WW-87 -- Japanese Carriers' Packet-fee Addiction

Wireless Watch Japan Mail Magazine
Re-published by J@pan Inc magazine
Commentary on the Business of Wireless in Japan
Issue No. 87, Tokyo, Tuesday, February 4, 2003
Subscribe for free: http://www.wirelesswatchjapan.com

today's lead sponsor is:

Coming February 5...

Toshiba's gorgeous new J-T08 handset:

The world's first quarter-VGA "Super-fine Polysilicon TFT LCD"
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run a sad, sad comparison with WWJ editor Daniel Scuka's two-year-
old Panny...

"We Rip the Faceplate Off Japan's Wireless Industry"

in this issue

++ viewpoint
Japanese Carriers' Packet-fee Addiction

++ wireless notes
** Comments from J-Phone 3G User
** And Speaking of J-Phone...

++ noteworthy news
--> DoCoMo Issues Advisory for mova N504iS
--> NTT Offers Cellphone-PC Video-Conferencing
--> DoCoMo Lures 16,300 3G Users In 4Q; Shows Slow Growth
--> J-Phone to Introduce New Movie Sha-mail Handset: the J-N51

++ overlooked data
** KDDI Subscriber Data History
** NTT DoCoMo Tech Journal

++ sign of the times
Aum Uses Sultry Net Sirens to Lure Male Members

++ events (ads)

++ subscriber statistics, corrections, credits, administrivia

++ viewpoint: Japanese Carriers' Packet-fee Addiction

I went to happy hour on Friday with a senior account executive at a major ad
agency that counts one of the top-four Japanese carriers as its client, and my
exec contact had a few pointed comments to make over beer and chips.

He related how he has participated in numerous campaign and strategy sessions
with his client's top management, and has been asked on several occasions for
his opinion on what kind of data services would sell (and, of course, how to
sell them). He's pointed out that, perhaps, the mobile world should think about
evolving towards new forms of content billing - and that maybe carriers should
take a hint from payment models used by other media.

"If you stop off at the station kiosk to pick up the Nikkei on your way to the
office in the morning," he said somewhat excitedly, "the guy in the booth
doesn't stop and say, 'OK - one newspaper - that's 30 pages at 10.8 yen per
page; that'll be 324 yen this morning, sir - a little cheaper than yesterday
isn't it?' No - he sells you one newspaper - however thick - for a set price."

This model of content billing - one 'blob' of content for a set fee - is how it
works with newspapers, books, magazines, and other mass-market media
consumables. The same model applied to mobile content gives rise to the much
talked-about "per event" billing system, something that the Japanese carrier's
haven't adopted with much enthusiasm.

By the second round of drinks, the exec was getting nicely warmed up. "Just
think of all those 40- and 50-year-old male office workers who have keitais but
don't use much data at all, except for the odd mail. Sure - they make voice
calls; but surf i-mode? Forget it," he harrumphed.

Mobile dialers brought up in the boom age of TV, radio, and print (switch it on,
watch/listen all you want; buy it, read all you want) aren't taking to Japan's
wireless Webs and their per-packet billing systems. In the 70s and 80s,
telephones in Japan, for example, were expensive and metered by the minute.
Subscribers in the post-30s generation just aren't in the habit of twiddling an
i-mode button for hours on end to gobble up packets (issues of screen clarity
and font size aside).

But now think about how to replace the printed broadsheet sports newspaper that
these non-teens are buying each morning with - Ta-Da! - a cell phone. Dad's not
going to exchange his 300-yen sports paper for a variable-priced download
session, but he might do so if the data price was a preset, reasonable sum - say
500 yen for all the text he wants.

But this is unlikely to happen, said my contact as the fish & chips arrived, so
long as Japanese carriers are addicted to their per-packet revenues. And
addicted they undoubtedly are.

