WW-02 -- Independent Thinking Cuts i-mode Hype

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J@pan Inc Magazine Presents:
W I R E L E S S W A T C H
Commentary on the week's wireless news from Japan
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Friday, March 30, 2001
Tokyo

INDEX
+++ Viewpoint: Independent Thinking Cuts i-mode Hype
+++ Noteworthy News
- DoCoMo readies i-mode for overseas
- Japan's Net users expected to hit 104 million in 2005
- Full color screen on US cellphone
- NTT DoCoMo, Walt Disney Internet Group (Japan) sign MOU
on overseas content
- The US: Land of the free, home of the brave, and mobile
content isn't king
+++ Worth a read
+++ Sign of the times
+++ P.S.

+++ VIEWPOINT

Independent Thinking Cuts i-mode Hype

A Tokyo-based mailing list for wireless developers saw some
interesting chat this week on the veracity of i-mode usage
numbers. Discussion focused on the number of owner-
subscribers who ACTUALLY use the service to access the
Web as well as send email. In the absence of verifiable
reports from DoCoMo on i-mode server traffic, some critics
believe that many subscribers simply pay the (low) i-mode
monthly fee (JPY300/month) but rarely use the service; or
use it only for email. i-mode competitors J-Phone, KDDI/AU,
and DDI Pocket offer similar low fees, so the same doubts
can be raised about their services as well. If true, this
would imply the wireless Web's overall usage is far smaller
than the operators would have everyone think.

Keitai-L list (http://www.appelsiini.net/keitai-l/) member
Victor Pikula, a mobile developer based in the Netherlands,
posted a well-reasoned analysis of what he thought the
actual number of i-mode users is based on data from a
variety of open sources, including (1) Hakuhodo Institute of
Life and Living (actual usage of all Net-enabled phones by
age and gender), (2) NTT DoCoMo (No. of i-mode subscriber --
now 21-plus million, but Pikula used November's figure of
15,410,000 to match Hakuhodo's data), and (3) D2
Communications (i-mode owners broken down by age). His
conclusion? There are only 3,870,689 actual i-mode users
(19-74 age group), far less than claimed by DoCoMo (Pikula's
original post and spreadsheet can be found at:
http://www.appelsiini.net/keitai-l/archives/2001-03/0562.html).

Pikula warns that the data were culled from differing
samples and that the samples themselves are likely very much
smaller than the number of i-mode subscribers, making any
statistical analysis somewhat problematic. Nonetheless, his
result is interesting and we suspect the continuing lack of
data from the operators drives marketing staff at potential
and current content providers crazy.

We tapped our DoCoMo Deep Source to confirm or refute
Pikula's math. Deep Source claims that i-mode active users
(including those who access the Web, and not simply email
users) constitute more than 90 percent of i-mode's
subscriber base. "i-mode's access logs reveal that in a
[presumably typical] one week period, over 90% of the whole
subscriber base accesses the Web via the portal site or an
independent site at least once," intoned Deep Source with an
air of certitude (as much as could be conveyed via email);
DS also claims this fact was revealed to the Japanese press
at i-mode's second anniversary press conference, but was
largely ignored. Readers can make their own decision on whom
to believe. Independent developer Pikula at least makes his
raw figures and reasoning publicly available, while DoCoMo
obviously isn't going to post its server log files anytime
soon. On the other hand, Deep Source has been dependable in
the past, and we guess that with all the hype, most new
customers try i-mode once or twice (out of curiosity, if
nothing else) and that lots probably get converted to
regular users.

In the end, we remain just a teensy bit skeptical of DoCoMo.
Sure -- we'll accept the 90 percent usage claim at face
value. But until we see verifiable server stats, we'll also
keep encouraging the kind of independent thinking
exemplified in Pikula's posting -- thinking that at least
tries to cut through the mountains of i-mode hype.

+++ NOTEWORTHY NEWS
(Note: Long URL references may break across two lines.)

-> DoCoMo readies i-mode for overseas
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article
&cid=FT3LFGZTMKC&live=true&tagid=ZZZPCGI2B0C&subheading=
telecoms
(Financial Times, March 22)

EXTRACT: A senior NTT DoCoMo executive says that the firm
will launch i-mode-like services through its global partners
within the year; services would be offered using dual-mode
handsets. DoCoMo is partnered with AT&T Wireless in the US,
KPN Mobile in the Netherlands, Hutchison Telephone in Hong
Kong, and KG Telecom in Taiwan. KPN Mobile has started
deploying a 2.5G network system known as GPRS, while AT&T
will introduce the European standard GSM and GPRS services
in 40 percent of its network areas this year. DoCoMo is also
encouraging its partners to roll out third-generation
services as quickly as possible between 2002 and 2003.

