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
Issue No. 5
Friday, April 20, 2001
+++ Viewpoint: Micro-Payment, Macro-Issue
+++ Noteworthy News
- Sony deal seen as lifeline for Ericsson phone unit
- Mobile wireless market -- benchmarking Europe, Japan, and the US
- KDDI to adopt Bluetooth in mobiles from June
- DoCoMo may raise KPN Mobile stake
- Toyota sells J-Phone stakes to Japan Telecom
- Sega, J-Phone to develop Java games for mobile
+++ Worth a read
+++ Sign of the times
When we first started covering i-mode, the thought, "Wait, the way it
bills for content is really big" kept scampering into our minds. And
then scampering back out to make room for the larger issues of the
wireless Web. As time passed, we occasionally mentioned that the
system was sort of important maybe, but the overall importance of Net
keitais overshadowed everything else. Besides, the topic of
e-commerce micro-payments seemed a bit (to use editor-speak) "five
Now we're not so sure. Micro-payments was indeed a popular subject
five years ago (and did fall off the radar screen), but the truth is
that the problem was **never solved.** (Well, not really solved. The
long list of near-misses include Cybercoin, Pay2See, MicroMint,
Millicent, Digicash, Cybercent, and Internet Dollar.) The problem
remained long after the tech media got bored with the subject and
moved on to the next big thing (B2C, B2B, P2P, et cetera).
Now that the bubble has popped, the media pack has jumped on the
"dot-com failure" angle. The same publications that were relentlessly
hypish about the Net are now relentlessly realistic -- and mockingly
critical of all that hyping that went on. And behind it all, there
(still) lurks the micropayments problem, unsolved and ignored
(despite the fact that had it been solved, we might not be
experiencing this bust -- or such a big bust, anyway).
In Japan, meanwhile, the problem **has** been fixed, for over a year
now. The i-mode system, quite simply, allows for e-commerce
micro-payments: a user can opt to receive a daily download of cute
pets, for example, agreeing to pay the 300-yen monthly charge that
will show up on the phone bill.
"On the phone bill" is the key.
The phone bill is where e-commerce charges belong. It makes perfect
sense. The Net is a telephony product. Telephony fees show up on the
phone bill. Works really well. Take the information number (411 in
the US, 104 in Japan), where you can ask the operator for a company's
phone number. Imagine if for whatever reason things had evolved so
that calls to this number didn't go to your phone bill, but that
instead you had to give out your credit card number and personal data
each time you wanted to use the service. If that were the case, how
successful would it be? Not very, right? A few souls would use it,
but it wouldn't be very appealing overall. Who wants to be go through
all that hassle for a 50-cent service?
No one, and that's why pay-for-content sites (for example) keep
failing -- their billing options suck. There's no choice in which you
can agree to pay 10 cents for an article and have that charge show up
on your phone bill at month's end. Instead, your only option is to
pay, for instance, $25 for monthly access to an entire news site. If
you only find two articles a month worthy of your interest, $25 is
too expensive. It's also a pain to enter all that information. The
end result? You don't sign up. It's a missed revenue opportunity for
the publisher (or vendor, in different examples), and for the phone
company, which could have skimmed 9 percent off the payment (as
DoCoMo does). It's a missed opportunity for you, too: you didn't get
to read that article (or buy that product or service) because the
dot-com went under.
There's no reason why the i-mode billing system (or one like it)
can't be more widely deployed. L-Mode, for example, will bring i-mode
to fixed-line phones (with bigger screens than cellphones) in
Japanese homes. If obaa-san (grandma) places a 200-yen order over an
L-Mode phone, well, there you have it: micro-payments in action.
Moreover, obaa-san, who's never used the Net and doesn't care about
it one way or the other, has no idea she's online and engaging in
Telcos around the world should look long and hard at the billing
solution of NTT DoCoMo -- a relatively new company that now ranks
12th worldwide in overall market capitalization (ahead of BP Amoco
and Merck), according to a recent issue of The Economist.
Of course, there are other lessons to DoCoMo's success, but, hey,
don't ignore this one!
-- Steve Mollman email@example.com
+++ Noteworthy News
(Long URLs may break across two lines.)
--> Sony deal seen as lifeline for Ericsson phone unit
Source: Dow Jones Newswire on Yahoo, April 19
EXTRACT: Swedish telecommunications company Ericsson is in advanced
discussions with Sony about cooperating on the sale of mobile phones.
A deal with Sony would allow Ericsson to benefit from Sony's design
and marketing expertise, as well as its experience with i-mode; Sony
would get the benefit of Ericsson's established worldwide
distribution channels. Last year, Ericsson had about 10%, and Sony
less than 2%, of the worldwide handset market.
COMMENTARY: This is definitely the BNOW (Big News of the Week)!
