WW-13 -- What DoCoMo Does is Harder Than it Looks

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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. 13
Monday, June 25, 2001
Tokyo

INDEX
+++ Viewpoint: What DoCoMo Does is Harder Than it Looks
+++ Noteworthy News
- KDDI to Open EZweb Cell Phone Service Network
- Ericsson Plans Trial Bluetooth Services in Japan
- Chip Developer Breaks DoCoMo Bonds
- DoCoMo Releases i-mode Java Specs (English Version)
- Japan's Fujitsu to Focus on 3G Corporate Users
- DoCoMo Takes Spammers to Court
+++ Worth a Read
+++ P.S.

<---------------------------ANNOUNCEMENT----------------------------

We'll be at Mobile Telecoms Japan in San Francisco!

Daniel Scuka, the regular writer of this newsletter, will be
participating in the Mobile Telecoms Japan conference in San
Francisco on July 11-13. The Japanese operators, Sun, Access,
Openwave, Google, AOL, Bandai, Funmail, and others will be making
presentations, so it should be a interesting. The conference is
being chaired by Tim Clark, a long-time Japan hand who's extremely
knowledgeable about the mobile business in Japan.

Mobile Telecoms Japan
July 11 - 13, 2001
http://www.srinstitute.com/part_iter_site_page.cfm?iteration_id=129

------------------------------------------------------------------->

+++ VIEWPOINT

What DoCoMo Does is Harder Than it Looks

Japan's wireless webs have long been lauded for their superior
business model, pioneered by NTT DoCoMo. The genius in creating
i-mode, say many pundits, was the fact that DoCoMo finally figured
out how to get users to pay for content -- and that's certainly not
to be underestimated (see Wireless Watch No. 5 for our take on the
significance of micropayments).

But many observers have failed to notice that the business model
implemented by the three big operators here (DoCoMo, KDDI, and
J-Phone) consists of far more than just setting up and running the
i-mode, EZweb, and J-Sky wireless information services and billing
for access to the content partners.

The Japan cellular market is highly operator-centric. Why? Because
it's the operator that provides the service, and in this culture,
providing service is extremely serious business. So everyone in the
cellular community more or less naturally defers to the operators --
they are responsible for serving the customer, after all, and the
customer belongs to the operator.

Add to this a history of government and bureaucratic deference to
NTT, its former monopoly status (which some would argue is not so
"former"), and its intensive ownership of public and corporate
mindshare, and there is little doubt that NTT DoCoMo has significant
advantages over the market and over cellular players (the handset
makers, the service providers, the infrastructure manufacturers,
et cetera).

The other operators similarly have excessive (though far smaller)
sway. In other markets, this is not the case, and that's a big
reason why successful wireless webs have yet to appear elsewhere.
If there's any doubt about the depth and degree of DoCoMo's control
of the market (and wireless standards) here, just look at how fast
Big D rolled out the Java-based i-Appli service -- which used
DoCoMo's own Java specs, by the way. Which other operator could have
done the same as fast?

As a result, the Japanese mobile Internet business model includes
elements such as:

** Domination of handset maker technology and development (DoCoMo
**tells** NEC, Sony, Panasonic, and the other makers what features to
build into the terminals.)

** Control of distribution and sales (Want to buy a cool new Sony
handset? Don't call Sony -- you have to go to the operator, or an
operator-dependent distributor whose profitability depends on
subsidization from operators.)

** Definition and control of standards (Want to build an i-mode,
EZweb, or J-Sky Web site -- or an i-mode Java application? Don't look
for the markup language specs or Java APIs on any sort of open
standard-based organization Web site like the W3C -- once again, you
have to go to the operators.)

** Management and gating of all content on the mobile portals (Want
to appeal a decision by one of the operators not to carry your
content? Forget it. Other than suing -- and this is a highly
litigation-averse society -- there is no one to complain to.)

