WW-50 -- Keitai Usability in America vs. Japan

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

Issue No. 50
Monday, March 25, 2002
Tokyo

INDEX

+++ Happy Birthday WW: We're One Year Old!!!

+++ Viewpoint: Keitai Usability in America vs. Japan

+++ Noteworthy News
--> J-Phone Subscribers Reach 12 Million; One in Three Uses 'Sha-Mail' Phone
--> Mobile Phone Replacement Cycle Lengthens to 23 Months
--> DoCoMo Renews Effort to Oust Web Phone Spammers
--> DoCoMo Chief Exec Keeps Faith on i-mode
--> DoCoMo Net Loss Seen Hitting JPY100 Billion
--> Will Japan's Successful Mobile Internet System Take Off in Europe?
--> KDDI Launches New 3G High-Speed Mobile Service

+++ Events (Advertisements)

+++ Subscriber Statistics, Corrections, Credits, Administrivia

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+++ Happy Birthday Wireless Watch: We're One Year Old!!!
From Bruce, Sumie, Mark, Fabien, Larry and myself: Thanks to all you
out there in Internet land for making this newsletter such a success.
From the start of Wireless Watch in March 2001 to today, we've signed
up over 2,100 subscribers and the new video version was watched more
than 1,100 times per week in the month of March. Thanks also to all
of you who participated in our first subscriber survey. We are
analyzing the results now and will get a report out to you soon.

+++ Viewpoint: Keitai Usability in America vs. Japan

I received an interesting note from Steve Mollman containing his
impressions of keitai usability in America vs. Japan. Steve was
editor-in-chief of J@pan Inc from December 1999 to last October,
after which he moved on to a full time freelance career. Last month,
he relocated to San Francisco, but he's obviously still interested in
what goes on here (link to his Web site below).

It's highly appropriate to include his commentary in the first
anniversary issue of Wireless Watch, since it was Steve's suggestion
that prompted me to start working on WW in the first place.

Steve writes:

Being the wireless geek you've become, I thought you might be
interested in my experience with my current cellphone. I've
joined -- gasp! -- the cdma2000 camp, with Sprint PCS. Why?
Because it was on sale at CostCo. But it sounds like while
W-CDMA will eventually be cooler, 3G on on cdma2000 will arrive
faster.

Steve's referring to Sprint PCS' plans to open a cdma2000 1xRTT
network (similar to the one KDDI is opening today -- see news item
below) offering maximum 144-Kbps download speeds by mid-year.

My Sprint handset (the Touchpoint 5250, made by LG) is
actually smaller than my [NTT DoCoMo] P503siS. It does have a
few graphics, but it's basically a text-navigation system
(and a pretty lame one at that). I've got an OpenWave browser
(called the UP.Browser from Phone.com), not an Access one, of
course.

I hate having to dial up, as opposed to the always-on
convenience of i-mode, though supposedly by mid-year
always-on 3G service will be offered on the Sprint PCS
network (if you can really call it 3G).

Steve's got a point. Is cdma2000 1xRTT really 3G? I suppose it is if
you believe the guys at Qualcomm and the carriers that use CDMA
systems. If you define 3G not so much by data speed (although DoCoMo
would be the first to insist that a minimum of 384 Kbps in a moving
environment is the minimum criterion, and that any network -- like
cdma2000 1xRTT -- not delivering this fails the grade) as by services
and user experience, then DoCoMo's FOMA is the only true 3G system
around since it offers a full range of content, applications and
services (albeit most are leftovers from 2G).

Of course, it's hard to argue against cdma2000 1xRTT's momentum. As
of end-February, there were 12 carriers that had deployed CDMA
systems (according to 3gtoday), including:

SK Telecom (South Korea) 1 Oct 00
KTF (South Korea) 1 May 01
LG Telecom (South Korea) 1 May 01
Monet Mobile (US) 24 Oct 01
Centennial (Puerto Rico) 19 Nov 01
Zapp Mobile (Romania) 7 Dec 01
Leap Wireless (US) 10 Dec 01
Telesp Cellular (Brazil) 12 Dec 01
Verizon Wireless (US) 28 Jan 02
SK Telecom (South Korea)1xEV-DO 28 Jan 02
Metro PCS (US) 1 Feb 02
Bell Mobility (Canada) 12 Feb 02

Further, if the Sprint cdma2000 1xRTT handsets, the SPH-n400 and the
SPH-a500 from Samsung, are as cool and feature-rich as Sprint says
they are, then perhaps it'll be easier to wholeheartedly endorse CDMA
as 3G. (The handsets are scheduled to have full-color screens,
polyphonic ringers and sounds through CMX technology, and high-speed
Internet access to support new and enhanced applications, including
messaging, Sprint PCS Business Connection, wireless digital imaging,
and wireless ISP. Time will tell how good these are.)

