WW-15 -- America's Wireless Community Learns From Japan

J@pan Inc Magazine Presents:
Commentary on the week's wireless news from Japan

Issue No. 15
Monday, July 16, 2001
San Francisco

+++ Viewpoint: America's Wireless Community Learns From Japan
+++ Noteworthy News
- DoCoMo to Boost i-mode Relay Capacity
- Sony to Take Charge to Pay for Recall of Phones
- DoCoMo Tunes Up For 3G Launch
- Oh i-mode, Where Art Thou?
+++ P.S.


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+++ Viewpoint

America's Wireless Community Learns From Japan

After attending the Mobile Telecoms Japan conference in San Francisco
last week, we have to admit we're less puffed-up on the superiority
of Japan's wireless industry versus America's. Although there were no
US carriers attending the conference, the infrastructure, content,
application, and service providers were out in modest but
enthusiastic force, and these folks are closely watching, learning
from, and -- in some cases -- already participating in Japan's mobile

Some pundits have whined that a Japan-style wireless revolution can't
happen in the States due to US-unique structural factors, which,
roughly in order of endless repetition, are:

** US carriers are weak and can't whip the content providers into
** The likes of Nokia, Motorola, and Ericsson can't or won't deliver
the sexy handsets that drive mobile consumer gadget lust -- and
frequent upgrades -- in Japan.
** Mobile surfers in the US won't pay for Hello Kitty or other cute

On the issue of carrier weakness, keep in mind that there was no
magic to what DoCoMo did to line up the initial content providers for
i-mode's launch in February 1999. Tim Clark, strategy director at
Tokyo consultancy Ion Global, explains that DoCoMo simply went to the
most conservative sector (the banks) and convinced them that the
then-new i-mode was a safe bet and a sure channel for customer
contact. Once Sumitomo Bank, Japan's leader, was onboard, all the
others followed. It was the same for other sectors.

The general lesson? Identify the champion in each industry and target
them for creating the seed content. We think AT&T Wireless, Sprint
PCS, and others can do likewise.

The handset issue, granted, is a little stickier. But Tetsuya Mori,
director for wireless business development at Sun's Palo Alto offices
(he managed Java implementation on i-mode), says there are no
technical reasons why handsets similar to Japan's high quality cellys
aren't available here. The problems, he says, lie in economics and
marketing: "Misperception of what the US consumer wants is one main
reason. There is certainly no component shortage." Mori showed his
i-mode phone to some people in the US (at the gas station) and they
loved it, and asked where they could buy one. It's been said that the
business of America is business -- and we think that US marketing
savvy surely includes cellphones.

But even if the US can't produce the full-color, 16-voice polyphonic,
Java-enabled pocket rockets that power Japan's wireless Web, then it
can at least import them. Sprint PCS (one of the leaders in the US's
wireless Web) is doing precisely that, and its new clamshell phone is
a marvel that rivals anything available in Japan. Now it's just a
matter of getting the cost beneath the present $499 list price.

Finally, American Net users **will** pay to use wireless services --
these just won't (necessarily) be the same services that the Japanese
pay for, although many may in fact be similar. Take Tokyo-based
content provider 104.com -- its basal body temperature tracking
service (with charts and a monthly calendar showing fertile peaks) is
proving to be hugely popular. Do American women wish to get pregnant
any less so than Japanese? We think not.

Perhaps the most interesting portion of the conference was the Google
presentation by software developer Lauren Baptist, manager of
Google's i-mode search site (and pretty handy on the piano in
Google's lobby, we hear).

Google i-mode was developed in the US entirely without access to an
i-mode phone. Baptist says that relying on friends and fellow
developers -- and the offer of a T-shirt to anyone reporting a bug
-- was vital to success. Google has now been ported to EZweb and

The Google team gets plenty of feedback mail from Japanese keitai
surfers, but has to wait several days for the in-house translators to
produce the English versions, since none of the developers read

While US carriers may not yet be deploying anything as good as the
now two-year-old wireless Net offerings from Japan's operators, it's
clearly only a matter of time. There's no reason (other than lack of
will, a polite term for "cojones") for the spark not to be lit.

-- Daniel Scuka

For more on Google and i-mode, see the following from our June issue:

Tim Clark writes an excellent newsletter, btw. Called The Japan
Internet Report, it can be seen at http://www.jir.net/welcome.html


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

-->DoCoMo to Boost i-mode Relay Capacity
Source: Japan Times, July 14

EXTRACT: Company officials said NTT DoCoMo plans to double the
capacity of its cellular base stations in order to rid i-mode of
communication glitches. The expansion is designed to handle the
hypergrowth in i-mode service subscribers, which has led to concerns
about connection difficulties, they said (there were 24,989,000
subscribers in June).

COMMENTARY: i-mode is provided via a 2.5G packet-switched overlay on
top of DoCoMo's existing 2G PDC voice network. The Japan-only PDC
(portable digital cellular) system is based on the US-developed TDMA
(time division multiple access) system, and offers six channels per
cellular base station. This means that each cell can handle six calls
(or six i-mode sessions).

In densely populated areas like Tokyo, cell radii are as low as
several hundred meters (these are called microcells), but even this
density is clearly proving to be insufficient in the face of i-mode's
tremendous usage. The plan to double capacity is an engineering
upgrade that will see each cell able to handle 12 voice calls or
i-mode sessions.

While no financial numbers were stated, such an upgrade can't be
cheap. It appears that DoCoMo intends to keep the existing 2G system
working for the foreseeable future, casting even more of a shadow on
the fall rollout of the 3G network. We're clearly going to have a
2G/3G dual environment for some time. The lesson for other operators?
Packet-switched data services provided by existing 2G TDMA and GSM
systems can be huge money makers. Unlike DoCoMo, don't rush to build
3G just yet.

