WW-96 -- Swamped by Euro Feedback - Now Let's Look at America

Wireless Watch Japan Mail Magazine
Commentary on the Business of Wireless in Japan
Issue No. 96, Tokyo, Tuesday, April 15, 2003
Subscribe for free: http://www.wirelesswatchjapan.com

Meguro Gajoen, Tokyo
May 22-23, 2003

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in this issue

++ Viewpoint: Swamped by Euro Feedback - Now Let's Look at America

++ Advertorial (promotion):
>> Access Your Mail Accounts via Your Cell Phone

++ Noteworthy News
--> Credit Card Companies Start Trial Service of Infrared Settlement
Using I-Mode
--> Japan Handsets ・Technology Isn't Everything
--> DoCoMo Gets a Clearer Signal
--> Tokyo Tama: Part Two

++ Events (promotion)
>> ICA EVENT - Steven D. Fitz of EMC on Building Robust Business

++ Sign of the Times
"Man Posing as Deliveryman Kidnaps Exec's Daughter"

++ Subscriber statistics, corrections, credits, administrivia

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++ Viewpoint: Swamped by Euro Feedback - Now Let's Look at America

A big "Thanks!" to everyone who submitted comments and observations in response to last
week's WWJ Viewpoint, wherein I solicited feedback on "what an outsider needs to know
about Europe's mobile Internet."

If you've just joined us, my query was elicited by your humble correspondent's pending
move to Germany after nine years of Japan experience - and the sudden realisation that he
doesn't know a whole lot about the Euro mobile Internet. There were, however, lots more
responses than expected, so you'll have to wait until next week (Apr. 21 - WWJ's
second-last issue from me) before I can collate, organize, and republish all the comments.

But that got me to thinking - why not balance things out by asking loyal list members to
also furnish their feedback, commentary, and informed insight on the ***North American***
mobile market? (... also ill-understood by your soon-to-be-ex-WWJ writer - despite his
Canadian origins.)

Go ahead and feel free to mail me (at the address below) with your notes on which
US/Canadian companies, technologies, business models, and content services bear watching.
Can m-mode delivered via GSM/GPRS by AT&T Wireless sweep the US? Or does the backwards
compatibility and high speed of CDMA 1x technology have an overwhelming advantage - making
the CDMA carriers the ultimate market winners? And, will US subscribers ever take to Hello
Kitty downloads? (There's evidence to say argue they already have - see WWJ No. 92, link

Republishing your collected, collective wisdom on the European and North American mobile
Net markets in the final two WWJ newsletters strikes me as being the best way I can pay
back your loyal readership and spread around some of the local-market knowledge that WWJ
subscribers have amassed (and remember - there are over 4,000 or you now - most working
deep in mobile Internet space somewhere on planet Earth).

I will gather your responses and present them in the final WWJ newsletter on April 28-
European responses will come on April 21.


Last week, I wrote that: "My first impression [with the 505i-series] was that DoCoMo has
now entered a "post-packet-fee" era. By this I mean that the company is no longer merely
fixated on deploying features and services that boost individual packet usage and ARPU;
this has been the sine qua non of mobile carriers in this country since the dawn of
i-mode. DoCoMo has clearly decided to make the phones uber-sexy so as to grab market share
and stem the churn over to KDDI (and - to a lesser extent - J-Phone)."

This observation sprang largely from the fact that Big D has adopted removable memory in a
big way with the 505i phones - a substantially new development at DoCoMo.

The natural conclusion is that the carrier is satisfied with the packet usage and traffic
fees generated by most individual users and doesn't mind letting them swap photos and
other data off the handset without using the network. So long as DoCoMo wins new converts
due to the sheer technical attractiveness of the handsets (i.e. removable memory,
high-resolution cameras, etc.), they'll earn plenty future revenue from an increased
subscriber base - and stem the loss of market share that's been bleeding away to KDDI's
CDMA 1x system for almost half a year now.

Of course, as one of my keen students at the mobile marketing course that I co-teach at
Niigata's International University pointed out yesterday afternoon (I wrote this on the
Shinkansen "Bullet" train as I returned to Tokyo), DoCoMo **had to** offer removable
memory as a way to get the huge picture files created by the new, 1.3-megapixel camera off
the handset without incurring injurious packet fees. True enough.

