WW-03 -- AT&T Wireless Gets DoCoMo Religion -- Kind of ...

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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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Issue No. 3
Friday, April 6, 2001
Tokyo

INDEX
+++ Viewpoint: AT&T Wireless Gets DoCoMo Religion -- Kind of ...
+++ Noteworthy News
- DDI Pocket adds music delivery PHS using SD Memory card
- J-Phone toys with 3-D graphics
- NTT DoCoMo lets site operators obtain 503i handset ID
- Wireless Net access of the future
- DoCoMo chairman urges quick move to 4G
+++ Worth a read
+++ Sign of the times
+++ P.S.

----

+++ VIEWPOINT

AT&T Wireless Gets DoCoMo Religion -- Kind of ...

On Tuesday this week, I was sitting in a Tokyo hotel listening
to a senior wireless exec explain his company's mobile Web
philosophy, which includes a portal, he said, offering the
company's own content, e-commerce, and services, as well as
those of third-parties and private brands. Hmmm... Sounds like
a senior i-mode drone from DoCoMo, you may think. Surprisingly,
no; the speaker was Umesh Amin, director of new technologies &
planning at AT&T Wireless, and while his presentation on the US
carrier's plans for i-mode in Seattle sounded a lot like a
description of i-mode as it exists in Japan, there are some key
differences.

AT&T Wireless is, of course, DoCoMo's exclusive partner for US
i-mode services, an arrangement secured by a handshake and a
$9.8-billion capital infusion; AT&T Wireless, Amin admits,
needed the money. Like other US carriers, the operator is
struggling to boost sagging ARPU (average revenue per user) and
win new subscribers in the face of stiff competition and lots
of satisfied, flat-rate home surfers who aren't (yet) impressed
by the wireless Web.

In Japan, the i-mode portal -- the best way bar none for any
carrier to boost revenues ever devised -- has developed into a
one-fee-gets-all, semi-Walled Garden. For JPY300 per month,
plus JPY0.3 per packet, subscribers access content and services
on the official i-mode menu AND on any Web site at large.
Traffic to the Web now roughly equals traffic to the portal --
and DoCoMo makes money on every single packet that zips across
the network, regardless of destination.

But Amin described a significant difference in plans for the US
i-mode portal; it won't be one fee gets access to all. The
cheapest level will lock the user firmly within the
AT&T-controlled i-mode Walled Garden, where they can access
only official partner content and services; "premium
subscribers" will pay more, but be permitted beyond the walls
and onto the Web. "We will bill higher for the widest access,"
says Amin, adding, "We will own the customer." Granted, his
company has some pretty weird demographics to deal with; US
fixed-line, flat-rate access penetration still exceeds mobile
access -- a situation unique in the world, he says. As a
result, AT&T's plans could be viewed as a savvy move to
leverage existing Net access (i.e. don't make the customer pay
for undesired wide access), and Amin claims as much. But we
disagree.

It appears that AT&T hasn't learned the first lesson of i-mode:
let subscribers access the universe, and they will, boosting
the service overall and triggering the virtuous circle of a
rising subscriber base attracting more content providers, which
will in turn attract more subscribers. Meanwhile, the operator
will rake in packet fee riches as users gobble up portal AND
Web content, not to mention mail. Why, after giving away 16% of
the company to DoCoMo, is AT&T messing with the formula? AT&T's
approach will do nothing to encourage casual use, and in fact,
through higher fees for wider access, will help perpetuate US
wireless users' reluctance to surf at all. Lesson No. 1 to
present and potential DoCoMo i-mode partners worldwide:
wireless Web success comes from encouraging as much use as
possible. Don't mess with the model, AT&T. Period.

----

+++ Noteworthy News
(Long URLs may break across two lines.)

--> DDI Pocket adds music delivery PHS using SD Memory card
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/news/126995
Source: Nikkei BizTech, March 30

EXTRACT: DDI Pocket says it will provide download of AAC-format
music files under its "Sound Market" brand (part of DDI's "Feel
Edge" PHS mobile Web service) starting later this month. Users
will be able to download encrypted files at 128Kbps (it will
take about 6 minutes to receive a 3-minute song), and store the
files on an SD Memory card for playback on compatible players;
fee will be the same as DDI's existing MP3 download service:
JPY200-400 per song, plus a usage fee of JPY13/minute.