Ericsson's handsets, especially the more recent models, have not been
doing well here, primarily due to clunky designs. Arch-rival Nokia
has had similar problems in this market, and its new 503
(Java-capable) i-mode phone -- to be released shortly -- is actually
an OEM model from a Japanese maker. Any maker tie-up that will help
get super-cool Japanese handset technology (like Sony's) distributed
in the rest of the world will provide a major boost to DoCoMo and its
plans to export i-mode to Europe (this year) and the US (next year).
Is this a sign that Japanese makers are finally realizing that they
can't go it alone when it comes to developing and marketing 3G phones
worldwide? Onboard software is becoming more complex -- there's the
LSI layer, Layer 3 (wireless signaling stuff), middleware, and
finally the browser or user interface layer. We heard one source at a
major handset maker quoted as saying, "We can't do the middleware."
Looks to us like phones are now a major client-software and SI
challenge -- and SI is a traditional weakness of Japanese electronic
--> Mobile wireless market -- benchmarking Europe, Japan, and the US
Source: eMarketer, April 17
EXTRACT: While parallels can be drawn and comparisons can be made
among the three most active regions in the global wireless market
(Europe, Japan and the US), it would be a mistake to assume that the
success of a particular wireless service (like i-mode) would
necessarily translate into success elsewhere. Mobile markets can be
characterized as mobile operator driven, Internet-driven, or
technology-driven (Japan is mobile operator-driven). A close
examination of each regional market is important if one wants cut
away the hype (includes a handy chart cross-referencing these and
other factors in each market).
COMMENTARY: A very insightful article that provides some handy
criteria for framing the big three markets. But don't get caught up
in Esoteric Telecoms Analyst Syndrome (unlike hoof & mouth disease,
we just made that up ... ;-)). i-mode, in particular, and any of
Japan's mobile webs, in general, are first and foremost marketing and
consumer-service success stories. In the same way that Coke, the Gap,
McDonald's, Johnny Walker, and dozens of other consumer brand names
are successful in diverse markets, so too can mobile Net services be
successful -- regardless (largely) of cultural factors. So while
technology, market conditions, and Internet penetration are all
important, we think if you can reproduce the same elements of the
successful Japanese mobile webs (packet billing, caller pays, color
displays, long battery life, low fees, semi- or open-Walled Garden,
and compelling content, among others) overseas, there is no reason
why wireless won't be a success there as well. People gotta breathe,
people gotta eat, and people gotta surf on the go...
--> KDDI to deploy Bluetooth in mobiles
Source: Reuters on Yahoo, April 16
EXTRACT: KDDI will offer Bluetooth wireless technology on its
cellphones sometime between now and June. KDDI's wireless unit "Au"
would sell two models -- one by Sony and another by Toshiba Corp,
targeting sales of one million units in the first year. NTT DoCoMo
does not have a Bluetooth-enabled cellphone and has not made public
any plans to introduce one.
COMMENTARY: Fine, nice, interesting -- and quite possibly a complete
waste. Bluetooth might be DOA. Microsoft has abandoned Bluetooth
(according to Dave Nadig, VP of MetaMarkets.com and a portfolio
manager at OpenFund -- his April 12 posting can be found on
thewapgroup.com), and the local area wireless connectivity provided
by 802.11(b)-compatible systems is already starting to win converts
in the US. While Bluetooth may be more agile, 802.11(b) home networks
are already selling well in Japan. People who have used home wireless
networks rave about their speed and convenience, and Compact
Flash-format cards should be available soon (low-cost PC Card format
cards have been out for a while). As with USB vs. Firewire, VHS vs.
Betamax, or i-mode vs. WAP, the technology that gets fielded first to
as many users as possible -- igniting the complexity theory-based
growth of 'buzz' and demand -- builds up the greatest mass of users
and ultimately wins.
We now offer Wireless Watch, Gadget Watch, and JIN -- three free,
weekly email newsletters. Keep up with the latest Japan-specific news
on technology innovation -- filtered for relevancy, annotated for
context, and hot off the presses.
To subscribe, access: http://www.japaninc.com/subscribe_news.html
--> DoCoMo may raise KPN Mobile stake
Source: Bloomberg, April 17
EXTRACT: Kiyoyuki Tsujimura, MD of DoCoMo's Global Business
department, says the firm would consider raising its investment in
KPN Mobile to promote the development of i-mode services in Europe.
He also said DoCoMo won't increase its investment simply to help the
company reduce debt. Royal KPN NV, KPN Mobile's parent, is under
pressure to cut debt, which has ballooned due to spending on
acquisitions and mobile phone licenses.
COMMENTARY: We think it unlikely that DoCoMo will take a majority
stake in any other mobile operator soon, but it may have to with KPN.