But lead CSFB telecoms analyst Mark Berman had a different take. He wrote to say,
"Actually [you are] incorrect. DoCoMo's churn rate has been steady, and actually fell in
the 3rd quarter (the last we have data for)." Ouch!

He added: "Also, I disagree with the view that DoCoMo is moving away from a strategy of
raising ARPU - [i-mode tanto-san Takeshi] Natsuno's presentation to analysts focused on
the increase in data usage they are seeing per user per day with the new camera phones - a
point I keep hitting on as an indicator that their data revenue will continue to rise at a
strong clip." Ouch again!

(After that sound thrashing, though, he did add, "Overall, though, good work on your
pieces!") ;-)


I'm still not convinced that packet revenue per user won't take a hit once folks realise
they can off-load pics using the memory cards instead of the pay-for-every-packet network
- and only 3 of the 6 new 505i models have the megapixel-class cameras that arguably demand
physical offloading versus network transmission; the rest still have 300k-pixel class lens
and remain clearly in the toy/novelty/convenience category.

If users aren't prepared to pay for one of the sure-to-be premium-priced Sony 1.3-megapixel
505i models, they're probably also too cheap to use packets to offload pics.

Further, in our upcoming video report from the 505i-series launch event, Natsuno-san told
me that he recognizes the fact that there are now two modes of usage - using the network
to swap photos, and using removable memory and photo print kiosks.

The cool new kiosks, by the way, are being pushed by NEC, Fuji Photo, and Omron, which -
since last fall - have been in turbo mode to develop and distribute as many kiosks as they
can to high-traffic public areas and chain shops (it costs about 50 yen to make a print).
The machines accept all forms of removable memory sticks and have evidently been designed
with non-packet-using el cheapos in mind.

Ultimately, any reduction in packet revenue due to offloading via removable memory may be
more than compensated for by other new usages - such as using removable memory to transfer
pics to the phone (and mailing them) from non-wireless-enabled devices like digicams.
Maybe Berman and me are both correct. ;-)

Please don't hesitate to drop me a note (mail address below) - even if just a few lines -
to provide your feedback on what an outsider needs to know about the North American mobile
market - and log on April 21 and 28 to access what will probably be WWJ's two best issues

-- Daniel Scuka

"Hello Kitty Content Sells in the USA (Wireless Notes section)"
WWJ No. 92,

"All Aboard! Next Stop: Digital Print Station," J@pan Inc Magazine April (free after 45

++ Advertorial (promotion)
Access Your Mail Accounts via Your Cell Phone

"classY Mobile" (pronounced "class Y") lets cell-phone users access private and work
e-mail accounts via Internet-capable mobile phones. classY Mobile also allows users to
respond to messages with the e-mail address of their choice, and to delete unwanted "spam"

** Message from Nelson Fung, creator of classY Mobile:

Thanks to the help from WWJ readers, we have received some valuable feed back. However, I
believe classY Mobile needs much more constructive criticism than what I have received to
date! So gentle readers, please give it a try and tell me what's wrong with it! Wanted
features would be helpful too!

Japan-based users can sign-up for free at: http://classY.jp/

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++ Noteworthy News

--> Credit Card Companies Start Trial Service of Infrared Settlement Using I-Mode
Source: NEAsia Online, Apr. 14

EXTRACT: Visa International, Nippon Shinpan, Aeon Credit Service, OMC Card, and NTT DoCoMo
announced that they have agreed to commercialize credit card settlements using mobile
phones, and that they will start a trial service soon. The mobile phones designated for
the trial service are NTT DoCoMo's i-mode-supporting 504i series and 504iS series that
have the infrared communication function to download Java applications. For the trial
starting in June, 3,000 Nippon Shinpan Visa card members will be recruited as monitors,
and about 500 member shops will be equipped with infrared receivers. The monitors download
the Java application for settlement containing their credit card information to their
mobile phones. They run the Java application at shop fronts to establish infrared
communication between their mobile phones and the card readers in the shops.