COMMENTARY: Sound is the No. 2 killer app on mobile (after
messaging). It's interesting to see DDI Pocket, last-place
wireless Net service in Japan's field of four, choosing music
download as the first major expansion of their "Feel Edge"
service since launch. The carrier says it has sold 200,000-plus
"Feel Edge" phones, about 70 percent of which are compatible
with the Sound Music service (with 7,000 accesses per day, SM
is dishing up 2,000 free and about 200 paid music downloads
daily; a solid, if yet modest, start). DDI Pocket appears to be
taking a cue from No. 2 wireless Web operator J-Phone, whose
music download service (based on excellent Yamaha synthesizer
chips in each handset) offers ringing melody download, new song
promotions, Karaoke, and -- get this -- movie soundtrack clips
offered in combo with the Oscars; it's hugely popular. We think
DDI Pocket is making a wise -- and lucrative -- move.

--> J-Phone toys with 3-D graphics
Source: Discussion with Philip Marnick, J-Phone managing
director, March 26

EXTRACT: We were privy to a hands-on demo of a new, exceedingly
cool, 3-D graphics-on-keitai concept phone, now actively under
development at J-Phone. The operator would not reveal the
screen maker, source of onboard processor, or any other
hardware details, or offer any hints on potential applications,
other than to say the phone is due for launch late this year or
early next.

COMMENTARY: The sample characters (we liked the dog AND the
panda bear) were rendered in startling 3-D realism, and
certainly equaled any of the characters seen on today's PC- and
console-based 3-D games (albeit a lot smaller in size). Today,
state-of-the-mobile-gaming art is represented by DoCoMo's
i-Appli Java-compatible phones, which have already reached
sales in the low hundreds of thousands. Java allows new games
to be downloaded at will, and to be played much faster since
all processing is done on the phone. But i-Appli's graphics
rendering is nothing to scream about, and J-Phone's efforts are
a welcome, and major, improvement. We guess issues for
deploying 3-D games include battery life, screen size, download
file size, and persuading the game makers to put decent muscle
behind developing the software (they're likely to be focused on
competition in the Xbox vs. PS2 vs. Nintendo console market
this year). Nonetheless, the popularity of mobile gaming is
already a significant money maker for the likes of J-Phone, and
we think revenue can only go up -- especially with 3D.

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--> NTT DoCoMo lets site operators obtain 503i handset ID
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/news/127130
Source: Nikkei, April 2

EXTRACT: DoCoMo disclosed HTML tags that allow a Web site to
query the unique terminal ID from a mobile user's handset. To
date, only official i-mode portal partners could obtain such
information (one of the benefits of being in bed with the 900lb
gorilla), but now any site operator can. The phone owner can
choose to disallow transmission of the terminal ID each time it
is requested.

COMMENTARY: The mobile Web is growing up! For several years,
wired Web sites have been able to track visitors by saving a
small text file, called a "cookie," onto the visitor's hard
drive (this hasn't been possible on cellphones). This allows
the visitor's site activity to be tracked, information that
many e-com operators use to plan services or evaluate
effectiveness. Some have charged that cookies are an
unacceptable loss of privacy, but, since unique user
information (like name, address, or credit card number) is not
transmitted by this method, most sites have quietly adopted the
benefits of cookie functionality. Indeed, we think many wired
surfers prefer the added functionality of a cookie-using site
(the site will remember what they bought last time, or their
user profile information), and wireless surfers will probably
react similarly. DoCoMo's move is the first step in creating
effective e-com on the non-official wireless Web, and that's a
smart way to encourage even more use of i-mode (see Viewpoint
above).

--> Wireless Net access of the future
http://www.yomiuri.co.jp/newse/20010403wo61.htm
Source: Yomiuri Shimbun, April 3

EXTRACT: A brief summary of up-and-coming wireless access
services, including "Biportable," a communications system
developed by NTT ME (and comparable to 802.11b) that targets
condominiums and apartments (an antenna mounted on the roof
provides wireless Net access to dwellings within a 400 meter
radius), and Softbank-financed SpeedNet's plans to offer
wireless access to home users via transmitters set up on
electrical utility poles (cutting NTT out of the final-mile
equation).

COMMENTARY: "Wireless" doesn't just mean running around town
with a keitai in your pocket. Wireless is, in fact, the model
for all future consumer-oriented connectivity and the basis for
home networks. In addition to the seriously small sizes of
Japanese homes, where installing any additional broadband
router or networking box would see residents scurrying to
rearrange the furniture, no one (Japanese or other) wants to
string Ethernet cable from room to room -- much less configure
PC network cards. The access situation is Japan is now
undergoing a revolution, and in the next 24 months, it appears
very likely that several tens of millions of (deep-pocketed and
e-com-hungry) Japanese home users will go online via broadband
connections provided through an air interface.