While it has been tempting to urge operators overseas to simply "do
what DoCoMo does" in order to spark successful wireless webs of their
own, "what DoCoMo does" is far more profound than simply choosing
cHTML, asking terminals makers to provide color displays, or lining
up a community of content providers. Few outside Japan can appreciate
this fact of wireless life unless they've been here and watched
DoCoMo up close.

That's why we were pleasantly surprised to see this month's
announcement of the M-Services initiative from the London-based GSM
Association. The M-Services initiative is aimed at enabling GPRS
users (GPRS is a 2.5G packet-switched wireless Internet
infrastructure effectively similar to i-mode's PDC-P network) to
experience a new level of consistently available services through the
Mobile Internet, and will encompass enhanced graphics, music, video,
games, ring tones, screen savers, and other services (Hey! Sounds
like i-mode!).

The initiative appears to have picked up wide support from operators,
handset makers, and equipment vendors alike, and may just be the
first concrete step to creating the same sort of environment in the
GSM world as exists in Japan under i-mode. M-Services includes
specifications for all the things that DoCoMo has had to define (and
enforce) on its own for i-mode (like how sites should work, what
features should be on handsets, the desirability of an early switch
to color, et cetera).

We guess the big difference is that in Europe, players will want to
climb aboard the M-Services initiative because they perceive that
comprehensive standards and deferring to a central voice of authority
will be good for business, and certainly better than simply repeating
WAP's failure. (In Japan, all players fell into line because DoCoMo
told them to.)

While the GSM Association may not yet be an authorative standards
body like the W3C, pushing the M-Services plan is definitely a step
in the right direction. Doing what DoCoMo does is harder than it
looks.

-- Daniel Scuka

M-Services Initiative Press Release
http://www.gsmworld.com/news/press_2001/press_releases_24.html

<----------------------------ANNOUNCEMENT---------------------------

Wireless Watch Day Changes

Starting with today's issue, Wireless Watch will appear each Monday.
Note that due to staff vacations, there will be no Wireless Watch
next week.

-------------------------------------------------------------------->

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

--> KDDI to Open EZweb Cell Phone Service Network
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=
onair/asabt/news/133424
Source: Nikkei AsiaBizTech, June 21

EXTRACT: No. 2 operator KDDI said that its EZweb browser-phone
service will be made open and compatible with other providers'
services this fall. Open EZweb will provide the following services:
1) give subscribers the choice to access portal sites run by other
service operators; 2) providers will be able to use the open network;
and 3) fee-collecting services for content providers operating Web
sites not listed on the EZweb official menu will be started. By the
end of June, KDDI will disclose its criteria for content providers to
qualify for inclusion on the official menu.

COMMENTARY: This puts KDDI some 18 months ahead of DoCoMo, who said
that it would adopt an open platform model for i-mode only in 2003.
What this move means is that major portal owners like Yahoo, Nifty,
Rakuten, and Lycos will be permitted to create their own branded
wireless portals, which EZweb users will then be permitted to set as
the default portal on their phones. And although the carriers would
take exception to any assertion that they are not the best qualified
to operate wireless portals, we think that handing portal operation
on EZweb, i-mode, and the other wireless webs over to the
professionals (or, at least, allowing the subscribers to choose) is a
good idea. In any event, the carriers will still earn lots of
revenue, since they bill for every packet that zips across their
networks -- regardless of destination.

The other interesting aspect of this announcement is the plan to
offer third-party billing services. So far, that has been the major
dividing line between mobile content providers that convince the
operators to let them onto the official menu (and make use of the
monthly phone bill for applying content charges) and those which the
operators block.

Finally, making the platform truly open (i.e., eliminating the
vetting process that the operators now apply to would-be content
providers) is also a good move. We would argue that this is largely
possible because the wireless webs in Japan are already at a mature
stage, with millions of subscribers and thousands of content
providers. **Launching** an i-mode or an EZweb, however, initially
requires carefully vetted content provider selection -- precisely
what DoCoMo, KDDI, and J-Phone did at the start of their services.
(On May 14, J-Phone announced it would keep its J-Sky service closed
"for the time being" -- unless the ministry requests otherwise.)

