WW-30 -- A Picture is Worth a Thousand Boring Textbook Definitions

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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 business of wireless in Japan
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Issue No. 30
Tuesday, October 30, 2001
Tokyo

INDEX
+++ Viewpoint:
A Picture is Worth a Thousand Boring Textbook Definitions

+++ Noteworthy News
- AT&T to Offer Java Services in Mid-2002?
- NEC on Track in First Half After Strong Phone Sales
- Sony Delays 3G Phone Launch, Focus on 2.5G
- DDI Pocket To Delay High-Speed Handphone Service

+++ Events (Advertisement)

+++ Sign of the Times

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+++ Viewpoint:
A Picture is Worth a Thousand Boring Textbook Definitions

Several wireless bits and pieces in this week's Viewpoint.

BrainHeart magazine (www.brainheartmagazine.com), now in its fourth
issue, has produced an impressive poster entitled, "The Wireless
Universe." It's a well-designed graphical representation of how the
wireless universe hangs together, and shows typical usages for most of
the major consumer- or corporate-targeted wireless communication
systems.

For those uninitiated into the arcana of all the wireless technologies
(and there's a lot more than just cellular, PHS, Bluetooth, and
802.11b), The Wireless Universe poster provides a snapshot of how the
systems interrelate, what frequencies they use, which standards apply,
and how wireless networks might evolve in the future. Of course, a
great deal of detailed data is left off, and we wouldn't propose that
anyone rely on the poster for a rigorous technical interpretation of
what's out there.

But for the average techno-head (or even non-techno-head) involved in
the technical, sales, marketing, and business development side of
wireless, this is a must-have for the cubical wall. You can see at a
glance how PANs, WANs, WLANs, MANs, FWA, and public cellular networks
all relate. We have to admit, we hadn't heard of a BAN (Body Area
Network) before, nor did we know that it referred to, "a network of
sensors placed around the different parts of the human body."

The poster also has a concise frequency spectrum chart -- showing
which bands are used for which services -- and several key definitions
splayed across the bottom of the poster, all presented in a decidedly
non-boring fashion. Parameters such as frequency, analog or digital
operation, and licensed or unlicensed spectrum help define the type of
services -- and the type of revenue model -- that can be provided on
wireless.

BrainHeart Magazine, by the way, appears to be owned by BrainHeart
Capital AB (at least, the URL is), based in Stockholm. So if the
BrainHeart Wireless Universe poster paints an overly positive picture
or perhaps pushes technologies that are being developed by this VC's
investee companies, don't be too surprised. Breathless enthusiasm
notwithstanding, this poster is a must-have (see link below).

Speaking of the Swedes, a delegation from the Startupfactory, another
wireless venture capital firm based in Stockholm, was in Tokyo last
week on a reconnaissance mission of sorts. We attended a discussion
forum with several other Tokyo-based wireless folks, and a couple of
interesting points came up.

First, one of the biggest frustrations for mobile content and service
providers is the strictly limited fee scale permitted by Japan's
wireless operators. The scale is JPY100, 200, and 300 on DoCoMo's PDC
i-mode, and is restricted to similar small sums on other networks.
This creates a sort of fixed elasticity of earning potential for the
content owner, versus an infinitely sliding scale of content access
cost for the customer (since the carriers will allow the mobile surfer
to spend almost any amount in data usage fees to access content --
which will still only earn the content provider JPY100, 200, or 300).

This particularly comes into focus with Java games, where the applets
can send data back and forth to the server, earning the content
provider zero additional fees (after the initial download is
complete), but earning the network operator lots in game-play packet
fees. How will operators in the US and Europe reconcile this
dichotomy, especially when dealing with content owners that will be,
we presume, more aggressive than those in Japan?

Second, one of the speakers, head of a Tokyo-based wireless systems
integrator, stated that Japanese content owners are finding it tough
to export Japan-developed contents (ring tones, screen images, etc.)
overseas -- even to Asian countries like Korea, which are culturally
closer to Japan than Japan is to the West.

This makes us think that Java's (and BREW's) "write-once,
run-anywhere" portability may, in the end, not prove to be that
significant. We'll be interested to see the first hit Java game
deployed in Japan over i-mode that also makes a splash in Stockholm,
Seoul, or Seattle.

--Daniel Scuka

Check out BrainHeart, and order a copy of the poster:
http://www.brainheartmagazine.com/default9.html

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

--> AT&T to Offer Java Services in Mid-2002?
http://uk.news.yahoo.com/011029/221/cdabd.html
Source: ComputerWire on Yahoo, October 29

EXTRACT: AT&T Wireless Services could be planning to offer its
customers Java-based services by the middle of next year following
NTT's sign-up of a software distributor in the US. NTT Software, a
sister company of Japan's largest mobile operator NTT DoCoMo, has
signed up Houston, Texas-based developer Vuico as the exclusive US and
Canadian distributor of its mobile Java software. Because AT&T is
DoCoMo's US partner, it seems likely that it will be one of the first
US operators to avail itself of the technology as it will be able to
draw on its ally's experience. DoCoMo launched its Java services
almost a year ago.

Meanwhile, Sprint PCS plans to it launch J2ME handsets in the middle
of next year, and Nextel Communications is already offering Java-based
services.

COMMENTARY (Updated Oct. 31): There is no doubt that Java is a key
money maker on i-mode, and will likely become so on J-Sky, EZweb, and
on the DDI Pocket service, as well as on AT&T's system in the US. But
this happy and profitable situation may not last for long -- at least
for DoCoMo. Why?

Indosuez W.I. Carr Securities analyst Kieran Calder expects that 50
percent of DoCoMo subscribers will migrate to FOMA (3G) within one
year of the 3G network achieving nationwide coverage.

