1985, although the government retained about two-thirds of NTT's stock. MPT favored breaking NTT up into competing local and long distance companies to promote a more dynamic domestic market and reduce telecommunications prices via competition. MITI sided with NTT, which opposed the breakup and wanted to be allowed to compete in international markets. In the end, a compromise was reached which broke NTT into three companies under the control of a parent holding company and allowed NTT to compete internationally. This decision was a transparent move aimed at giving the appearance of promoting competition while actually increasing NTT's power, since no real breakup had occurred.
The victory of NTT was a setback for MPT, but it was also not much of a victory for MITI. MITI has not found a major role in important new policy areas such as the Internet and network computing. Instead, the stalemate between MITI and MPT has prevented Japan from developing coherent, coordinated strategies to deal with the policy issues raised by convergence, network computing, and the Internet. The two are pursuing their independent NII strategies, while NTT will be left to make the major investments and decide the form that Japan's NII will take. The future of Japan's computer industry is likewise being shaped by the management decisions of NEC, Fujitsu, Toshiba, Hitachi, and the other major companies. Japan's bureaucrats have not become irrelevant, but they are hardly the visible hand guiding the computer industry that they were in the past.
Japan seemed to have all the ingredients for success in the PC era, from strong manufacturing skills and control of many key components technologies to a corporate structure that could support a sustained drive into export markets. Yet in spite of their success in components and peripherals, the Japanese computer makers have had only limited success in PCs, and have been virtually shut out of the software industry.
The reasons for this mixed record are complex, yet the most important have to do with Japan's industry structure. Japan's large, vertically integrated firms were well suited to high-volume, capital-intensive components production. They also did quite well in the relatively stable mainframe industry, because they could marshal the necessary resources within their keiretsu groups and count on the members of those groups as captive customers. However, in industry segments such as PCs and hard disk drives, where product cycles are short and timing critical, the Japanese industry structure was a liability. Unable to make decisions quickly, Japan's computer makers had limited success in such businesses.
Japan's industry structure has been even more of a barrier to the growth of a competitive software industry. Small software companies found it difficult to raise capital or develop adequate distribution channels. Large users long