WW-90 -- Who Will Take the i-mode Lead in Europe?

Wireless Watch Japan Mail Magazine
Commentary on the Business of Wireless in Japan
Issue No. 90, Tokyo, Monday, February 24, 2003
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in this issue
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++ Viewpoint: Who Will Take the i-mode Lead in Europe?

++ Wireless Notes:
** Sprint Sanyo vs. DoCoMo Panasonic: Another Disappointed Returnee
** Any Chance of KDDI 3G/GSM Roaming?

++ Noteworthy news:
--> Electronics Makers Lead the Charge in Quest for Longer Battery Life
--> Mobile Phone Industry in a Spot
--> NTT DoCoMo to Expand FOMA 3G Service to Cover 97% of Kanto
Koshinetsu Region
--> Troubled Times for a Telco Titan
--> MTI's BREW Application on 'Au' Cell Phone Operates PC Wirelessly

++ Events (promotion):
>> Super Rock Jam IV in Shibuya February 26!
>> ICA Event: "A Roadmap for Building Leadership Excellence"
>> SECOND ROUNDTABLE ON BRANDING IN JAPAN May 28

++ Sign of the times:
"Tottori Assemblyman Busted for Buying Narcotics"

++ Subscriber statistics, corrections, credits, administrivia

----------------------------------

++ Viewpoint: Who Will Take the i-mode Lead in Europe?

Conrad Yiu, director of development at London-based Carbon Partners, a mobile content
developer, said last week that the difficulty with using the wireless Internet as a
marketing and promotion platform (see "Marketing is the Mobile Internet," WWJ Viewpoint
No. 89, link below) is the grey area mobile marketing and mobile consumer services
crossover.

The issue, as he sees it, is that in the former, the client advertiser or marketer
traditionally pays for the marketing, whereas in the latter, the end-user pays. "We have
now this conundrum," he said, "of end users paying to be marketed at; or more to the
point, that the mobile Internet has allowed this conundrum to occur."

Conrad explained that in the UK, the "dreaded" situation of forcing the mobile end-user to
pay is referred to as the "self liquidating campaign."

I agree that this is a conundrum, but the Japan experience can be useful for establishing
a benchmark of what amount mobile subscribers will or will not pay to be marketed to. In
Japan, who pays for what and who receives which revenue is clearly delineated. Subscribers
pay packet and content fees to carriers who in turn share most of the content fees with
the providers. So, the subscriber pays 100% of both the service costs and the marketing
cost, since, in theory, the provider is free to market as much as possible to their
subscriber audience.

DoCoMo realised that this could cause the self-limiting problem Conrad mentioned, so, at
the start of i-mode, they established and enforced rigid requirements on what the
providers could do. Banner ads were forbidden, as were text ads or any HTTP links off the
provider's official site.

Of course, DoCoMo couldn't police what providers wrote in text on their sites, and in
particular could not police the content of mail magazines targeting mobile subscribers, so
providers did find a way to send ads, marketing, and promotional material to their
subscribers (at the subscribers' expense).

Of course, this material wasn't just regular cheesy ads like you find on late-night TV;
they were carefully contrived marketing campaigns involving contests, drawings, prizes, at
other fun, participatory events, so the subscribers rarely felt cheated and in fact really
enjoyed participating. It's kind of fun to get an mail announcing "Only two more days
until our grand prize drawing!! Have you registered to win yet?" when you're standing on
the platform waiting for the train to arrive.

And, yes, the subscribers paid the content fee and the packet fee to receive this stuff.
By around mid-2001, everyone realised that banner ads ("picture ads") were **not** the
non-starter that everyone feared. DoCoMo agreed to allow banner ads on a limited basis,
and they really took off. And no one complained.

Now, there are no restrictions on banner ads or on where they can link; providers use ads,
mail, Web pages, images, and ring tones as marketing tools; the subscribers pay for it all
(because it's fun and entertaining); and DoCoMo rakes in the packet fees while providers
sell all sorts of off-line goods and services.

Even in Japan these sorts of campaigns would become "self-liquidating" if they weren't so
damn fun - or if subscribers didn't get a cool ring tone or other freebie, or if the tone
and quality were reduced to the level of cheap street-level handout flyers. They're not -
they're sophisticated, fun, and entertaining.

Another huge factor is that the packet fees are really cheap; you have to use a lot of
packets before you get a rather stiff bill at the end of the month so, by and large,
subscribers don't self-limit or self-meter.