Of the existing DoCoMo i-mode subscribers, 28 percent have already
switched to Java handsets, he says, and this has helped generate a lot
of revenue for the carrier. He believes that high-volume Java i-mode
users will be the first to migrate. But on FOMA, packet fees are up to
90 percent cheaper (they have to be, or else no one would use the
network). As a result, DoCoMo will be the first carrier faced with
self-generated data ARPU cannibalization that causes a drop in
revenue. Nice problem to have!

--> NEC on Track in First Half After Strong Phone Sales
http://uk.news.yahoo.com/011029/221/cdabe.html
Source: ComputerWire on Yahoo, October 29

EXTRACT: NEC on Friday reported a JPY30 billion first-half net loss
from sales that were flat at JPY2.47 trillion. The figures were within
the range of most expectations, and NEC became one of the first major
Japanese electronics company's in recent days not to accompany its
results announcement with negatively revised full-year loss
projections. Like the rest of Japan's major chip players, NEC has been
hamstrung by the collapse of prices and demand in that sector.
However, unlike some, such as Toshiba and Fujitsu, it has been able to
fall back on sales of mobile phone handsets and infrastructure.

COMMENTARY: NEC's 2.5G handsets have been largely immune from the
recall disasters of the past year (though not the 3G models), pointing
not, we think, to superior technology, but to better luck (a senior
company manager admitted as much in a recent interview -- see WW No.
27). As a result, the company says it has won market share from
Matsushita, and NEC's sales to Big D surged 64 percent in the first
six months of the year (we guess this is a year-on-year growth).

NEC seems to be doing better with handsets; Sony, Matsushita, and
several others have reported losses and delays in their handset
operations so far (see item below).

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--> Sony Delays 3G Phone Launch, Focus on 2.5G
http://biz.yahoo.com/rf/011024/t61872_2.html
Source: Reuters on Yahoo, October 24

EXTRACT: Sony said on Thursday that its introduction of 3G phones
would be delayed as the consumer electronics giant concentrates on
rolling out interim 2.5G technology in Europe. "2.5G is our main
target right now," Sony president and chief operating officer Kunitake
Ando told Reuters in an interview, referring to the mobile phone
development and manufacturing joint venture with Sweden's Ericsson
launched this month. "3G will be a little bit delayed, but I don't
know by how much," he said, indicating that Sony Ericsson Mobile
Communications AB will concentrate on Europe first.

COMMENTARY: Sony's Ando was quoted as saying that, "We need a strong
killer application for 3G, but right now many people are still content
with what they have." The company would like to integrate high-speed
data phones into its existing audio, visual, computer, and consumer
electronics hardware, and for the Sony's consumer market, this is
obviously key.

But we'd argue that 3G **and** 2.5G also need a strong killer app in
the enterprise market, and that has yet to emerge. One area worth
watching (after wireless corporate email -- but you don't need 3G do
offer that) is enterprise file storage, access, management, output,
and sharing. Several US and Japanese players are trying awfully hard
to come up with packages that address these needs. Possible partners
are the network operators (actual and virtual), data host companies,
ASPs, handset/PDA makers, and system integrators/financial service
providers.

Now's the time to start thinking about such enablement; as one
industry insider mentioned recently, by mid-2002, the rise of GPRS
networks in Europe and the US will see widespread coverage in the 28-
to 40-Kbps range. That's more than enough to offer really great
enterprise services, and this offers a logical evolution to 3G speeds.

While 3G doesn't make these services any more possible, it will make
them faster. And if enterprises have already adopted wireless
enterprise applications and services on 2.5G, then they'll pay for the
3G upgrade when the new networks appear.

--> DDI Pocket To Delay High-Speed Handphone Service
http://sg.biz.yahoo.com/011022/15/1kwky.html
Source: Nikkei on Yahoo, October 23

EXTRACT: DDI Pocket, a KDDI subsidiary and Japan's largest PHS service
provider, has decided to postpone the scheduled fall launch of its
high-speed PHS service until spring 2002, The Nikkei reported in its
Tuesday morning edition, quoting company sources. The company has
decided it will be difficult to offer a faster speed for its unlimited
data communications service, which was launched in late August,
because of crowded telecommunications networks due to the service's
greater-than-expected popularity.

COMMENTARY: Bad news. The enhanced, high-speed PHS network was to be
the platform on which mobile virtual network operator Japan
Communications Inc. (and others) planned to roll-out enterprise data
services (using branded PHS wireless data cards, in the case of JCI).
One senior staffer at JCI said, "We're really disappointed." JCI's
service will still debut, we guess, albeit at the slower present speed
of 64 Kbps -- still plenty enough to do some useful stuff.

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+++ Sign of the Times

Old Phone Specs

Does anyone remember 1991? The writer of this newsletter was living in
Germany and serving a stint in the Canadian Army. We used to go out on
NATO exercises, and tear around the German countryside to practice
defending against the (then-rapidly vaporizing) Soviet threat. In any
event, the portable phones that we received for non-secure use were
commercial models rented from the Deutsche Bundespost, and the massive
brutes came with a carrying strap!

In April 1991, NEC had just released its NEC TZ-804 Mova handset for
use on DoCoMo's analog network. Even then, the Japanese phones were
lighter than the bricks we lugged around in Germany, and NEC's weighed
in at 250g. The battery offered an 8-hour wait time and 45 minutes of
talk time, and there was room for 100 entries in the electronic
address book! The current NEC N210i (on i-mode) weighs 95g, offers 500
hours of wait time, and can handle 700 entries in the address book, as
well as full i-mode-based Internet access.

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

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