But back to Steve's note:

One reason I hate dialing up is that immediately after
launching the browser, a message comes up warning me
I will start being charged from this point on. Ouch.
That really changes the whole tone of the experience.
You can't play around like you can with an i-mode phone.
In fact, "play" as a concept seems to be missing.

Handset-wise, being smaller is the only way the Touchpoint
wins (if you call that a win). In every other way it's less
elegant. Whereas the [DoCoMo] P503 falls naturally into place
in its cradle, the Touchpoint has to be awkwardly clicked
into the proper place, and half the time it feels like you're
cracking some vital component in the cradle or handset
receptor. The antenna is butt-ugly. It looks like something
broke and was fixed. No color coordination, either. One thing
I especially miss is an alarm clock function, for which I'm
currently employing my otherwise-useless P503.

In a nutshell, these observations sum up why Japan's consumer
wireless revolution has been just that -- a revolution. The networks
are always-on (so no waiting to set up a call), the billing is
invisible, and the handsets are fun to use and really do work
**well**. That's one reason why the handset software failures of 2001
related to Java and 3G were such major disasters (the bugs seem to
have been ironed out).

When I first got this thing, I thought, 'Wow, the US isn't
that far behind after all.' Upon more usage, however, I have
to say it really is.

Let's be careful here. I can understand Steve taking the point
of view of the end-user -- who sees only the handset and not the
network. But in fact, by end-2002, America's networks won't be all
that far behind Japan's (however much so America's handsets may be)
in terms of speeds, software and services. America's mobile webs may
even be ahead of Japan's -- particularly where enterprise mobile
services are concerned.

And ironically, America's networks and mobile Internet services may
be on par with anything offered in Europe, a supposed leader, as the
European carriers are likely to remain bogged down in debt and the
inability to invest in 3G infrastructure for some time yet.

I wonder how many analysts, pundits, and investment gurus who brag
that Japan's mobile Internet is only a success because "Japanese like
to download Hello Kitty" or "Japanese like to pay for content" have
taken the time to sit down and actually compare a Japanese pocket
rocket to one from overseas? If, like Steve, they had, they'd quickly
see that the user experience resides in the handset and the mobile
data services, and that carriers outside of Japan have a fair way to
go to catch up.

--Daniel Scuka
daniel@japaninc.com

Access the web site of J@pan Inc's ex-Editor in chief at:
http://pages.sbcglobal.net/semollman/

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+++ Noteworthy News
(Long URLs may break across two lines so copy and paste to your
browser.)

--> J-Phone Subscribers Reach 12 Million; One in Three Uses 'Sha-Mail' Phone
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/cover/177117
Source: Nikkei AsiaBizTech, March 28

EXTRACT: J-Phone announced that on March 20 the total number of
subscribers to its mobile phone services surpassed 12 million. The
number of J-Phone users reached 10 million in April 2001, so the
company has managed to sign up 2 million new customers since then.
The main driving force behind J-Phone's success in attracting new
users has been "Sha-Mail" -- a service that allows users to take
photos with cameras that are built into their handsets and then send
them to other phone users via email. About 4 million Sha-Mail phones
are now in use, or a third of the total number of J-Phone handsets.
J-Phone launched Sha-mail in May 2001.

COMMENTARY: These guys are going to do well. And DoCoMo still doesn't
have a camera phone in the fleet! (They're working on one.) How does
this compare to KDDI/Au? Their new GPS-enabled handset, launched in
December 2001, has sold about 400,000 units as of end-February. Good
-- but J-Phone has added almost 300,000 in the months since Sha-mail
was launched. The EZmovie handsets appear to be selling well (as many
as 130,000 in one month since launch in December).

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--> Mobile Phone Replacement Cycle Lengthens to 23 Months
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/resch/176360
Source: Nikkei AsiaBizTech, March 25

EXTRACT: The upgrading cycle for cellular/PHS handsets has expanded
to as long as 22.6 months, according to a November 2001 survey
conducted by the research unit of Nikkei BP Consulting Inc. Growth in
the number of subscribers in the cellular phone/PHS market has been
declining steadily, and the demand from users who buy new models in
exchange for older units has been stagnant. The upgrading cycle for
mobile phone/PHS handsets has steadily become slower since the survey
was first conducted in July 2000. And the cycle has suddenly grown
longer, by as much as 4.9 months, from the survey done in July 2000.
(For the survey conducted in November 2001, questionnaires were sent
to 1,500 monitors randomly selected among about 5,800 monitors. The
number of valid responses was 991, giving a response rate of 66 percent.)

COMMENTARY: Nikkei BP Consulting asked survey participants what
makes consumers buy a new mobile phone in exchange for an old one?
Over 35 percent of consumers said they choose a new model offering
(a) improved color LCD displays, (b) large display screens, or (c)
clamshell design. Also, survey respondents without mobile Net access
said they switched to a new handset simply to obtain i-mode, J-Sky or
EZweb services. But it appears that these factors are peaking, and
that new services may now be the main drivers for upgrades.