Conrad agreed that, even in Europe, or at least the UK, mobile users should be willing to
pay for "marketing messages" that are fun and cool. "That is the holy grail for the brand
or media owner. I guess the same idea of US college kids who wear their sweatshirts with
the college name on it," he added.

Of course, the problem is how to get this marketing platform up and running - in other
words, who will pay to coordinate the creation of the platform, the content, and the
services that will attract the huge pool of to-be-marketed-to subscribers. In Japan, that
was DoCoMo and the other carriers; only they could afford the investment (and only DoCoMo
had sufficiently low coordination costs, so they took the lead).

I wonder who is taking a similar lead in Europe? Will it be the DoCoMo partners (KPN,
E-Plus, et al)?

-- Daniel Scuka
daniel@wirelesswatchjapan.com

Mobile Marketing is the Mobile Internet
WWJ Newsmagazine, No. 89, February 17, 2003
http://www.wirelesswatchjapan.com/nl/0217.shtml

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++ Wireless Notes
---------------------------------------------------------------------

** Sprint Sanyo vs. DoCoMo Panasonic: Another Disappointed Returnee
WWJ sr. contributing editor Michael Thuresson, recently returned to Los Angeles to join
the LA Business Journal editorial staff, sent in a user-level review of his new Sanyo
handset that he uses on the Sprint network:

The faceplate looks almost exactly like my old i-appli
Panasonic DoCoMo model, but the thing is three times
as thick and it is much heavier. This makes it hard to
tuck the phone in my front shirt pocket - the left
side of my shirt is tugged down by the weight. Based
on my experience of trying to download ring tones, I
have to say Sprint's user interface is disappointing.

As you scroll through a list of tones, you cannot sample
them before you buy them. Hard for people new to this
idea to get interested if they can't do that! Then they
cost $1 each and expire in 90 days. I still have all my
old ring tones stored on my old DoCoMo i-appli phone - I
bought around two dozen for 300 yen.

Also, even though this is 3G CDMA, it isn't noticeably
faster than DoCoMo's old 2G [PDC] network. But the voice
reception is outstanding; have had nothing but crystal-
clear connections in my two weeks of owning it (incoming
calls from overseas were perfect as well). Having to pay
for incoming calls is a real negative, but I think the
"unlimited minutes" plan for calls after 9:00PM makes up
for it.
-- Mike (mthuresson@labusinessjournal.com)

** Any Chance of KDDI 3G/GSM Roaming?
WWJ subscriber Mark Singer wrote in from Tokyo to ask a question that I can't answer
(anyone with an answer or response can drop me a note and I'll run it here next week):

Not really a comment, but a question. Is there any news on
when Qualcomm's MSM6300 chip that allows CDMA and GSM to be
combined in the same handset will see actual launch,
resulting in a true world phone? Qualcomm announced that
they were shipping samples of this chipset to interested
handset vendors since last November, 2002.

More importantly, is KDDI/au showing active interest in this,
and if so, when we can expect a launch here in Japan? Given
that J-Phone's much ballyhooed new Global Standard handsets
can't be used in either the USA or Korea (did someone say
global?), thereby requiring Vodafone's Japanese customers to
still carry at least two handsets, it would seem that the
sooner that KDDI/au can use the MSM6300 chip, the sooner
they could counter the potential threat from J-Phone.
-- Thanks, Mark

++ Noteworthy News
--------------------------------------------------------------------------------

--> Electronics Makers Lead the Charge in Quest for Longer Battery Life
http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh&Artic...
Source: IHT, Feb. 24

EXTRACT: But trouble is looming for the battery world. While lithium-ion batteries
represent today's cutting edge, the gadgetry that depends on them is advancing more
quickly than the power technology. As mobile devices take on richer features, battery life
has become a key issue for gadget developers, and now manufacturers need to go one better
than lithium-ion, in both size and energy output. With power technology lagging, many new
mobile technologies that could be brought to market may have to be kept on hold, some
analysts say. "You need some kind of technological breakthrough to close the gap," said
one executive from a major technology manufacturer. NTT DoCoMo Inc., the leading Japanese
mobile carrier, stumbled with its third-generation phones a year ago in part because of
low battery life. The phone gave out after 30 minutes of continuous video-call use.

