DoCoMo's Keichi Tachikawa on i-mode and Beyond (int'l
edition)
The CEO talks about taking the technology global and why cooperation
among competitors is key
Keiji Tachikawa has a lot to be proud of. The 60-year-old chief executive of
NTT DoCoMo, Japan's largest cell-phone operator, has proven that there is a
mass market for mobile Internet access. And ahead of all his rivals in America
and Europe, he has served up a popular product called i-mode that provides
continuous Net connectivity. DoCoMO's i-mode service now boasts about 3
million subscribers. Business Week Tokyo Technology Correspondent Irene M.
Kunii recently sat down with Tachikawa to discuss i-mode and the mobile Net.
Here are edited excerpts of their conversation (for an additional video interview,
click here ):
Q: Why has i-mode been such a runaway success?
A: Because we're using a packet-network system and charging a low subscriber
fee. Also, we created a demand by offering a wide range of content in the
HTML format [used by Web sites]. We were the first to show that it's easy to
send e-mail or access the Internet via a cell phone. It just so happened that it
matched the taste of Japanese consumers.
Q: How much has i-mode contributed financially?
A: It's not very much yet in terms of revenue. It was about $50 million for the
first half of fiscal 1999, when our average number of subscribers came to
770,000. But the service is growing rapidly, and we expect to hit 4.8 million
subscribers by the end of the fiscal year. When that happens, revenue will
increase significantly.
Q: Your competitors in Japan are introducing a packet network that will
make a constant Internet connection possible. Will that affect your
business?
A: Their service will operate at a speed of 14.4 kilobits per second, so it's not
much of an improvement over our 9.6 kilobit service for i-mode. While WAP
[wireless application protocol], which they use, is improving, it's still not possible
to [apply it] to all the content on the Internet. Everyone now is using HTML,
while WAP uses a language called HDML. That means that Web-site operators
have to redo all their content in order to cater to users accessing from mobile
handsets.
This will change with the introduction of a next-generation cellular service. We've
proposed to the WAP forum that a standard combining WAP and HTML be
adopted for the next-generation system.
Q: Do you think i-mode can be extended to users in other countries?
A: We are now talking to the Americans and the Europeans, and they all say
i-mode is very good. America Online tells us that it regards i-mode as ideal for
the wireless Internet. I think it would gain popularity if it was introduced in
Europe or America.
Q: Looking at your three top i-mode executives, two have been recruited
from other companies. Is DoCoMo more receptive to [hiring outsiders]
than other Japanese companies?
A: We do have many people who have joined us from other companies. In the
[i-mode] business, the majority come from the outside. I think if we're attempting
something radical, we need to hire experts. That's another reason why i-mode
has succeeded. We went outside NTT to look for the right people. The
exception is [Keiichi] Enoki, who heads the project. He comes from NTT, but
he's not typical.
Q: When can we expect DoCoMo to introduce its wideband-CDMA
service?
A: DoCoMo has already built its network and put in orders with equipment
manufacturers. What's left are the handsets and service. We've already asked
companies to make their handsets and displayed some of them at Telecom '99,
like the video phone or models specifically designed for mobile data
transmission. Unlike with ordinary cell phones, there will be many more
categories of phones. The new mobile sets will handle not just voice but video,
car navigation, data transmission, and music. There will be dedicated sets for the
transmission of video approaching [high-definition TV] quality.
The problem will lie in deciding what kind of service to offer. DoCoMo is doing
a lot of R&D in this area, but we think it's good to conduct joint development
with other operators. In October, we helped launch the Joint Initiative for Mobile
Multimedia [JIMM], an organization made up of operators. Vodafone, British
Telecom, France Telecom, AT&T Wireless, DoCoMo, SK Telecom, Singapore
Telecom have all joined this forum. What we're trying to do is to jointly develop
services for 3G [third generation services]. If we don't match our protocols, we
could end up with different versions, depending on the country.
Q: Will it be possible to use the same handset in different countries?
A: Yes, it will. And you'll be able to use a service similar to i-mode. This group
is now discussing the possibility of adopting i-mode. We're now debating issues
such as whether it's better to use XML [another Web formatting standard] for
content, and what the protocol should be. In six months, we'll all prepare our
responses and try to reach an agreement. It will be open specifications. Judging
from our experience, the most likely service will be a next-generation i-mode or
something close. It will offer fast speed and Internet access to graphic as well as
text-based information. And, of course, the screen will be in color. I think it'll be
suitable for music delivery and video conference.
Q: When do you plan to launch your 3G service? The original plan was
for
the end of fiscal 2000.
A: It'll be in the spring of 2001. I can't say when definitely, because the licenses
haven't been awarded yet. We aim to finish preparations by March of next year.
Since it's known as IMT-2000, we'd like to roll it out at least in fiscal 2000
[which ends in March 2001].