COMMENTARY: The service will use Visa's "Infrared Financial Messaging" system, and
establishes communication between the i-Appli running on the cell phone and the merchant's
terminal via IR. A year ago, I was quite bullish on this sort of practical mobile
commerce, but my sense today is that it won't compete well in view of the bitWallet "Edy"
contactless IC money system (to be launched in later this year). The Edy system is fast,
convenient, and merely requires that the contactless IC chip (mounted on a card, on a cell
phone, etc.) be swiped within a few centimeters of the terminal reader; it's already
hugely popular as used in the "Suica" train pass system. In contrast IR is comparatively
limited since it requires the two devices' IR ports to be more or less lined up (it's a
line of sight technology - just like your TV remote control). Still, this may turn into an
interesting niche as Edy is a debit systems while this is the first example of a mobile
Java-based credit card payment service.


--> Japan Handsets ・Technology Isn't Everything
Equity Research Report (limited release)
Source: Morgan Stanley, Singapore, Apr. 11

EXTRACT: Japanese companies have a technology edge derived from digital media expertise,
and particularly long experience with displays and cameras; experience in multimedia
applications, from i-mode in the domestic market, has led to software and application
expertise. Japan has an obvious technology lead, but the gap is narrowing. We estimate the
technology lead Japan enjoys over Korea has shortened to 3-6 months. It's lead over Europe
is probably longer - about 9 months. We believe Japanese handset makers are unlikely to
gain share in 2003-04; we expect market share to remain stable around 16%, with modest
room for growth and upside due to increased use of outsourcing partners.

COMMENTARY: Eric Wen and colleagues at Morgan Stanley's Singapore office have released the
latest in a series of excellent reports examining Japan's handset makers in the context of
the wider Asian and global markets. In the current report, the authors point to the
Japanese makers' inability to achieve economies of scale in the export markets, and they
allege "too much focus on the proprietary domestic PDC standard" as reason why costs are
still so high (of course, Japanese carriers eat a big part of that cost, so handsets end
up being cheap at retail - at least after an initial couple of months on the market).

They also point out that due to slow progress on business model-related issues and a delay
in the take-up of data-intensive 3G services (read: DoCoMo's 3G services), "Japanese
handset makers' technology edge is likely to be chipped away as other competitors narrow
the gap." Look out Japan: Korea's gonna eat your mobile lunch! This report is a must read
for anyone seriously studying handset issues.

Eric has kindly consented to respond to requests for copies:
Eric Wen
+65 6834 6754

Note: This week's WWJ video newsmagazine is particularly pertinent to handsets. We sit
down with a senior manager from Sony Ericsson's consumer terminal design section and talk
about the design process, features, style, cameras, technology, and why Japanese handsets
are so darn cool!

Morgan Lewis is a global, fully integrated, multipractice law firm. We have nearly 1,300
lawyers in 16 offices worldwide, with new offices in San Francisco, Silicon Valley and
Irvine, California.

Our Tokyo office serves as the firm's portal in Asia, with experience in start-up
representation, venture capital, M&A, patents, joint ventures, distressed debt, and
securitization. The Tokyo office works closely with our other offices to advise Japanese
companies in connection with their business activities in the U.S. and Europe. We also
represent non-Japanese entities doing business in Japan and the rest of Asia, working
closely with Japanese and other local attorneys.

For further information, please see http://www.morganlewis.com or contact John Y. Sasaki,
at jsasaki@morganlewis.com.

--> DoCoMo Gets a Clearer Signal
Source: Business Week, Apr. 21

EXTRACT: A year ago, NTT DoCoMo looked like yet another Japanese company gone astray.
After writing off half of the $16 billion it had invested in overseas phone companies,
Japan's No. 1 wireless operator plunged into the red for the first time since its founding
in 1991. Its reputation as a leader in innovation took a beating after it was late to
offer cell phones with built-in cameras, the latest rage in Japan. And the launch of its
much-hyped 3G high-speed mobile service turned out to be a much-publicized flop. Now,
though, DoCoMo is bouncing back. Although the company won't report fiscal 2002 earnings
until mid-May, Credit Suisse First Boston Corp. sees a $1.7 billion profit, on sales of
$40 billion, vs. a $985 million loss on revenues of $39.5 billion in 2001. Moreover,
thanks to booming handset sales, declining capital outlays, and higher mobile revenues,
DoCoMo is cash-rich again; it rang up $3 billion in free cash flow for the year ending
Mar. 31, analysts say.