Take the case of NTT DoCoMo. In September, the carrier claimed 34.883 million
i-mode users, according to a recent IR presentation, and each i-moder was
handing over a tidy 1670 yen per month for i-mode usage (the majority of which
comes from packet fees). Although overall ARPU (voice and data) at DoCoMo is
trending down, data is comprising an increasing share - 880 yen per user per
month in March 2001 to 1690 per user per month (estimated) for March 2003. How
would you like to have 34.8 million customers handing over almost USD$15 per
month? Especially if that revenue is holding up a bottom line that is otherwise

Obviously, the carriers' focus is on boosting per-user packet usage; if those 34
million users (or 17 million in the case of competitors J-Phone and KDDI) can be
convinced to use even just 5 or 6 more packets in a month (Five more mail
messages? Two more micro-Web page views?), that means DoCoMo would earn an
additional 34 million x 6 x .3 = 61 million yen. Hence the carriers' delight at
the packet-gobbling surfing habits of the typical carefree teen...

But until there's some thought put into creating data services and content that
earn revenue in more "traditional" ways, it's going to be hard to replace those
sports papers in the hands of the mid-aged commuters with cellular terminals.

Sure, maps and a few other data 'blobs' are already priced by-the-download, but
that's for the content fee (the traffic fee is still by the packet). I'll be the
first to cheer when even one of Japan's mobile Internet troika offer substantial
per-event traffic billing regardless of number of packets. Realistically, this
probably won't happen on the 2G networks (the spike in usage would swamp the
systems, yada, yada, yada), so the interesting question is: which 3G network
will offer re-event billing the first? And which will subsequently offer
flat-rate? Don't be surprised if it's KDDI with their CDMA technology.

My ad exec bar mate, perhaps grateful that someone would patiently listen to his
ventilation, kindly offered to pick up the tab. The bill, by the way was for an
order of fish & chips and four pints and the pub, unsurprisingly, didn't bill
per chip. ;-)

-- Daniel Scuka

++ wireless notes

** Comments from J-Phone 3G User

After last week's newsletter, I received a few comments on J-Phone's 3G roaming
services. The response below is from Martyn Williams, Tokyo correspondent for
the IDG News Service:

I bought a Motorola V66 quite fast and plan to switch everything to
J-Phone too. I am currently an Au user and have stuck with my roaming
phone for sometime although been disappointed with Au's lack of support
for the service. The phone has never been upgraded meaning if you want
roaming, you can't get Java, a camera, or any of the other new features.

Of course, J-Phone's new service doesn't offer Web and mail right now,
but I think they are planning fuller handsets from the summer. For
people who want roaming, here's my advice: Get the V66 for all your GSM
needs (it's a tri-band phone at a price you can't beat) and then, later
this year, chose from any one of the other W-CDMA handsets [ presumably
for data - ed. ]. The SIM card means you can switch your phone number
and address book between the two phones and, because you will have a GSM
handset, you will be open to buying any one of the W-CDMA handsets for
Japan use. If you don't have the V66, you'll be limited to the
W-CDMA/GSM models and they are only dual-band GSM anyway so you'll have
to hire a phone when you travel to the US.

** And Speaking of J-Phone... What's This About Pre-Paid?

Looks like the folks at Atago Hills are keen to boost the country's hitherto
anemic pre-paid market. The company said on Monday that they would start selling
the J-D07 enjorno (by Mitsubishi) pre-paid-only handset on February 10 at
J-Phone shops nationwide. The company will also offer new discount plans; the
handset should retail for 9,800 yen including 3,000 yen of usage good for 30 to
90 days depending on calling plan.

In other J-Phone news, Kyodo reported on Feb. 3 that J-Phone had said its mobile
phone services have run into problems in some parts of Okayama, Shimane, and
Tottori prefectures in western Japan since mid-morning. J-Phone attributed the
problems to a failure in "radio wave relay equipment" had couldn't say when
services would return to normal. There was also no word on whether the problems
affected 2G users, 3G users, or both.

++ noteworthy news

--> DoCoMo Issues Advisory for mova N504iS
Source: Company PR , Jan. 29
DoCoMo, N504iS, battery problems, advisory

EXTRACT: NTT DoCoMo announced today that in very rare cases its
second-generation N504iS phones may overheat. The problem is due to a hardware
conflict between the battery pack and the handset, which in rare instances
causes a glitch that generates heat. DoCoMo today issued an advisory to N504iS
customers asking them to bring their handsets to DoCoMo Shops if the part where
the phone strap hook is located gets hot. DoCoMo will also issue warnings via
newspaper ads, as well as the company's website and portal site. DoCoMo is
urgently producing replacement battery packs, which will be mailed to customers
when they become available, sometime after mid-February.