J-Phone and its Sha-mail system is one good example; Movie Sha-mail,
launched March 1, should prove to be equally compelling. (I asked the
CEO of Office Noa -- maker of the codec used for Movie Sha Mail --
this week what the sales results were. "It's still too early to
tell," she said.)

===========================ANNOUNCEMENT==============================

WIRELESS WATCH STREAMS!

We now produce a weekly streaming video version of the Wireless Watch
newsletter, courtesy of the media gurus at Video-link.com.

Here's the program lineup for the last two weeks:

Apr. 1 -- There's only one airline with a 3G-optimized,
bilingual, B2C presence on all three of Japan's wireless webs,
and it isn't even a Japanese carrier! Join us for an exclusive,
in-depth profile of Cathay Pacific's consumer-facing wireless
strategy and find out why a foreign airline is spending so much
to get mobilized in Japan.

Mar. 25 -- This week, Wireless Watch sits down for coffee with
Drew Freyman, Tokyo pointman for Nokia Venture Partners, a VC
fund targeting the wireless space. We ask "Can Japanese wireless
service providers follow DoCoMo overseas?" (Hint: NVP has yet to
place an investment in Japan... Gulp!).

We'll post the latest webcast in various streaming formats each
Monday evening, around 17:00 JST.

Tell your friends, burn your bandwidth, and log on to the inside
story with the Wireless Watch Video Newsletter.

http://www.video-link.com/wireless/index.asp
=====================================================================

--> DoCoMo Renews Effort to Oust Web Phone Spammers
http://www.ananova.com/news/story/sm_555522.html?menu=news.technology
Source: Ananova, March 28

EXTRACT: The Japanese firm says the move is necessary to counter
growing volume of unsolicited messages reaching its next-generation
phone subscribers. The aim is to make it more difficult for
unscrupulous parties to forge domains. NTT DoCoMo thought it had
tackled the problem by allowing i-mode phone users to stipulate up to
10 domain names they are prepared to receive mail from. But spammers
have found a way around this by making their messages appear to have
originated from legitimate sources, such as rival telecoms carriers.

COMMENTARY: According to Wireless analyst Keiran Calder at WI Carr
Indosuez, 50 percent of i-mode usage is for email, a large increase
from 36 percent in September 2000 (traffic to un-official sites is
next, at 26 percent). He also reports that the company says 89
percent of i-mode mail is bounced back as 'undeliverable' because it
is addressed to unknown or non-existent addresses. I guess that's a
direct result of DoCoMo allowing (even recommending) users change
their addresses to avoid spam. What a helluva problem to deal with.

In the fiscal year ending March 2002, spam countermeasures (and, I
guess, lost revenue, since all i-moders now get 400 free packets per
month) will cost Big D JPY27 billion. The company is contemplating
new spam countermeasures that include stronger legal action, enhanced
spam filters at the server, allowing users to limit the domains from
which they receive mail (already implemented), and recommending
(AGAIN!!) that users change their address.

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--> DoCoMo Chief Exec Keeps Faith on i-mode
http://www.bayarea.com/mld/mercurynews/business/2971772.htm
Source: Mercury News, March 31

EXTRACT: Tachikawa says he's confident of DoCoMo's strategy, despite
some stumbles, such as overpaying for investments in several foreign
telecommunications companies. "I believe the business model of i-mode
can be applied universally," he says. When it comes to new
technologies, he adds, DoCoMo has "developed next-generation
services in quite a pragmatic way." [...] But video is high-bandwidth
stuff, requiring a much faster connection than mobile networks have
offered until recently. DoCoMo has introduced so-called '3G' or
third-generation service in Tokyo, but it's not going very well so
far. The 3G phones are much more expensive than older ones, and so is
the service. Don't miss the bigger picture, says Tachikawa. The 3G
antennas can handle vastly more of today's normal traffic than their
predecessors, so there's an advantage to installing the new
infrastructure even if 3G is slow to take off.

COMMENTARY: In this item, Dr. Tachikawa also says that, "There will
be plenty of room, I'm convinced, for any wireless service that
doesn't frustrate its customers -- something many American wireless
providers do routinely -- and i-mode emphatically does not frustrate
its current customers." Hmmm. Interesting point. See Steve Mollman's
letter above in Viewpoint.

--> DoCoMo Net Loss Seen Hitting JPY100 Billion
http://www.forbes.com/newswire/2002/03/27/rtr553806.html
Source: Reuters on Forbes.com, March 27

EXTRACT: NTT DoCoMo will post a group net loss of JPY100 billion in
the year ending this month as it takes special charges of JPY1
trillion on overseas investments, the Nihon Keizai Shimbun said on
Thursday. The newspaper said Japan's top mobile operator, which had
previously forecast a net profit of JPY255 billion for the year,
would fall into the red for the first time since going public in
1998.