COMMENTARY: Good news - finally - for Big D. We told you so. ;-)

"Tokyo Analyst: 2003 Wireless Outlook"


--> Tokyo Tama: Part Two
Source: Wireless Gaming Review

EXTRACT: DoCoMo actually prohibits any direct connection between users who don't know each
other already. In the 1980s, a kidnapping occurred as a result of someone meeting up on
one of the party chat telephone lines, and ever since then the carrier (which still has
government ties) has banned any such functions. The other carriers, J-Phone and KDDI,
which don't have the government legacy, are quite happy to offer these type of services.
This variation in functionality also leads many content providers to develop
carrier-specific versions of their games. One title like this is "Baby Cupid" from Spike
Media. In the DoCoMo version of this game, players who register tell the game a little
about themselves, and the game matches two "parents" to raise a little baby character. The
players then communicate through this character.

COMMENTARY: A couple of weeks out of date, but this story is an absolutely authorative
review of handsets, the latest mobile games and services, pricing strategies, how Java
works on all three carriers, and more. Author David Collier is one of the most
knowledgeable Japan mobile hands I know. Check out the link to Japanese handset mobile
Java benchmarks - find out which handset really is the fastest.

++ Events (promotion)
>> ICA EVENT - Steven D. Fitz of EMC on Building Robust Business

How do great companies protect their business and retain customer value when confronted
with crisis? As the world's leading networked storage provider, an astonishing 95% of
Fortune 500 Financial Services companies have selected EMC to protect their business from
the "unexpected." Steven D. Fitz is president of EMC Japan KK and managing director, Asia
Pacific, for EMC Corporation.

If you would like to attend please RSVP on our sign-up page at:
by 17:00 Tue. April 15, 2003.

Thursday, April 17, 2003
Time: 6:30 Doors open
6:30 Networking / Cash bar
7:00 Dinner
7:35 Main Presentation
8:30 Q&A

Yurakucho Denki Building, Foreign Correspondents' Club
Cost: 3,000 yen (members) 5,500 yen (non-members)
No shows will be charged. Dinner will be served.


Brand Mythology: results-driven strategies to leverage the brand story
Four Seasons Hotel, Tokyo
Wednesday May 28th 2003

Main issues to be discussed:
- 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

Online registration is available at:

++ Sign of the Times

Man Posing as Deliveryman Kidnaps Exec's Daughter
Mainichi Shimbun, Apr. 14
KASHIWA, Chiba -- A man posing as a deliveryman kidnapped the 12-year-old daughter of a
company president but later released her, police said Monday. The man visited the home
of the junior high school student in Kashiwa, Chiba Prefecture, at about 8:30 p.m.
Sunday while her parents were out. After the man told her over the intercom that he was
a deliveryman, the girl opened the entrance door and was grabbed and forced into his
vehicle. Two hours later, the man called her father's mobile phone, demanding tens of
millions of yen. Five hours later, the kidnappers released her.

... I wonder how they got the dad's keitai number? ...

Subscriber Statistics, Corrections, Credits, Administrivia

4,078 (via japaninc.com and wwj.com) as of Apr. 15, 2002

WWJ Video Newsmagazine host & research:
Daniel Scuka (daniel@wirelesswatchjapan.com)

WWJ Mail Newsletter editor & host:
Daniel Scuka (daniel@wirelesswatchjapan.com)

WWJ Sr. Contributing Editor:
Michael Thuresson (mthuresson@labusinessjournal.com)

WWJ Video Newsmagazine digital media producer:
Lawrence Cosh-Ishii (lcosh-ishii@wirelesswatchjapan.com)


Text copyright (C) 2003 WirelessWatchJapan.com. All Rights Reserved. Reproduction in whole
or in part by any means without written permission is strictly prohibited. WWJ Mail
Magazine is republished by J@pan Inc magazine by special permission.