COMMENTARY: The company also said that it would suspend sales of N504iS models
for the time being. The interesting aspect to this is how far Japanese companies
- in this case, NTT DoCoMo - will go to ensure customer happiness and to avoid
any public criticism.

There was a famous case a couple years ago when a long-dissatisfied customer
actually made a recording of a large company's customer support staffer getting
irate and abusive on the phone. This is extremely rare, so when the customer
posted the recording on a personal Web site, there was a lot of traffic. The
utterly embarrassed company sent repeated delegations of senior managers to
apologize in person and provide gomenasai gifts - and money! Apparently there
are folks who do little but harass large companies for perceived ill-treatment
in the hopes of winning a similar cash windfall.

Also, care to guess how many 504iS handsets suffered from the overheating
problem? Out of 840,000 sold to date? Would you guess maybe, oh.., one hundred?
50? Precisely 8 ( eight! ). N504iS was introduced to the market on November 22,


--> NTT Offers Cellphone-PC Video-Conferencing
Source: Yahoo , Jan. 28
NTT, NTT DoCoMo, PC, mobile videoconferencing

EXTRACT: Japan's Nippon Telegraph and Telephone Corp. (NTT) and its mobile unit,
NTT DoCoMo Inc., said on Tuesday they had developed a technology that enables
video-conferencing between PCs and third-generation (3G) handsets. DoCoMo
already offers a video-conferencing function between users of its 3G handsets,
but this is the first time that real-time video conferencing has been made
available between 3G handsets and PCs, it said. DoCoMo said the new function had
a variety of business applications, such as expert support of sales
representatives making presentations to customers in remote locations or the
remote monitoring of construction sites. NTT Broadband Initiative Inc, a wholly
owned unit of NTT, plans to offer the new service on a test basis for two months
from February, with commercial operations slated by the end of September.

COMMENTARY: This is interesting, not the least because videoconferencing seems
to be more and more central to what DoCoMo - and the NTT group - wants to do
with 3G (NTT said the new service would be one of about 20 broadband-related
projects that group companies are developing so as to replace falling voice
revenues). There is, of course, already a FOMA-to-fixed line service available,
but the home user has to have a "Moppet" terminal (from NTT East or West) and
the service operates as a telephony service via FOMA's 64-kbps circuit-switched

This new technology will offer bi-directional communication between IP networks
and FOMA; this form of communication had been difficult to achieve because of
the differences in the bearer service and protocols used by these networks,
according to the companies' press release. Still no word on what the packet fees
will be. Maybe we can hope for per-call billing instead of packet-based billing
(see Viewpoint above)?


WWJ has Web, email, and video promo slots for a
limited number of sponsors

160,800 video minutes/month, 3,560 subscribers in Japan, Europe, and
North America. The No. 1 channel for promoting your company, product,
or service

"We Rip the Faceplate Off Japan's Wireless Industry"

--> DoCoMo Lures 16,300 3G Users In 4Q; Shows Slow Growth
Source: Dow Jones on Yahoo , Feb. 3
DoCoMo, FOMA, subscriber growth

EXTRACT: NTT DoCoMo said Monday it signed up 16,300 new subscribers to its
third-generation "FOMA" mobile communications service in the October-December
quarter. The data underscore the sluggish growth in subscriber numbers for its
flagging 3G service. DoCoMo's 3G service had attracted only 152,000 subscribers
by the end of December since the launch of the service in October 2001.

COMMENTARY: In the month ending December 31, KDDI signed up 775,900 new 3G users
for a total of 4.67 million subs - a tough target for DoCoMo to match (ever). I
remain hopeful for DoCoMo and FOMA for 2003, but KDDI's lead appears to be
absolute. Moreover, after not launching any 3G-optimized services for the first
7 months of 3G operation, KDDI now has a couple offerings (Movie Mail and
CD-quality ring tone downloads), muting earlier DoCoMo criticism that KDDI had
done nothing on the services side. The Telecommunications Carriers Association
subscriber figures for the month of January should be out later this week.