--> Sony to Take Charge to Pay for Recall of Phones
Source: New York Times on Siliconvalley.com, July 6

EXTRACT: Sony announced that it would take a charge of about JPY12
billion, or $95 million, to pay for the recall of 1.1 million
cellular phones.

COMMENTARY: This is the first acknowledgement of the tremendous cost
of recalling Sony's faulty i-mode and EZweb phones. The confirmation
comes after the early-July recall of 560,000 phones made for KDDI due
to problem batteries. There were also recalls in May of 126,000 EZweb
and 420,000 i-mode Sony handsets due to software glitches. Yikes!

We've mentioned before that the Japanese handset manufacturers are
having problems with onboard software integration, particularly with
getting the Java environment, the browser, and the embedded operating
system (OS) to work together (see link below for JI story on
cellphone problems).

But we were surprised to see the most recent problems -- with the
batteries. While software glitches are perhaps understandable, we
thought the Japanese denkis were masters at hardware. Apparently, the
KDDI phones would, under rare circumstances, generate too much heat
and melt the plastic body. This problem is not unrelated to the
growing demand for hardware functionality -- including streaming
video and audio, more onboard memory, brighter and better color LCD
displays, and increased standby and talk times. Speaking at the
Mobile Telecoms Japan conference (see Viewpoint above), Intel's
Patrick Reilly, head of the Cellular Communications Division, said
that the latest models being contemplated by all manufacturers will
include **two** onboard processors in the 50-200 million instructions
per second (MIPS) class and 4 megs of Flash and RAM memory. If
anything, demands on batteries are only going to increase.

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--> DoCoMo Tunes Up for 3G Launch
Source: BWCS Consultants, July 13

EXTRACT: DoCoMo has unveiled details of the advertising campaign that
will accompany the commercial rollout of its 3G service, called FOMA.
The company has enlisted leading Japanese R&B singer Hikaru Utada to
serve as advertising lead on the campaign. DoCoMo's management
believes the image projected by Utada-san -- of budding potential,
innovation, and international appeal -- fits well with the perception
they wish consumers to have of the FOMA service.

COMMENTARY: One aspect of Japan's wireless revolution that has
received scant notice outside the country is the role of marketing.
Rarely have we seen such extensive, expensive, and flashy ad
campaigns touting brand image and lifestyle choice as key drivers for
consumer cellphone purchase decisions anywhere, making the big
cigarette ad campaigns look rather pale by comparison.

And where DoCoMo has previously pushed its absolutely blue-chip
corporate image, KDDI and J-Phone have countered by appealing
directly to youth and young adults. J-Phone TV and billboard ads no
longer even mention handset capabilities or technical specifications
-- they're marketed purely on image appeal and style. (This approach
has been highly effective: J-Phone stole second place in the Japan
subscriber race from KDDI in June.)

It's impossible to walk more than two blocks in Tokyo without seeing
some sort of style & image advertising for cellphones. US carriers,
meanwhile, continue to push voice calling plans, cost, and free
minutes of usage at the top of full-page newspaper ads -- handset
style and brand image come in last, if at all. What a contrast!

--> Oh i-mode, Where Art Thou?
Source: Yahoo News, July 10

EXTRACT: Originally expected to launch its wildly popular mobile Web
browsing service in Europe this fall, NTT DoCoMo now says it could
postpone the rollout for several months. A DoCoMo spokesperson was
quoted as saying that the company was "not yet able to say when it
will launch the service" in Europe.

Because a joint venture with KPN Mobile aimed at developing i-mode in
Europe has not yet been established, its debut could be later than
expected, the spokesperson said. A lack of phones based on the GPRS
standard -- a stopgap technology in the run-up to 3G that promises
faster data transfer speeds than today's GSM -- has already delayed
the launch of GPRS services in Europe. KPN and NTT DoCoMo will
probably first launch i-mode services in Germany or the Netherlands.
In September, the companies plan to announce details about the

COMMENTARY: DoCoMo is finding that it's tough to push on a rope.
While the company may be able to lead others to the i-mode cash
trough, it can't make them drink -- and that's a shame. It must be
frustrating trying to convince the overseas partners (KPN Mobile in
Europe, AT&T Wireless in the US) to simply take the i-mode model and
run with it, sans modification. But it appears that the partners
aren't putting the staff, resources, and brainpower into seeding the
content and services like they should.

We'll admit that technical or supply difficulties with the GPRS
packet-switched data overlay system may be an excuse, but in the
meantime what is keeping the overseas operators from getting the
content and services lined up? What about launching developer sites
and furnishing a software development kit and an emulator? It isn't
rocket science: If DoCoMo could do i-mode, so can you, KPN and AT&T!

+++ P.S.

DoCoMo Hits Up US Service Members for Deposit

NTT DoCoMo has started charging members of the US military stationed
in Japan a deposit of JPY50,000 for the use of its mobile phone
services, company sources said recently. The move is directly aimed
at US sailors, soldiers, marines, and air force personnel who rotate
out of Japan without paying their cellphone bills. The deposit will
be used to settle up final bills, and any unused portion will be
returned to the individual military subscriber. The US forces' Stars
and Stripes newspaper criticized DoCoMo's move, and ran stories
featuring US service members describing the new practice as "unjust."
S&S quoted phone company sources as saying unpaid bills average
around JPY3 million a month. How embarrassing! Free advice to the
United States armed forces: Grow up!

(The Japan Times, July 11)


Written by Daniel Scuka (daniel@japaninc.com)

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