COMMENTARY: Keep an eye on this situation - boosting battery life is utterly crucial to
making the rest of the mobile future happen. Fuel cell technology appears to be promising,
and a fuel cell could provide power to a notebook PC, for example, for up to 20 hours
(Casio Computer has already revealed such a trial device; it weighs about half as much as
the previous lithium-ion battery pack). In 1990, Nickel Cadmium batteries were
state-of-the-art and had a charging time of 8 hours and an energy density of 40 Watt-hours
per kilogram (Wh/kg). The Lithium-ion (Li-ion) batteries used today in PDAs, cell phones,
and notebooks have a typical charge time of 3 hours and an energy density of around 150
Wh/kg. By comparison, a fuel cell offers charging times of a few seconds and an energy
density of 1,000 Wh/kg. But, in addition to problems with heat and flammability, cost is
still a big issue for fuel cells.

Battery Fuel Cell Technology
Fuel Cells Move Beyond Science Fiction & Pure Hype
http://www.3nw.com/pda/battery_fuel_cell_technology.htm

----------------------------------

--> Mobile Phone Industry in a Spot
http://straitstimes.asia1.com.sg/techscience/story/0,4386,173056,00.html
Source: Straights Times, Feb. 22

EXTRACT: Tens of billions of dollars are riding on the future of fast, mobile Internet
services, but industry leaders leaving the world's top wireless trade show still struggle
to justify the investment. At the 3GSM World Congress in Cannes, the 28,000 visitors as
usual overloaded the local mobile phone network, underlining that the industry still faces
basic problems as it seeks to rekindle sales with advanced data services.

Japan's leading mobile operator NTT DoCoMo admitted that had it not splashed US$332.7
million in subsidies on handset makers to develop 10 other 3G models, the phones would not
have arrived. It is not up to operators to decide if 3G is worth it. Businesses also need
to decide if they want to invest the millions needed to let employees access e-mail and
business applications on expensive mobile devices.

COMMENTARY: Is there a market anywhere in which even a group of carriers - much less a
single player - would drop a cool 300 million bucks on the likes of Nokia or Ericsson to
underwrite the creation of 3G handsets? I think not.

One other point that may be haunting Big D: will they also have to subsidize the content
providers? To date, under the low-bandwidth 3G environment, there was no direct investment
from NTT DoCoMo or the other carriers into content, application, and service providers.
Sure, the carriers did pay for content & services which they adapted onto the wireless
Internet portals as carrier-owned and carrier-branded data services (like J-Phone's J-Navi
map database system), or for vital onboard software (DoCoMo has also invested in Access -
maker of the i-mode microbrowser). But as far as "pure," third-party content providers,
there's been nothing. Yet FOMA, as the name - "Freedom Of Mobile Multimedia" suggests -
will require multimedia content that is much more sophisticated than the ring tones and
images now widely available on 2G i-mode. DoCoMo has created several
3G-bandwidth-optimized services (i-motion, V-Live), but the outside provider community is
still rather small. Will 2003 see DoCoMo become a content owner to boost 3G on the data
side? USD$300 million can buy an awful lot of 3G video and audio clips...

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--> NTT DoCoMo to Expand FOMA 3G Service to Cover 97% of Kanto
Koshinetsu Region
http://www.nttdocomo.com/current_information/product/pressrelease/
article/20030220_11083910.html
Source: NTT DoCoMo PR, Feb. 20

EXTRACT: NTT DoCoMo announced today that the company will expand its third-generation (3G)
mobile phone service in the Kanto Koshinetsu region, effective February 22, 2003. As a
result, FOMA service will cover approximately 97% of the region's populated areas, making
nationwide coverage available to some 89% of the population.

COMMENTARY: The carrier also said that 91% of Japan's population will be covered by
end-March and 97% by March 2004. The company also announced that it will increase the
number of FOMA 3G network base stations in existing service areas of the Kanto Koshinetsu
region from approximately 1,800 to some 2,200 to provide customers with optimum service.
By the end of March 2004, DoCoMo aims to have the same number of 3G W-CDMA bases stations
as 2G PDC (800MHz) bases stations (about 2,600). The Kanto Koshinetsu region consists of
Tokyo, Kanagawa, Chiba, Saitama, Ibaraki, Tochigi, Gunma, Yamanashi, Nagano and Niigata.
I'm wondering if we'll see any sort of marketing or other push at the end of March to
coincide? The rumored December 2002 FOMA push turned out to be more or a fizzle with the
N2051, F2051 and P2102V being delayed (the N2051 finally went on sale on Jan. 18).