--> J-Phone to Introduce New Movie Sha-mail Handset: the J-N51
Source: Company PR , Jan. 30
J-Phone, NEC, Movie Sha-mail

EXTRACT: J-Phone announced today it will offer a new Movie Sha-mail (video
messaging) handset, the J-N51 by NEC, for sale after late April 2003. Movie
Sha-mail is a service that enables users to send video clips of up to five
seconds in length with audio as e-mail attachments. The J-N51 is only 21mm
thick, making it J-Phone's thinnest clamshell model so far. It also boasts twin
lenses that can take VGA-resolution pictures using an embedded CCD camera with
310,000 effective pixels. The J-N51 also features large, vivid and
high-luminance TFT LCDs for the 2.2-inch main display and 1.2-inch sub-display.
Additionally, the handset includes a new high-speed Web browser and T9 ョ text
input and word prediction for easy text entry.

COMMENTARY: A couple of firsts on this one: This will be the first IR-capable
handset for J-Phone, allowing users to exchange pictures and contact
information. Ironically, this will make it easier for users to swap Sha-mail
photos without using the network (or paying J-Phone). I guess with 8
million-plus Sha-mail users, they aren't so worried anymore about wringing every
last yen of revenue out of the service.

Also, this handset boasts have large, high-luminance TFT LCDs: a 2.2-incher for
the main display and hefty 1.2-inch sub-display - that's about as big as the
main display on my two-year old Panny! The company also claims this is the
industry's largest-class 1.2-inch (120 x 80 pixel) TFT sub-display. Further,
compared to the previous J-N05 model, brightness has been increased by 15% and
color reproduction and contrast performance have been roughly doubled, according
to the press release.

Note that the CCD camera 310,000 effective pixels; however this handset will hit
the streets around the time that DoCoMo's 505-series i-mode handsets are due out
- and they're supposed to feature 1-million-pixel-class CCD cams.

++ events

Brand Mythology: Results-Driven Strategies to Leverage the Brand Story

Topics include:
- Fusion of the brand and business strategy
- Brand management in crisis and recession
- Delivering global brands in foreign markets
- B2B targeted versus consumer sector branding
- Global and local case studies of failure and success

May 28, 2003 (Wed.) Four Seasons Hotel, Tokyo
Online registration is available at: Economist Conferences

++ overlooked data

** KDDI Subscriber Data History
Check out KDDI subscriber numbers between 1997 and 2002 for all networks.

** NTT DoCoMo Tech Journal
Ever wonder how i-shot works? (Hint: it's circuit-switched up and
packet-switched down.) How about the architecture of the FOMA multipoint
videoconference platform? Subscribe to the company's technical journal here.

++ sign of the times

AUM Uses Sultry Net Sirens to Lure Male Members
Mainichi Shimbun , Jan. 29
Aum Shinrikyo, the doomsday cult responsible for the deadly 1995 gas
attack on the Tokyo subway system, is getting women to use controversial
Internet matchmaking sites to lure new men into the group, the Mainichi
has learned. Amorous AUM members from the cult's Nagoya base apparently
pretend to be interested in meeting men's desires for female
companionship, but instead use their seduction to get the men into the
cult. Police quoted a recent example of a man who used his mobile phone
to respond to a message posted in a matchmaking site by a woman saying
that she was lonely and wanted somebody to talk to. The woman replied
and agreed to meet him. When he turned up at the appointed time, there
were two women waiting for him. The three went to a nearby cafe, where
the women told him they were about to head off to a yoga class and
invited him to join them. He was taken to a monthly meeting where the
cult leader read sutras. He began attending these meetings without fail
and became a member of the cult. He soon developed doubts about the
authenticity of AUM's teachings, however, and left the group.

... no thanks necessary folks! I consider passing along such warnings of
cell phone danger as part of WWJ's public service obligations ;-) ...

++ subscriber statistics, corrections, credits, administrivia

3,560 (via japaninc.com and wirelesswatchjapan.com) as of Jan. 26, 2003

WWJ video newsmagazine researched, edited, and hosted by Daniel Scuka.
WWJ email newsmagazine researched and created by Daniel Scuka and Michael
WWJ video newsmagazine produced and edited by Lawrence Cosh-Ishii in cooperation
with Video-Link.com.


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