WW-39 -- 2002: FOMA's Year?

J@pan Inc Magazine Presents:
Commentary on the business of wireless in Japan

Issue No. 39
Tuesday, January 15, 2002


+++ Viewpoint: 2002: FOMA's Year?

+++ Noteworthy News
--> NTT DoCoMo Says Unlikely to Meet March Goal for 3G
--> Sprint PCS Says It Will Be First Carrier to Sell Hitachi
Handsets in US
--> Keisuke Kuwata's Ballad is Most Downloaded Song
--> Qualcomm Offers Free Japanese BREW SDK for Cellphones
--> CNN's Japanese Site Shut Down
--> KPN Starts Test with European i-mode Service

+++ Events (Advertisements)
ICA 2nd Round Table Discussion on the Future of Mobile Comms
Yurakucho Denki Building, FCCJ, Tokyo, January 17

+++ Sign of the Times
Mobile Phone and PDA Score High in Annual Ranking


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+++ Viewpoint: 2002: FOMA's Year?

To date, there is a definite lack of 3G FOMA-specific content,
applications and services. The only content service that
specifically makes use of FOMA's bandwidth is the i-motion video clip
service, launched in November. (Of course, one of the FOMA phone
models can also provide videoconferencing, but that is a telephony
service provided via the circuit-switched mode of the W-CDMA network,
not a data-based content service offered via the 384-Kbps
packet-switched mode.)

According to sources familiar with the carrier, DoCoMo business
development staff spent the last couple of months of 2001 quietly
inviting content providers over for coffee and a chat to introduce
FOMA, explain the network, and to basically implore providers to
consider how they could create high-bandwidth content for 3G. But
providers still think FOMA is risky, and are unwilling to commit
time, energy, and resources to developing 3G-optimized content until
they see a larger customer base (see latest TCA figures in first news
item below). Remember -- wireless operators here provide little
significant assistance to content providers, and certainly offer zero
in the way of cash to help underwrite the risk of developing new

What a change from the days of 2.5G i-mode! In the first year (and,
for that matter, all subsequent years) of i-mode's operation,
content, application and service providers beat a path to DoCoMo's
door begging to be allowed onto the default menu as an official
provider, with signs of micropayment riches dancing in their eyes. At
one point last year, Big D was seeing upwards of 100 supplicants each
week lined up in best bib and tucker ready to pitch their best ideas.

Several industry insiders have said that the videoconferencing
feature is being used (it works well), but there are still few other
FOMA subscribers with whom to conference. FOMA also suffers from the
limited service area coverage. Outside the 3G coverage area (roughly,
Tokyo-Kawasaki, but this is growing), even the basic 2G-level
services (like regular i-mode and mail) don't work.

Despite this grim situation, we think FOMA will steadily gain
momentum during 2002. The carrier has committed enormous capital to
making FOMA work (both cash and pride), and i-mode and DoCoMo have
unbeatable brand value. The more that DoCoMo hypes FOMA, the more
subscribers will switch.

One comment heard out of J-Phone recently relates to the carrier's
concern that its highly lucrative youth demographic tends to abandon
the carrier as soon as they graduate from school (J-Phone and J-Sky
have **too** much of a "kid" image). Most invariably switch to DoCoMo
(the "adult" brand), and we guess that in 2002, many if not most will
at least consider buying one of the top-of-the-line 3G handsets. If
nothing else, Japanese consumers love premium-branded goods.

Besides, there will soon be a lot of coverage in the Japanese press
as 3G networks are opened in Australia and elsewhere and i-mode is
launched in Europe. What loyal consumer isn't going to want to
participate in a made-in-Japan overseas success story?

We think 2002 will be FOMA's year.

-- Daniel Scuka


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

--> NTT DoCoMo Says Unlikely to Meet March Goal for 3G
Source: Reuters on Yahoo, January 10

EXTRACT: NTT DoCoMo said on Wednesday it is not likely to meet its
goal of 150,000 subscribers for its 3G services by the end of March
2002, but it still expects to have 1.5 million subscribers by the end
of the next fiscal year. When asked by an investor whether DoCoMo
planned to revise its near-term 3G subscriber target, DoCoMo Senior
Executive Vice President Yoshinori Uda said: "You're right that
150,000 (by the end of March) may be a bit tricky considering we have
only about 30,000 or 40,000 now. But to have 1.5 million in the next
fiscal year is something we're quite confident in." Uda spoke through
an interpreter at the Salomon Smith Barney 12th Annual Entertainment,
Media and Telecommunications Conference in Scottsdale, Arizona.