----------------------------------

--> Troubled Times for a Telco Titan
http://www.wired.com/news/print/0,1294,57720,00.html
Source: Wired, Feb. 20

EXTRACT: In early 1999, Japan's top mobile-phone company, NTT DoCoMo, received cheers from
customers and analysts alike for introducing its i-mode mobile Internet service. The
service, which claims 37 million subscribers and lets them check stock quotes, sports,
news and other information over their cell phones, was hailed as the greatest invention in
Japan since the Walkman. When similar services were introduced in the United States last
year, one DoCoMo executive remarked to the news media that U.S. cell phones were still
like "black-and-white TV sets" -- so passテゥ compared to the color i-mode phones in Japan.

Nowadays, DoCoMo isn't gloating. Compared to glowing reports two years ago that i-mode
would conquer all -- even cell-phone markets outside of Japan -- news coverage on DoCoMo
has lately focused on foreign investments gone awry and software glitches plaguing its
high-speed 3G FOMA service. "We are afraid we had to recognize impairment loss with
respect to some of our overseas investments," said Miki N. McCants, a DoCoMo
representative. "And, unfortunately, sometimes NTT DoCoMo's FOMA third-generation (3G)
service may be perceived as poorly performed.

COMMENTARY: This is a well-written story that sums up DoCoMo's troubles. But the carrier
appears to be doing something about these problems, including creating dual-mode 2G/3G
handsets (something they previously said they wouldn't do), continuing to push i-mode
overseas (roll-out in Spain is accelerating with DoCoMo partner NEC building a new i-mode
server platform for Telefonica Moviles), and boosting handset makers at home (with a
USD$332-million investment in makers - see News item above). Advice for the carrier? Keep
investing overseas, but do it bigger than you have. Seamus McAteer, an analyst with market
research firm Zelos Group, is quoted as saying that DoCoMo should consider owning more
than 15 percent of a company to wield more influence in a particular market. "You either
own it or you don't."

----------------------------------

--> MTI's BREW Application on 'Au' Cell Phone Operates PC Wirelessly
http://www.nikkeibp.asiabiztech.com/wcs/frm/leaf?CID=onair/asabt/
news/229915
Source: NEASia Online, Feb. 6

EXTRACT: MTI Ltd. unveiled on Jan. 31 the "TUNA M+," a Binary Runtime Environment for
Wireless (BREW) application program for wireless operation of a Windows PC by an "au"
mobile phone available from KDDI Corp. Users pay a monthly charge of 315 yen. Originally
developed by WeeW Communications, Inc of Korea, it has already been introduced in the
Korean market in March 2002 by KT Freetel Co, Ltd, a leading mobile carrier in that
country.

COMMENTARY: Hey! What's this? Japan importing mobile Internet application know-how from
Korea?!? Actually, this may be a trend we'll have to learn to live with. Korean carriers
are much further ahead than Japan's KDDI in developing BREW apps, and since KDDI only
controls a portion of the market here, maybe it won't be cost effective for the carrier to
strong-arm third-party application providers into investing heavily into BREW. Yes, yes:
all the BREW guys will chant the mantra about BREW being a global platform and Japanese
providers would be able to benefit from overseas sales... I don't see that happening until
there's a way to assure providers here that customers in other markets won't be relying on
them native-language support (Korean, English, Mandarin) for tech troubles or sales. MTI
admits in this News Item that "There are possibilities of supporting [an] English language
[version] in the future." But not yet.

++ Events (promotion)
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++ Sign of the Times
--------------------------------------------------------------------------------

Tottori Assemblyman Busted for Buying Narcotics
http://www12.mainichi.co.jp/news/mdn/search-news/871722/
mobile-0-5.html
Mainichi Shimbun, Feb. 13
OSAKA - A local assemblyman from Tottori Prefecture was
busted Thursday for purchasing narcotics, police said.
The arrest of Susumu Ota, member of the Kurayoshi Municipal
Assembly, was followed up by raids on six locations. Ota
denies the allegation. Police confirmed that an Osaka
dealer and Ota were in regular contact after studying the
Osaka man's mobile phone records.

... Note to those who need to make phone calls while engaged in illegal activities: use a
pay phone (if you can find one anymore) ...

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Comments

The i-Mode success is undoubtedly due to some great marketing, but also due to the availability of packet networks; and the Japanese love of such devices and applications.It is also worth remembering that the Japanese ARPU (average revenue per user) is nearly double the Western European average.

business