--> Ericsson Plans Trial Bluetooth Services in Japan
http://dailynews.yahoo.com/h/nm/20010619/tc/tech_bluetooth_japan_dc_1
.html
Source: Reuters on Yahoo, June 19

EXTRACT: Ericsson's Japan unit said on Tuesday it will launch trial
information and Internet services in Japan, using Bluetooth
short-range wireless communications as it seeks commercial uses for
the technology. The project, joined by trade house Marubeni Corp, the
Japan unit of handheld computer maker Handspring, and several other
computer and online services companies, aims to develop commercial
services by April of next year. Similar trials are planned for the
US, and several are also underway in Europe, including a supermarket
test of a system that lets shoppers use Bluetooth to pay their bills.
In Japan, where even credit cards are still rarely used, financial
applications are considered far less promising than entertainment and
information, says Nippon Ericsson president Morgan Bengtsson.

Ericsson's trials mentioned above will include two Tokyo cafes
offering rentals of palmtop computers that provide access to Sony's
So-Net (a major ISP and portal) via Bluetooth. West Japan Railway
will also offer trial services at one of its stations and on a bullet
train line, while one PC reseller has agreed to offer product and
other information to employees and customers using BT.

COMMENTARY: In Japan, Bluetooth technology is already available in
Fujitsu and Sony notebook computers, as PC Card-format adapters, in
ISDN terminal adapters for home dialup access, as PHS phone adapters,
and integrated with the Sony C413S cdmaOne phone (EZweb). Sony has
said it hopes to see a 10-Mbps or faster protocol as soon as possible
(currently, Bluetooth devices deliver in the neighborhood of 450-750
Kbps, depending on the device and other factors). There's still some
incompatibility between different makers' Bluetooth devices.

Bluetooth products developed by Toshiba, IBM Japan, and NEC all use
Bluetooth version 1.0b (the original protocol), while those from
Fujitsu and Sony use the incompatible version 1.0b+CE. Version 1.1
devices went on the market earlier this year, and these are also
incompatible with the two existing protocols.

Finally, even devices that use the same protocols are sometimes
incompatible because different makers implement the protocols in
different ways (especially with respect to encryption). There are
also interference problems with wireless LAN devices that operate in
the same 2.4 GHz slice of spectrum. Business take-up has been slow
due to these issues as well as cost, and so far all the activity is
in the consumer area.

For these reasons and others, we remain skeptical of Bluetooth in
Japan at this time. 802.11(b)-based wireless LAN products (known as
WiFi) have already established themselves in the consumer space, and
are starting to win some corporate sales. All the major electronic
shops have WiFi hubs, routers, and access points for sale, and the
prices aren't outrageous. It won't be long before somebody like
Tully's or Starbucks starts to install these cheap access devices
into coffee shops.

<---------------------------ANNOUNCEMENT----------------------------

From the June issue of J@pan Inc:

"The Other i-modes: Fifteen million happy non-DoCoMo users can't all
be wrong."
http://www.japaninc.net/mag/sub/2001/06/jun01_investor_imode.html

Top Java Downloads on Cellphones: Which i-Appli apps are popular?
http://www.japaninc.net/mag/sub/2001/06/jun01_filter_java.html

See the full table of contents at:
http://www.japaninc.net/mag/current.html

To subscribe to the magazine, click here:
http://www.japaninc.net/mag/subs.html

------------------------------------------------------------------->

--> Chip Developer Breaks DoCoMo Bonds
Source: The Nikkei Weekly Newspaper, June 18

EXTRACT: 3G chipset developer Yozan is leaving the DoCoMo fold and
starting to approach European companies. The Yozan president says the
company thought the Japanese 3G system would become the world
standard, but now thinks the European system will be used worldwide.
3G services will be offered using three mutually incompatible
standards: In Japan, DoCoMo will use W-CDMA; in Europe, the system
will be called UMTS; and in the US, CDMA systems under the cdma2000
brand will be significant.