COMMENTARY: DoCoMo's 3G FOMA service started in October, after a
4-month trial period. The Japan Telecommunications Carriers
Association reported that on December 31, DoCoMo had 27,000 W-CDMA
(3G) subscribers -- a modest increase of 13,000 over the November
2001 count. Uda-san appears to be acknowledging what is plainly
obvious, and we suspect the carrier will take steps to boost FOMA
subscribers -- in fact, it already has. As of this month, the NEC
N2001 FOMA handset will list for JPY14,800 -- lower than even some of
the 503i-series 2.5G (PDC) handsets (e.g. Sony and NEC). The NEC 3G
handset now compares well with J-Phone's hyper-popular J-SH07 camera
phone (Sharp), which lists for JPY12,800. With packets on the 3G
network priced at JPY0.2 to 0.05 (depending on calling plan), DoCoMo
can now legitimately advertise FOMA phones and i-mode as "cheaper"
than 2.5G PDC phones and i-mode (on the 2.5G PDC network, packets
cost a uniform JPY0.3 each).

--> Sprint PCS Says It Will Be First to Sell Hitachi Handsets in US
Source: Sprint press release, January 7

EXTRACT: Sprint says it will be the first wireless carrier to bring
Hitachi phones to the US. Hitachi will launch new 3G Sprint PCS
phones (CDMA) in mid-2002 when Sprint PCS launches 1X-services over
its nationwide wireless network. The Hitachi handsets are expected to
support J2ME Java and audio and video applications.

COMMENTARY: We've always argued that Japan's ultracool pocket rockets
were one of the reasons behind the success of the wireless Internet
here. Now that similar models are starting to appear in the US, there
is one less hurdle for carriers to clear in launching i-mode-like
services. And when consumers see these babies, they will want to
possess them. We've heard the same comments again and again from
non-Japan residents when we show them even a less-than-up-to-date
celly from Japan: "I **must** have one!"

Sprint also said it will offer Sanyo cellphones equipped with
cutting-edge organic light-emitting diode (OLED) displays starting
next year.

--> Keisuke Kuwata's Ballad is Most Downloaded Song
Source: Nikkei AsiaBizTech, January 4

EXTRACT: Giga Networks announced its 2001 ranking of the most
downloaded songs as ring melodies for mobile phones in Japan. The
company operates a ring melody Web site, and it released the yearly
ranking of downloads during the period December 1, 2000, to November
30, 2001. According to the ranking, the most downloaded melody was
"Johnny the Surfer" by Keisuke Kuwata, which was used in Coca-Cola's
TV commercials (1,476,182 downloads). Ayumi Hamasaki was the top
single artist whose songs in total had the largest number of
downloads (35 songs; 7,810,617 downloads). Mariah Carey took the
first place in the non-Japanese pop music category with her song,
"All I Want for Christmas is You," which enjoyed 691,466 downloads.

COMMENTARY: This news item also contains rankings of most downloaded
songs by genre, and is well worth a quick look. Giga Networks
launched its ring melody downloading service based on a karaoke music
archive owned by parent and karaoke machine maker Ricoh. The service
claims more than 4.6 million registered members as of November 2001,
and it pays JPY5 to JASRAC (the guardian of musicians' rights in this
country) for each song downloaded.

A quick, thumbnail calculation based on this report indicates that
there were **at least** 52,348,655 downloads off of Giga's servers.
If we assume that each file is approximately 6,000 bytes in size, and
all were downloaded over 2.5G i-mode, that translates into roughly
(6000/128 * JPY0.3 * 52,348,655) = JPY736,152,961 revenue for DoCoMo
in packet fees (from just this one site -- and there are many more on
the official menu and countless more on the Net at large). Don't let
anyone tell you ringtones aren't big revenue generators!

The top downloaded female artist was Hikaru Utada (1,188,391
downloads)who, ironically, is NTT DoCoMo's TV ad face for FOMA.


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--> Qualcomm Offers Free Japanese BREW SDK for Cellphones
Source: Nikkei AsiaBizTech, January 10

EXTRACT: Qualcomm started offering on January 8 a Japanese version of
the BREW Software Development Kit (SDK), a tool to develop software
applications for cellular phone handsets, for free. The Binary
Runtime Environment for Wireless (BREW) is an application platform
that runs on the firm's wireless communications chip, the MSM Series.
Applications developed with the BREW SDK will operate on a cellular
phone handset equipped with BREW and MSM. Qualcomm Japan expects 100
to 150 Japanese companies will use the Japanese version.

COMMENTARY: In Japan, most of KDDI's cdmaOne cellular handsets use
MSM chips. KDDI has said it will release BREW-equipped cdmaOne and
cdma2000 mobile phones in the spring of 2002. It looks like BREW may
gain at least some momentum, if only because independent developers
working in Java have to compete with thousands of other Java
developers producing a plethora of Java apps. BREW applications, by
the way, must be digitally certified and signed by a certifying
authority. Late last year, Qualcomm said unofficially that the
logical organization to perform this function would be KDDI.

--> CNN's Japanese Site Shut Down
Source: Nikkei AsiaBizTech, January 7

EXTRACT: The Japanese edition of CNN.com, CNN.co.jp, discontinued
updating news stories on December 31, 2001. CNN.co.jp explained that
it would concentrate its activity on mobile/wireless editions. CNN
news already available on TV and through i-mode mobile phones will
stay intact after the suspension of CNN.co.jp.