--> DoCoMo chairman urges quick move to 4G
http://dailynews.yahoo.com/htx/nm/20010403/tc/telecoms_nttdocomo_dc_1.html
(Source: Reuters on Yahoo, April 3)

EXTRACT: Kouji Ohboshi says DoCoMo wants to launch 4G mobile
services as soon as 2007, much earlier than the current target
of 2010.

COMMENTARY: For now, this is wishful thinking. DoCoMo is
rumored to be having problems with its 3G rollout due for next
month, including network congestion and limited support from
terminal makers (only five 3G terminal models are likely to be
ready for rollout). Also, the Forma phones will be limited to
use in the Tokyo and Yokohama areas until DoCoMo builds out the
network. This might leave customers -- now spoiled to mobile
connectivity almost anywhere -- seriously disappointed, which
is precisely why J-Phone decided in March to delay its 3G
network launch for six months. Further, there are still
technical issues with the 3G network standard (W-CDMA) and no
one is certain that 3G networks anywhere can generate enough
revenue to subsidize their costs; for now DoCoMo is the world's
only operator who has decided to proceed. While we applaud the
operator's drive, we think any talk of 4G is seriously
premature.

----

+++ WORTH A READ
--> Will J-Phone Provide Vodafone's Foil Against DoCoMo?
Interview with Rick Timmons, J-Phone managing director, on how
to grab market share from i-mode and Vodafone's recent
increased investment in J-Phone. We think J-Phone, operator of
Japan's No. 3 wireless portal, has a really good chance of
meeting DoCoMo eye-to-eye in Europe through the Vodafone link.
(M for Mobile)
http://www.mformobile.com/print.asp?pk=13850

--> DoCoMo's Java Bridge to 3G
A great, quick-read summary of the i-Appli Java service on
i-mode. Covers games, stocks, costs, and problems. Also has
quotes from (predictably) Cybird-founder Robert Hori. Cybird
set up a wholly owned subsidiary (K Java Labs) last year in a
bid to establish leadership in the mobile Java development
field.
(Business Week)
http://www.businessweek.com/bwdaily/dnflash/apr2001/nf2001042_626.htm

----

+++ SIGN OF THE TIMES
--> Yesterday morning, San Francisco-based i-drive.com
(www.idrive.com) signed a deal with Tokyo-based Access (maker
of the microbrowser that sits on 80 percent of all i-mode
phones) to provide enterprise-focused online storage
functionality to Access's Compact NetFront-series of browsers
(a press release should be out in about a week). For the
Americans, the deal represents one of the first opportunities
for an enterprise software house to climb aboard the i-mode
platform, soon to be everywhere (well, Milan and Seattle at
least...). For the Japanese, it's a chance to spruce-up their
browser offering for the US market, where many carriers believe
enterprise functionality will be a key revenue generator on the
wireless Web. (The oft-repeated wisdom is that entertainment
alone cannot generate enough of a return -- a serious delusion,
we think.)

--> On March 27, Uppsala, Sweden-based wireless software house
Pocit Labs announced the June launch of BlueTalk Game Engine, a
P2P network gaming environment that allows developers to create
game software for a variety of Bluetooth-enabled mobile
devices. The press release says BlueTalk Game Engine is an
integral part of BlueTalk, Pocit Labs' network client for local
wireless P2P communication, which the company claims is the
world's first. While not (yet) related to wireless in Japan,
this caught our eye; we think Japan, with the world's best
wireless access networks and most switched-on mobile users (and
gamers), is a fertile ground for the first deployment of any wire-
less P2P operation. Our prediction? A local mid-size software maker,
like Access or Livin' on the Edge, will partner with these
savvy Swedes and build P2P functionality into software already
deployed on cellphones here (like i-drive, above).
See our take on wireless P2P at:
http://www.japaninc.com/mag/comp/2001/04/apr01_p2p.html

----

+++ P.S.
--> Disney puts Pooh on i-mode
With the help of Cybird and Walt Disney, Winnie the Pooh's
presence on i-mode is getting a big boost. Japan's Disney unit
will start furnishing screen graphics featuring the "Pooh
gallery" series of images for background screens, as well as
the "Pooh melody" collection of ring melodies, all linked, of
course, to on- and off-line sales of related merchandise. Users
must register to access the Pooh collection menu; monthly fee
will be JPY100. Hey! It may be kitsch, but it makes money.
(Nikkei BizTech, March 29)
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/moren/126869

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

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