT's open-tender process.

Along with defining the application, rough volumes, and price targets for new equipment, NTT issues equipment requirements such as the bit rate (or equivalent, if not digital), type of fiber, optical parameters, physical dimensions, and appearance. Specific engineering design details are not included - selected bidders are free to optimize the design based on technologies they have in-house. These selected manufacturers then develop and deliver prototypes, along with volume-pricing information. Since NTT does not guarantee production quantities, manufacturers often choose to carry out their own market analyses in order to develop realistic pricing forecasts. They compete to achieve the best performance and reliability, which factors, along with pricing, determine the share of the business they finally win. Occasionally, a manufacturer making it through the prototyping stage still loses out and gets no share of NTT's final purchases, but the potential rewards are high: winning bids under the open-tender process guarantees a large market to the winners. Some contract winners are non-Japanese: in 1994, NTT purchased from more than 1,000 non-Japanese companies $1.09 billion worth of telecommunications products, which was 16% of NTT's total purchases of transmission equipment, digital switching systems, optical-fiber cable, internetworking devices, and computers (NTT 1994).

Eventually, NTT's specifications are made available to the industry for additional purchases, but the initial participants gain in (a) being able to negotiate the final requirements, (b) being among the first, exclusive suppliers to NTT, and (c) gaining a head start in developing the new product line and scaling-up manufacturing capabilities. NTT must give its permission for a system (or device) developed under the open-tender process to be sold to customers other than NTT.

Two important systems recently developed in this bidding process were SDH 10 Gbit/s trunking systems using optical amplifiers (erbium-doped fiber amplifiers, or EDFAs) for amplification at 1550 nm, and FTTH systems capable of two-way ISDN (integrated services digital network) at 1310 nm, combined with one-way video at 1550 nm. These systems pave the way for interactive broadband services for homes and small businesses, generally accepted as a key requirement for the so-called "Information Age" revolution just now beginning. AT&T was one of the suppliers to NTT of prototype FTTH systems.

Fig. 2.1. Flow chart of NTT's Track II, III, II-A, and III-A procurement procedures (NTT). At manufacturers' R&D labs, the JTEC panel observed numerous activities that supported products for NTT:

NTT's vision for the future national telecommunications network and its resulting requirements disseminated through the open-tender process provide valuable focus for the optoelectronics industry. Through these functions NTT allows researchers and manufacturers to narrow the scope somewhat of certain R&D activities and to avoid pursuing too many alternatives or waiting for the marketplace to demonstrate the need for future telecommunications products.

Published: February 1996; WTEC Hyper-Librarian