COMMENTARY: As recently as March, we were hearing industry insiders
proclaim that with 3G, "Japan would rejoin the rest of the world."
It's starting to look like that may not be the case. DoCoMo's haste
to be the first to launch 3G has led it down a protocol path that
diverged last summer when the Europeans established UMTS, and the
Japanese giant became even further isolated when J-Phone (which does
use DoCoMo's PDC standard for its present 2G network) announced that
it would wait to roll out its 3G network specifically so it could use
the DS-CDMA standard (yet to be finalized by the 3GPP -- the 3G
Partnership Program).

We wonder if this development is in any way intentional on the part
of European equipment makers. If the Japanese handset and
infrastructure makers are locked into a DoCoMo-only, Japan-only
wireless standard, there will continue to be little incentive for
them -- powerhouses, everyone of them -- to wade into the European or
US market, reducing competition for the likes of Nokia, Ericsson, and
Alcatel. Hmmmm.....

--> DoCoMo Releases i-mode Java Specs (English Version)
http://www.nttdocomo.com/i/java/index.html
Source: Email notification from NTT DoCoMo, June 22

EXTRACT: Not really a news item, but welcome all the same. DoCoMo
posted the English-language version of its i-Appli Java service
specifications on the English corporate Web site.

COMMENTARY: Late? Well, it depends on your point of view. The
majority of Java developers working on i-Appli sites are, obviously,
Japanese, and the company is under no obligation to assist the
non-Japanese-reading developer community, so kudos to Big D for
committing the time and money to creating the translation.

But the release comes almost five months to the day after the launch
of the i-Appli services, and even longer after the Japanese-version
specs were originally handed to select DoCoMo content partners for
their exclusive use in preparing i-Appli sites for the January 26
service launch. Must be nice to be a chosen friend...

We also think the translated Java specs are an indication of the
amount of work that has to be done to get developers in the US and
elsewhere actively supporting supporting i-mode mobile development
for AT&T Wireless and KPN and its European partners. In fact, a lot
more needs to be done. Where is AT&T's (or KPN Mobile's) developer
community site -- with FAQs, tech support, mailing list, and a
discussion board? (Or perhaps AT&T Wireless will rely on Openwave for
developer tech support?)

J@pan Inc story on DoCoMo's Java rollout and delay in releasing Java
specs:
"DoCoMo's Java Jive-Talkin'"
http://www.japaninc.com/mag/comp/2001/04/apr01_docomo.html

--> Japan's Fujitsu to Focus on 3G Corporate Users
http://www.forbes.com/newswire/2001/06/21/rtr286618.html
Source: Reuters on Forbes.com, June 21

EXTRACT: Fujitsu said on Thursday that when 3G mobile services start
in October, it will release handheld devices only for business use
and put the rollout of 3G handsets for consumers on hold. "In the
immediate sense, we see the business market for 3G applications as
the one that's being developed first and fastest, and that's our area
of concentration," a Fujitsu spokesman said. Fujitsu's wary stance on
entering the consumer market reflects growing concerns about how
quickly demand for 3G handsets will pick up and when handset makers
can recoup their hefty 3G development costs. So far NEC is the sole
3G handset supplier, and the introduction of a video phone model by
Japan's number one handset maker, Matsushita, has been delayed by
technical glitches.

COMMENTARY: The handset makers, like chip developer Yozan mentioned
two items above, are loathe to commit resources to develop 3G
technology that they can't sell anywhere else. If DoCoMo wants to go
it alone, the firm will have to pay a huge premium, and drag the
infrastructure and terminal makers along kicking and screaming every
step of the way. Even though Fujitsu is a relatively minor player in
the handset market (Reuters says it sold 1.65 million terminals in
the year ending March 31, compared with 22 million sold by
Matsushita), this announcement is significant, as it will allow
other, bigger vendors, to use the same excuse. DoCoMo had originally
lined up 11 terminal makers for its 3G program, but only two showed
up at last month's launch.

While DoCoMo's technical troubles with 3G infrastructure and
terminals has been getting all the press, the bigger story shaping up
is the fact that nobody wants to go the 3G distance with DoCoMo. And
if no other operators move to W-CDMA-based 3G, building a business
out of the new technology is going to prove extraordinarily
difficult.

