Three Telco Presidents Discuss Future of 3G Mobile Phone Services (Part 2): NTT DoCoMo
October 7, 2002 (TOKYO) -- Keiji Tachikawa, president of NTT DoCoMo Inc., talked to Nikkei about the future of 3G mobile phones.
NTT DoCoMo, KDDI Corp. and J-Phone Group will roll out their third-generation mobile phone services before the turn of the year, although slow business persists in other parts of the world.
NTT DoCoMo intends to collaborate more closely with user companies for application development, and review its handset strategy as its FOMA subscribers are fewer than what it had estimated.
Nikkei Communications: How do you view the situation of the current mobile phone business?
Tachikawa: The most innovative change is that the mobile phone services have plunged into the third generation (3G). The second thing is that the way of communication is changing. I believe it is now shifting from voice communication to voiceless communication.
Only Two Companies Manufacture FOMA Handsets
Q: How do you evaluate FOMA almost a year after its launch?
A: I think we have done our role as a pioneer. Because we took the lead in standardizing W-CDMA, our main point in commercializing 3G mobile is to demonstrate the technology. There are many problems that come up when you commercialize a product. The 3G technology was much more difficult than we expected.
Q: What was the most difficult problem?
A: One thing we didn't expect was that only two out of the 11 companies that we ordered from were able to develop the FOMA handsets. It wasn't only the hardware, but also the software with which we had trouble. The FOMA handset has 150,000 steps in the software, so it takes a lot of effort and cost.
Q: Do you think FOMA can get 130,000 subscribers at the end of fiscal year 2002, as you have planned?
A: There will be different kinds of handsets coming out. We released a PDA in July. In the fall, we plan to improve the battery, which has been the biggest issue for us. The new handsets will have more than 150 hours of standby time.
Q: Can you attract subscribers just with those new handsets?
A: The function of the handsets will improve for sure, but the important part is how to use them. The main feature of 3G phones is the high-speed data communication and video transmission. The question is how to utilize this feature. We are trying to figure it out with other corporations by providing the actual handsets to them. For example, we have Takenaka Corp., a construction company, using our handsets at its construction sites, and seeing how the images there can be used. The Corporate Marketing Division of NTT DoCoMo is discussing the possibilities with these companies.
Managerial Emphasis to Shift from Growth to Profit-Making
Q: The mobile phone business is shifting from a period of rapid growth to a period of stability. What is your strategy from now on?
A: I believe it is now the turning point where the emphasis on management is moving from creating growth to making profits. Emphasizing profit-making means reducing expenses. We have some measures for that. One is to review the businesses that are not making profits. We are now going over all the businesses, including the cell-phone business.
Q: What have been the main sources of your profits in recent years?
A: Our main service is voice communication on 2G. But data communication is now about to occupy more than 20 percent of our income. That means that we can make profit also with data communication. The average revenue per unit (ARPU) for voice communication, or the total income, will not decrease too much.
DoCoMo started offering data communication services earlier, and tried to cover the decreasing ARPU for voice communication with that. It has succeeded, so the revenue that we get from one user will stay almost the same.
Dual Handset with GSM Does Not Mean Much
Q: Is there a possibility of releasing a dual handset that has FOMA and GSM capabilities for international roaming service?
A: That kind of handset has very little value. We need to quickly expand the 3G network in Japan, and have to make an environment where a user who wants to have the 3G function can have the 3G handsets and can also use the 2G network.
Q: Do you mean you are to release the dual handset with 3G with PDC capabilities?
A: We plan to. The basic concept is that 3G also serves as the PDC in voice communication.
Q: Are you saying that we can use the roaming service abroad with that handset?
A: Yes. GSM means nothing in Japan. If the handset has GSM capability, the user can use it when he or she goes to Europe, but if the 3G phones can be used in Europe, there is no point in having a GSM phone.
Q: It means that 3G has to be diffused in Europe.
A: Yes, and we are aiming for that. If the speed of diffusion is not fast enough, the dual mode handset with GSM will become necessary.
There Could be a Marriage of FOMA and Wireless LAN
Q: How do you view the future of wireless LAN access?
A: The wireless LAN enables high-speed downloads. We hope to provide users with different ways to use it, such as having fast access inside the wireless LAN area, while having slow access inside a car. NTT DoCoMo is providing the PHS service as well as FOMA. All the speed can be provided when the wireless LAN comes in. If we combine all these services, users will be able to communicate anytime without choosing a certain network.
Q: Do you see that it can be put into practical use?
A: We know it for sure. There already is a communication card for each system. The rest is to develop the software that can control several systems.
Q: There is a flat rate service for PHS, but is there a possibility for the same service with 3G?
A: With the flat rate service, a certain number of people could occupy the frequency, which is the limited resource, and thus needs to be shared. So we are not thinking of offering the flat rate service even for packet communication. The service does not work out with that kind of cost structure.
After the interview
KDDI Corp., which started its 3G service as an extension of 2G, is now getting a move on introducing the high-speed service designed especially for data communication. J-Phone Co., Ltd., which delayed its full-scale service until December, is making an effort on the international roaming service as the member of Vodafone Group Plc. in England. And NTT DoCoMo, which started its "FOMA" 3G service ahead of others, but is having a hard time attracting users, is now reviewing the handsets and trying to develop applications in cooperation with user companies. These are the directions in which those companies are heading.
Three companies have different views on international roaming. NTT DoCoMo is aiming to offer the roaming service with 3G, but the other two are planning to offer it with GSM. Since many European carriers are in a severe economic situation, it is unclear whether the situation would move towards the direction of what NTT DoCoMo expects it to.
The companies are all suffering in developing a killer application for the 3G service. If one of them can find the right one, that carrier can have a big advantage, which will also benefit related vendors. "Sha-Mail" by J-Phone was the head start. It contributed in increasing the demand for data communications in Japan, as well as exporting software to Vodafone in England, which is planning to offer the same kind of service in Europe this fall. Sharp Corp., the developer of the handset, also received quite a few orders for that.
For the wireless LAN service, three companies have different approaches, but have the same view. As President Onodera of KDDI implied, there could be a possibility for the flat rate service, if the ways to use the 3G and others can be properly categorized.
Profile of Tachikawa
Tachikawa was born in 1939, and graduated from the Electronic Engineering, Engineering Department of the University of Tokyo in 1962. He received his MBA from the Massachusetts Institute of Technology in 1978. He has been in his current position since 1998.
Related story: Three Telco Presidents Discuss Future of 3G Mobile Phone Services (Part 1): KDDI, J-Phone
Photo by Hui Zhou
(Toshiaki Matsumoto, Deputy Editor, Nikkei Communications)
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