DoCoMo desperately wants i-mode to succeed overseas, and the last six
months have seen reversals of fortune for several European operators
-- KPN included -- who overbid on 3G licenses and other 3G-related
investment and now have to face the music. Ironically, DoCoMo is one
of the few operators in the world that has cash to spare (although
this may also change soon, as some analysts have charged that DoCoMo
will be faced with huge 3G network capex -- capital expenditure --
costs that may be unsupported by demand) and would be willing to
rescue its overseas partners in the name of shoring up i-mode. A
further bit of irony might see DoCoMo nominating its own people for
senior CEO/COO/VP-level positions in KPN or anyone else it has to
prop up, and -- as we predicted last week in Wireless Watch --
Takeshi Natsuno, executive director in the Gateway Business
department and responsible for content management and business model
strategy development, might be the first guy they export. Don't say
we didn't tell you so...
--> Toyota sells J-Phone stakes to Japan Telecom
Source: Reuters on Yahoo, April 15
EXTRACT: Toyota Motor sold its holdings in the three J-Phone group
firms to Japan Telecom at the end of March. Prior to the sale, Toyota
owned 1.97 percent of J-Phone East, 1.98 percent of J-Phone Central,
and 5.01 percent of J-Phone West (total price was estimated at JPY40
to 45 billion; no firm figure released). Toyota plans to focus on its
wireless-related projects (e.g. intelligent transport systems)
COMMENTARY: Poor old third-place operator J-Phone! First, abandoned
this spring by AT&T, its capital investment partner of two years,
when DoCoMo bought into AT&T Wireless, and now left by Toyota for the
sexier charms of No. 2 KDDI. If we were J-Phone, we'd say, "So long
-- and good riddance!" Free advice to J-Phone: Concentrate on your
cutting-edge mobile Web services (which are better than anything the
other two have), build your brand, romance the Brits from BT (whom
you're now working closely with), and use that connection to show the
world -- and especially Europe -- how to really run a mobile Web.
--> Sega, J-Phone to develop Java games for mobile
Source: Nikkei AsiaBizTech, April 19
EXTRACT: Sega and the J-Phone group companies said they will jointly
develop Java games for cellphones. Sega will develop the device APIs
(application program interfaces), new games, and entertainment
content. Sega will also develop the server.
COMMENTARY: This should see the porting of titles like "Space Channel
5" -- now available on Sega consoles -- to the mobile platform.
J-Phone has already said its Java API will be open, so we should see
a respectable number of Java developers signing on. Like we said
above, J-Phone does it right, and we have a lot of respect for the
perennial No. 3 competitor.
+++ WORTH A READ
--> Interview with Tadashi Onodera, executive VP of KDDI Corp.
Onodera tells about the operator's cdmaOne 1x rollout (at least 100%
faster than DoCoMo's 3G service) due to launch in October, the new
MPEG-4- and Bluetooth-enabled handsets, and the switch to xHTML-based
markup language for the EZWeb mobile Net service. When are we going
to see the media and industry pundits give KDDI credit for building
a (Qualcomm) cdmaOne 1x technology-based, world-class network that
runs faster and cheaper than DoCoMo's heavily over-engineered W-CDMA
+++ SIGN OF THE TIMES
--> We heard from an Osaka-based source this week that startup Mobile
Television will install small Web cameras on highways, at
playgrounds, baseball stadiums, ski resorts, beaches, and other
locations, and transmit video data on traffic conditions, crowd
conditions, and weather and snow conditions to mobile phones starting
in July (65 locations in all; 3 frames per second). The Kansai
Electric Power Company- and Yomiuri Television-backed venture has
JPY100,500,000 in seed capital and plans to upgrade the system as
soon as 3G services start in Osaka (around December). While we're not
sure how useful this will be, it's an idea that could morph into
something; Robert Horie started Cybird on the strength of his
text-based "Nami Densetsu" surf condition-reporting system. We wish
these guys well.
--> Woman guilty of causing phone-call trauma
The Toyama District Court has handed a suspended sentence to a woman
who made **12,000** harassing phone calls to another woman, ruling
that the post-traumatic stress disorder caused to the victim
constituted criminal injury. Evidently, the woman made some 12,000
harassing calls, some silent, some threatening bodily harm, to
another woman whom she suspected of trying to steal her boyfriend.
The calls were placed starting in November 1996 and continued, we
gather, until recently (that's roughly 8.4 calls per day!!). There's
no way she could have made all those calls -- and still maintained a
daily commuting and working schedule -- without using a keitai.
Aren't cellphones amazing? ;-)
"Spring proves a deadly cocktail for Japanese revelers"
(WW 004, Apr. 13)
This item was an extract from The Asahi Shimbun, and the source
should have been cited as:
The editors regret any confusion.
GET THE MAGAZINE
To UNSUBSCRIBE to this newsletter, click here:
For more information on advertising in this newsletter, contact
FEEDBACK AND PROBLEMS
Send letters to the editor to firstname.lastname@example.org.
Please contact us with any problems that arise:
(C) Copyright 2001 LINC Media Inc.