COMMENTARY: More evidence that the wireless Internet is qualitatively
a different medium than the wired Web. Content, applications and
services that are untenable on the traditional Net can be much more
effective on mobile. This goes beyond merely the fact that wireless
allows for microbilling and pay-for-content, and is directly related
to the always-on, always-in-your pocket aspect of wireless devices.
Mobile Net access is the mainstream, while access via a monster
desktop is the niche, customized for data input and heavy-duty number

--> KPN Starts Test with European i-mode Service
Source: MobileMediaJapan.com, December 20

EXTRACT: Dutch telecom company KPN will start testing i-mode services
in the Netherlands and Germany from December 20, 2001. The mobile
Internet service will possibly be extended to Belgium, where KPN has
a subsidiary, at a later date. At a special press conference, KPN
announced it will start operating a full-scale service from spring
2002, after testing the service with a select group of trial users.
KPN announced that the service will be made available in Europe under
the same name as in Japan and with a corresponding logo. Also, as in
Japan, it will utilize compact HTML (cHTML) as its markup language,
as developed by Japanese browser software maker Access. The service
will support high-resolution color content, a feature duly lacking
with current European mobile services.

COMMENTARY: This is a detailed report that goes on to describe some
of the new Dutch i-mode content partners, including Albert Heijn
(supermarket chain), SNS Bank, Foto Play (arcade machine producer),
Reuters, Cybird Japan, Radio 538 (radio station popular with
teenagers and students) and TMF (MTV-like television channel).
Overall, it appears that KPN will adopt the Japan i-mode model hook,
line and sinker -- and good for them for not trying to reinvent the
wheel. The handsets will come from NEC (you can download a PDF data
sheet on the NEC N21i from this story).

One sad aspect is that KPN has let Big D strong-arm it into **not**
including Java support in the initial service profile, due to "the
user's learning curve." Did someone say narrow-minded paternalism?

+++ Events (Advertisements)

ICA 2nd Round Table Discussion on the Future of Mobile Comms
Yurakucho Denki Building, FCCJ, Tokyo, January 17
Map: http://www.fccj.or.jp/general/map.htm
6:15 Doors open
7:00 Stand-up buffet
7:45 Round Table starts

Following the success of the October Round Table, the International
Computer Association will hold a second discussion and networking
party this week on Thursday evening. The event will start with a
networking session with stand-up buffet and cash bar (admission
includes two free drink tickets), and the discussion will cover the
mobile enterprise market, creating and developing the services of the
future, how enterprises can benefit from mobile solutions, and more.
Participants will include Mr. Ted Matsumoto, president of Qualcomm
Japan, Punnamas Vichitkulwongsa, CEO Arriya Solutions, and Mike
Alfant, President of Building2.

Cost: JPY5,000 members, JPY7,000 non-members
No shows will be charged

RSVP at event signup page http://www.ica.gol.com/signup.html
Queries to Chris Ohta at ohtac@icnet.ne.jp

+++ Sign of the Times

Mobile Phone and PDA Score High in Annual Ranking

The AsiaBizTech Web site has released its list of the most-accessed
news stories in 2001. The top-ranked stories contained the keywords
"PDA, mobile phone, and semiconductor." Among the top 20 articles,
the word "PDA" was seen in articles ranked first, second, eighth and

AsiaBizTech News Access Ranking for January-November 2001:
1. January 18 X21 Software to Transform Java-Compliant Cellular Phone
to PDA
2. August 15 Sony's CLIE is Distant Number One in PDA Battery Life
3. July 10 Coca-Cola Model Notebook PC to Debut in Japan
4. July 4 World DRAM Prices Spot Prices for DRAMs Drop Below US$3
5. June 27 Linux in Possible Crisis; IBM, NEC, Two Others to Form
Promotion Group
6. June 13 Transmeta to Release New Crusoe Chip on June 26
7. February 23 Mac Fans Not Happy with Jobs' Speech at Macworld/Tokyo
8. February 7 Fujitsu to Give PDA Orders to Firms in Taiwan
9. March 19 Bluetooth Devices Unable to Communicate with Each Other:
Solution Unlikely to Appear Within 2001
10. April 9 Bluetooth Wireless Products Reach Market in Japan March
26, 2001

"PDA, Mobile Phone, and Semiconductor Stories Stand Out:
Annual Ranking," Nikkei AsiaBizTech, December 31, 2001

SUBSCRIBERS: 1,705 as of January 15, 2002

NOTE: This edition of Wireless Watch is one day late due to the
Japanese national holiday (Coming of Age Day) on January 14.

Written by Daniel Scuka (daniel@japaninc.com)

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Copyright (C) 2002 Japan Inc Communications KK. All Rights Reserved.