COMMENTARY: This is the first we've heard of dual-mode
handsets, but it's a good sign. Having more or less
guaranteed customers for handsets that are compatible with
Japan's PDC standard and any of the overseas standards would
help give incentive to Japan's terminal makers to exploit
sales in a wider variety of markets than now. We've said it
before; the ultra-cool handsets provided to subscribers of
Japan's wireless Net services are a significant factor in
the success of the mobile Net here -- and will be overseas
as well. Note the final comment on encouraging partners to
adopt 3G (W-CDMA) tout suite. By at least one estimate,
DoCoMo stands to save JPY600 billion in domestic
infrastructure procurement costs over the next ten years if
it can persuade other carriers to move to W-CDMA without
delay (the more carriers buying W-CDMA infrastructure, the
cheaper the cost for everyone).

-> Japan's Net users expected to hit 104 million in 2005
http://www.cnn.com/2001/TECH/internet/03/22/japan.internet.
reut/index.html
(Reuters on CNN.com, March 22)

EXTRACT: Reuters quotes an IDC Japan report stating the
number of Net users in Japan will rise to 104 million in
2005 from 39.8 million in 2000, primarily due to mobile.
That 104 million would represent some 80 percent of Japan's
population, compared to a Net penetration of just 30 percent
last year. The report forecasts the total number of Net
accounts will grow 28.5 percent annually to exceed 230
million in 2005, with 86.3 million mobile accounts vs. 73
million home accounts.

COMMENTARY: Some argue that wireless Net penetration doesn't
count, as though accessing the Web on a tiny screen is in
some way inferior to doing so on a 19" monitor. There may be
a kernel of truth in this. Admittedly, mobile customers here
are in actuality simply accessing a single, gigantic
corporate intranet operated by their network operator, NOT
the Internet itself (the operators here all allow customers
to get onto the Net, should they wish). But concerns of Big
Brother aside, we think this largely doesn't matter. In
fact, it's in the intranet owner's best interests to make
sure that the network offers high quality, speed, and
security, whereas the Net at large is fixedly "best effort"
for all concerned. In the next few years, m-com,
advertising, one-to-one marketing, and personal services
will all migrate to the wireless Web (or webs), and services
offered to wired Net surfers will become less significant.
According to the stats above, Japan's mobile surfers will
exceed fixed-line surfers in just a couple of years; we
think the wireless webs will see all the action.

-> Full color screen on US cellphone
http://e10.sprintpcs.com/aboutsprintpcs/mediacenter/2001/
01_03_29.html
(Sprint press release, March 29)

EXTRACT: Sprint and Sanyo announce the launch of the Sprint
PCS Phone SCP-5000, a clamshell handset purported to be the
first full-color screen on a mobile phone marketed in the
US. Phone highlights: 2-inch (dia.) screen, 256 colors,
memory for up to 20 photos and 5 backgrounds, caller "photo
ID" & visual screening, voice-activated dialing, one-touch
Web access, 120 hours standby time, and $499.99 at Sprint
Stores.

COMMENTARY: This is really, really important. As we said in
the first item above, handsets are vital for mobile's
success in the US and Europe. Why? Because, as Japan has
proven, wireless Net commercial success is driven by
consumer adoption of entertainment, personal services (train
schedules, restaurant guides, sports news), and games
delivered via keitai. The virtuous cycle (growing subscriber
base attracting even more content providers, which attracts
more subscribers) can only start when consumers are handed a
very cool, full-color, lightweight, take-with-you-anywhere,
show-off-to-your-friends pocket rocket -- and that requires
a color screen. We're curious about the details of this
phone's photo-based, "visual caller ID" function. If you
don't like who's calling, and want to screen out their call,
why would you have their photo in your phone in the first
place, or keep it any longer?

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-> NTT DoCoMo, Walt Disney Internet Group (Japan) sign MOU
on overseas content
http://www.nttdocomo.com/new/contents/01/whatnew0329.html
(DoCoMo press release, March 29)

EXTRACT: DoCoMo and Disney (Japan) say they will jointly
develop and market mobile content services aimed at overseas
markets based on Disney's animated characters. The content
services will be similar to what Disney already provides on
i-mode in Japan.