COMMENTARY: Don't make the mistake of doubting how deep Big D's
pockets are. And it's not DoCoMo's fault that after dropping JPY1.8
trillion on overseas investments, the world's telecoms industry went
for a dive. Whatever the cost, these guys are in the game for the
long term, and keep in mind that the cash cow -- i-mode in Japan --
is still doing quite well, thank you very much.

===========================ANNOUNCEMENT==============================

J@pan Inc magazine produces three other newsletters:

** Music Media Watch (MMW); Tuesdays, A brand-new addition to J@pan
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Subscribe, unsubscribe, and find out more at:
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--> Will Japan's Successful Mobile Internet System Take Off in Europe?
http://www.economist.com/business/displayStory.cfm?story_id=1059370
Source: The Economist, March 28

EXTRACT: Mobile-network operators in Europe have long looked
enviously at Japan, which leads the world in the adoption of the
mobile Internet. Tens of millions of Japanese consumers routinely use
tiny phones with vivid color screens to send and receive e-mail,
download cartoons and consult weather reports. Better still, they pay
handsomely for the privilege, which helps operators to offset falling
revenues from voice calls. Now the Japanese model is coming to
Europe. Earlier this month, NTT DoCoMo, Japan's leading mobile
operator, launched its popular i-mode system in Germany in
conjunction with KPN Mobile, which will extend the service to the
Netherlands and Belgium over the summer. KPN faces stiff competition,
however, because rival operators are copying i-mode's best bits.

COMMENTARY: Ah, yes -- sorry, KPN. Didn't you guys know? You don't
need DoCoMo to do what DoCoMo does, and there's no need for any
license or royalty payments to deliver cHTML-encoded data using HTTP
over a packet air interface using TCP/IP.

This report goes on to quote one Henry Elkington of the Boston
Consulting Group, who notes that the "cultural differences mean that
the sorts of services that are popular in Japan, such as daily
horoscopes or cartoon downloads, may not prove such hits in Europe.
Moreover, Europeans are used to getting their Internet content free,
and thus may be reluctant to pay for it on their phones." All we can
say is, Horse radish! Once the content is localized, the model works
anywhere. And, no, American/European/South American thumbs are
**not** too big for those tiny buttons...

--> KDDI Launches New 3G High-Speed Mobile Service
http://home.kyodo.co.jp/all/display.jsp?an=20020401008
Source: Kyodo News, April 1

EXTRACT: KDDI on Monday launched a new 3G high-speed data
transmission service for its Au mobile phones to compete with a
similar service offered by rival NTT DoCoMo. The new cdma2000 1xRTT
service, to be available across Japan, moves data at 144 kilobits per
second via the Internet, making it easy for users to send and receive
video. Japan's second-largest telecom operator is also launching five
new handset models, one of which features a built-in miniature
camera. KDDI President Tadashi Onodera said the company aims to ship
seven million handsets for the system by the end of March 2003. The
handsets are priced at the JPY20,000 level, about half of FOMA
handsets.

COMMENTARY: This report says that the cdma2000 service will launch in
33 of Japan's 47 prefectures and will be available in 90 percent of
the populated regions of Japan by the end of this year. Finally, the
world's first direct nose-to-nose contest between CDMA and W-CDMA.
Maybe this will finally solve the arguments as to what actually
constitutes '3G' and whose system is better. Let the battle begin!

+++ Events (Advertisements)
(No events this week)

=====================================================================
+++ Subscriber Statistics, Corrections, Credits, Administrivia

WIRELESS WATCH EMAIL NEWSLETTER SUBSCRIBERS:
2,156 as of March 31, 2002

WIRELESS WATCH WEB:
January 1 - March 31: 10,539 page views

WIRELESS WATCH VIDEO:
February 1-28, 2002
3,796 streams (908 mins/day); 3.2 views per unique visitor

March 1-30, 2002
4,621 streams (1,557 mins/day); 1.75 views per unique visitor

CORRECTIONS:
In WW No. 48, we told you that transmitting a single, 5-second video
clip on J-Phone's Movie Sha-mail service cost about JPY300. This was
incorrect. The correct figure is JPY35. We guess this implies a total
revenue boost of JPY70 to J-Phone each time a mail movie clip is sent
and received (since both sending and receiving terminals are billed
for the packet usage).

STAFF
Wireless Watch newsletter and Wireless Watch Video Newsletter
researched and hosted by: Daniel Scuka (daniel@japaninc.com)

Edited by: J@pan Inc editors (editors@japaninc.com)

Wireless Watch Video Newsletter produced and edited by:
Lawrence Cosh-Ishii (video@japaninc.com)in cooperation with
Video-Link.com

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