--> DoCoMo Takes Spammers to Court
http://www.thestandard.com/article/0,1902,27271,00.html
Source: The Industry Standard, June 19

EXTRACT: NTT DoCoMo has gone to court to seek injunctions against
some 30 individuals who have sent electronic junk mail to i-mode
users. The company is also taking steps to reduce the cost of
receiving spam by offering i-moders 400 free packets of data per
month (at 1 packet = JPY0.3). DoCoMo is hoping for a repeat of a
legal victory by @Nifty, the Japanese ISP that succeeded in stopping
a spammer with a court order. DoCoMo also plans to start offering
free wireless access to its "i-menu" feature, which enables users to
change their i-mode email addresses and block mail from certain
senders. Both of these measures will take effect from August 1, and
the company expects to see revenue drop JPY27 billion (Wow!!) by the
end of its 2001 fiscal year.

COMMENTARY: Quick comparison between spam frequency on i-mode vs.
J-sky. A posting on a local message board reported that between last
Thursday and Monday of this week, one owner of a J-Phone and a DoCoMo
phone received 11 spams on i-mode vs. 3 on J-Sky. One reason is
likely the fact that i-mode email addresses all use the same domain
(docomo.ne.jp), while J-Sky users can use jp-c.ne.jp, jp-n.ne.jp,
jp-t.ne.jp, among others, so it's harder to guess addresses. J-Phone
also doesn't charge for receiving mail (J-Sky is circuit-switched,
and the sender pays for the call).

How did Big D track the spammers? Some have simply used regular mail
programs and unmasked ISP accounts, and while the mail header
information doesn't appear on the recipient's phone, the i-mode
server can certainly extract it. This issue is really hurting --
DoCoMo's stated selling points have always been ease of use, safety,
security, etc. Spam makes it look like the i-mode folks don't know
what they're doing. If we were the judge, we'd hang the spammers out
to dry.

<---------------------------ANNOUNCEMENT----------------------------

BBC World's Click Online recently interviewed J@pan Inc editors:

Watch Editor at Large Daniel Scuka discuss 3G at:
http://www.bbcworld.com/Content/clickonline/click_one.asp

See Editor in Chief Steve Mollman address broadband at:
http://www.bbcworld.com/Content/clickonline/click_four.asp

------------------------------------------------------------------->

+++ WORTH A READ

Financial Times Special Report -- Understanding 3G

A solid, well-researched backgrounder on 3G technology that helps put
the Japanese operators into perspective. The section on "Feeling the
Squeeze" explains the significance of Qualcomm's (cheaper, faster,
more robust) cdma2000 technology as a competitor for W-CDMA. If
Verizon, under pressure from its UK partner Vodafone, adopts the
European UMTS standard, and Sprint PCS adopts cdma2000, and DoCoMo
partner AT&T Wireless follows the GSM/GPRS-to-W-CDMA path, than the
US market -- under 3G -- will be just as balkanized and subdivided
into fiefdoms as it is now.

Financial Times Special Report -- Understanding 3G
(http://specials.ft.com/understanding3g/index.html)

+++ P.S.
Worshippers flock to shrines to ward off stalkers, affairs

The centuries-old Yasui Konpira Shrine in Kyoto sells tiny amulets
that resemble the straps many people attach to the antennas of their
mobile phones. The talismans are said to provide protection from
being stalked. The chief priest explains that some visitors weren't
too happy that the shrine was offering amulets that look like mobile
phone straps, but others support the idea, saying that most stalkers
use mobile phones to target their victims. "We actually made the
amulets that way in the hope that people would be able to banish
their ill fortune through their mobile phones," says the chief
priest.

(This item also explains how women at one shrine hammer nails into a
2-meter-long phallus as a way to seek revenge on cheating spouses.
Ouch!!)

(Mainichi Shimbun)
http://mdn.mainichi.co.jp/waiwai/0106/010621shrines.html

====================================================================

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

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