Q: Looking ahead to the fourth and fifth generations, what do you think
lies in store?
A: Looking back over history, a new standard emerges about every 10 years. It
started with analog, then digital, and now the third generation. The fourth
generation should be ready by 2010 and the fifth generation by 2020. What will
change? The next-generation system will provide transmission speeds much
faster than what we've had, moving from 9.6 kilobits per second to 2 megabits.
That's an increase of 200 times. But we expect that 384 kilobits will be the most
commonly used and that will be 40 times faster. It'll be sufficient for video.
The fourth generation will provide even faster transmission, in the range of 20
megabits per second. Just to increase the speed 10 times isn't enough of a target.
For example, we could aim for the seamless connection of wired and wireless.
Users could use wired and mobile phones in the same way. Actually, I oversee
researchers who are now working on the fourth generation. I give them targets,
telling them, for example, to aim to reduce costs by 10%.
Q: The U.S. currently lags behind in the mobile cellular sector. Do you
think this will change in the years ahead?
A: America has achieved many breakthroughs where the Internet is concerned,
and we can expect this to continue. That's why most of the Internet conferences
are held in America. For wireless, there are a number of good manufacturers and
large operators. AirTouch has many good researchers, and AT&T has
impressive research facilities. So, I expect to see more developments come out
of there.
Q: Do you expect foreign competition to increase?
A: The difference will come in the type of services provided. A lot will depend
on what content providers one ties up with. There will be competition over such
things as easy search methods or cheap subscription feeds. Those who come up
with the best idea early on could benefit.
Q: Do you have many patents on wideband CDMA?
A: Yes, we do. But the industry now believes that things should be open, fair,
reasonable. One should pay money for the technology, since the company that
developed it paid for research and development. America backs this view, but
then you have Qualcomm charging a high royalty [for its CDMA technology].
Since we don't have a contract with them, I don't know what they're charging,
but I've heard it's in the order of several percentage points. What it means is that
Qualcomm could take a cut of several percent from the sale of our 3G handsets.
But in the case of wideband CDMA, we own some of the technology, as do
Lucent and Qualcomm. So it'll be difficult to sort through all the patents. That's
why we're calling for more cooperation. In the end, users will have to bear the
cost, and we want to keep it within reason.
Q: You recently announced that you're purchasing a stake in Hong
Kong's Hutchison. Do you plan more investments of this time overseas?
A: Yes, and we have a philosophy governing foreign investment.... Our basic
policy regarding expansion abroad is this: We would like to see our
next-generation standard adopted globally without a hitch. To make it possible,
we're ready to offer the necessary support. It could be in terms of technology,
staff, or money.... We think Asia is the best place for us because of its proximity.
Q: It may not be possible to divide up the world so simply. Your rivals
eye China and the region as a highly attractive market.
A: The biggest region for cellular phones is Asia. It has a population of 3.3
billion, while Europe's is 500 million and the U.S. the same, if you calculate in
terms of market reach. So 3.3 billion is huge by comparison. That's what the
Europeans and Americans are thinking.
Q: What are your plans for China?
A: It's still not a place where we can easily invest. I think we'll have to wait for
some time before making a move.
Q: What about a technological tie-up?
A: We already have one. We're doing experiments on wideband CDMA in
China with Ericsson. We're doing similar joint tests in Malaysia and Singapore,
and we plan the same for South Korea and Thailand in the near future.
Q: Do you expect competition in the Japanese market to intensify?
A: AT&T and British Telecom have invested in Japan Telecom. So AT&T, BT,
and Vodafone have all invested in Japan Telecom, but BT and Vodafone are
rivals. And AT&T's wireless unit competes with Vodafone in the U.S. It's a
complicated arrangement.
Next year, 3G licenses will be awarded in Japan, England, France, and other
places. So we're very interested in seeing what these operators will look like
when they raise their hands. In Japan, the government will choose three
operators, and we expect to be one of them.
Q: Do you plan to list shares in New York in the future?
A: We are studying the possibility of an ADR [American depositary receipt]
because 15% of our shareholders are foreigners. Since we're only listed in
Japan, Americans have to buy our stock overnight. I think they should be able to
buy our stock during the day in New York. So we're thinking of listing in New
York, London, and in the future in a unified European market if one is realized.
But it's a difficult process because of the differences in accounting systems. We
won't be able to do it in one year.
Q: Do you think it would be better for DoCoMo to operate independently
of NTT?
A: As a manager in the telecommunications sector, I don't know whether the
wireless business will continue to do as well as it has. In the end, operators of
local wired networks may be the only ones that survive, and fiber optic could
become the main form of transmission. That's why everyone is diversifying. It's
too dangerous to limit yourself to one area. For that reason, AT&T is moving
into cable and has a wireless unit. It's too dangerous to be independent. |