COMMENTARY: Let's see if we've got this straight. The Walt
Disney Internet Group in Japan is the mobile content
business arm of Walt Disney International Japan, which is in
turn a subsidiary of parent company Walt Disney in the
States. So, this report means that Japanese mobile content
based on Disney characters created in the US and originally
exported to Japan will now be imported BACK into the US by a
Japanese company on a technology platform invented in the US
(cell phone research started at Bell labs in 1947) but
improved and perfected by the Japanese. If that isn't
amazing (and headache-inducing), then we're getting old. ;-)
By the way, this report also said the Disney character
content would be distributed via i-mode-like multimedia
services to be offered by DoCoMo's overseas affiliated
companies, as well as by "member operators of the Mobile
Multimedia Joint Venture (MMJV), a consortium to be
established by NTT DoCoMo and its partner companies
overseas." This is the first time we've seen "mobile
multimedia joint venture" referenced as a stand-alone
consortium; DoCoMo has used this term several times as an
adjective to describe each of its partnerships with overseas
operators. There's no further mention of "MMJV" on the
DoCoMo English site, Google, or on the Nikkei (English or
Japanese).

->The US: Land of the free, home of the brave, and mobile
content isn't king
http://news.cnet.com/news/0-1004-200-5381633.html?tag=cd_mh
(CNET News, March 29)

EXTRACT: Jupiter research reports that US carriers are
having trouble making mobile content pay. In a new study,
Jupiter says that by 2003, American carriers will be
spending $7.5 billion for mobile content, almost two-thirds
of which will come from providers in Asia (games) and Europe
(messaging services); only some 10 percent of such content
will come from US partners. A Jupiter analyst says US
carriers are being stingy with their content providers and
milking as much revenue from them as possible; some are even
charging content providers to list on cell phones' default
menus. US carriers are hooked on the time-billing model, so
there's little cash left over for the content providers. One
source at Cingular Wireless is quoted as agreeing with the
report and states that customers just aren't interested in
mobile content. The Jupiter analyst urges game makers, news
providers, and mobile mail service providers to stay away
from the US until the carriers can create the same type of
payment system that providers enjoy overseas.

COMMENTARY: Overall, we're pretty positive about the
Wireless Web, and think that mobile Net services can be just
as successful in the US or Europe as here. But there's one
caveat: the i-mode-like networks established overseas HAVE
TO have ALL of the same elements for success that i-mode and
the other networks have here. These include, roughly in
order of importance,
* pay-per-packet billing (so no one counts time while
surfing)
* operator-mediated management of site access and m-com
billing (so carriers and content providers make some real
money and are incentivized to continuously improve the
service)
* compelling content, services, and applications customized
for use on the go (to attract users, which will attract more
content, will attract more users)
* color, high-resolution displays (fun to look at and
content providers have a basis for competition when their
logos and brands can be delivered in color)
* caller-pays-all voice billing (so that subscribers learn
to leave phones always on) and
* good battery life, weight, and design (self-explanatory).
If the US carriers don't figure this out real soon, than the
Jupiter analyst's grim assessment of the US will become
permanent.

+++ WORTH A READ
-> NTT DoCoMo's i-mode business enters second phase
Interesting report covering advertising, popular services,
and demographics. Includes the Hakuhodo Institute of Living
and Life data mentioned in this issue's Viewpoint (above).
(Nikkei)
http://www.nikkeibp.asiabiztech.com/wcs/frm/leaf?CID=
onair/asabt/fw/126491

+++ SIGN OF THE TIMES
Webraska, a France-based wireless software developer (with
offices in Europe, the US, and Asia-Pacific) specializing in
location-based applications and navigation, is advertising
for the following positions at its Tokyo office: Technical
Director, Marketing Manager, Production Director, Project
Manager, Account Manager, and Java/C++ Developer. Don't just
take our word that this city is a happen'in wireless
place...
http://www.webraska.com/

+++ P.S.
A House of Representatives committee has urged Japanese
politicians not to read, write, or send e-mail during
parliamentary debates. Committee chairman Takao Fujii (LDP)
said sending e-mail during proceedings "disrupts order and
undermines a sense of tension." We guess those damn Java
games don't help, either.
http://dailynews.yahoo.com/h/nm/20010323/od/email_dc_1.html
(Kyodo, reported on Reuters, March 23)

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STAFF
Written by Daniel Scuka (daniel@japaninc.net)

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