DoCoMo Launches 3G Service;
Industry Hopes for Recovery
By ROBERT A. GUTH
Staff Reporter of THE WALL STREET JOURNAL
TOKYO -- Takeshi Ando is holding the wireless industry's future in his hand, and he isn't impressed.
Mr. Ando is clutching a glistening blue-and-silver mobile telephone that can send video, still images and e-mail and download music and short animated cartoons over NTT DoCoMo Inc.'s third-generation wireless network. DoCoMo's 3G service, the world's first, debuts Monday in Tokyo.
Mr. Ando, a producer at a video company, has been voluntarily testing the service, and after three months he compares it to a car that is "fast with a lot of power." However, it has got "bad styling, bad brakes, loose steering and it uses a lot of gas," he says.
DoCoMo, Japan's dominant cellular provider, says its cutting-edge service is ready for prime time and it continues to iron out the kinks. Whether DoCoMo can turn it into a hit is one of the biggest questions in the global telecommunications industry, which has been pummeled by rising debt, bankruptcies and falling share prices. DoCoMo is the first of a long line of mobile operators world-wide that are betting billions of dollars that 3G services will drive their growth over the next decade. DoCoMo alone is spending some $10 billion to build its 3G network in Japan.
The company expects a big payback. DoCoMo's President Keiji Tachikawa last week said he thinks demand for the new service will outstrip DoCoMo's existing service, raising the average monthly revenue the company gets from each subscriber to more than 10,000 yen (US$83.72) from the current 8,000 yen. "We believe a lot of people are going to sign up," Mr. Tachikawa says.
Either way, the industry will take notice. Japan is one of the world's most gadget-savvy markets, and DoCoMo is one of the industry's most aggressive 3G pioneers. If Japan doesn't take to 3G, the thinking goes, what of Europe and the U.S.?
The fact that DoCoMo is starting its service Monday is "good for confidence in the future," of 3G, says Chris Gent, chief executive of DoCoMo rival, Vodafone Group PLC. Vodafone's Japan unit is planning to start its own 3G service next year.
The 3G technology has taken a beating recently. Mobile operators in Asia and Europe originally heralded the technology, which boosts the data download speed for mobile phones by up to 40 times, as the beginning of a new mobile age. They anticipated big profits from new mobile markets such as video communication and broadband Internet services.
But as operators prepared for the rollout of 3G, this vision blurred. In Europe, operators crippled themselves with debt by dishing out more than $100 billion to buy wireless spectrum from governments. Then the complexity of the technology taxed makers of handsets and infrastructure, which in turn forced operators to delay 3G services. 3G is now expected in Europe next year, and in the U.S. perhaps a year after that.
DoCoMo persevered, but software bugs in its 3G network and in its handsets forced the company to delay the debut until Monday, instead of this past May 31 as planned. It will be a modest start: From Monday 3G services will be available in the Tokyo area, expanding to major cities nationwide in the spring of 2002.
The company will sell two phone models, including one videophone. It also is targeting the business market with a 3G data card that can be slotted into notebook PCs so that they can connect wirelessly to the Internet and corporate networks.
Last week, DoCoMo's Mr. Tachikawa said his company has made ready just 20,000 standard phones, without the built-in camera, for the roll-out, plus several thousand videophones and modem cards. The service will allow a phone to download data at up to 384 kilobits per second and send data at 64 kilobits per second.
Despite the early glitches, "we are confident that we can achieve our goal of 150,000 subscribers" by March 31, the end of DoCoMo's fiscal year, Mr. Tachikawa said. DoCoMo forecasts six million users within three years.
Mobile operators world-wide are searching for fresh sources of revenue as growth in subscribers levels off. DoCoMo hit on a cash cow in 1999 with its i-mode service, a mobile Internet service that brought in new subscribers and encouraged them to spend more every month. I-mode now has 28 million subscribers and is growing by 30,000 subscriptions a day.
But i-mode's very success could be a barrier to 3G. I-mode phones are so popular and so packed with features -- including e-mail and simplified Net access -- that customers may balk at the extra cost of a 3G phone, although it offers much higher speed connection speeds and access to i-mode services. DoCoMo's 3G handsets will cost between $300 and $500, or 30% to 50% more than its current handsets. Those prices are expected to come down as the service grows.
Mr. Ando, the Tokyo video producer, is a self-described gadget freak, just the sort of customer DoCoMo is banking on as an early 3G adopter. He dangles two cellular phones and a Palm-style organizer in belt holsters.
Since June he has been one of more than 4,000 "monitors" who have been testing the 3G service, which DoCoMo has branded FOMA, for "Freedom of Mobile Multimedia Access." For the test, DoCoMo gave him two identical videophones manufactured by Matsushita Communication Industrial Co., the maker of Panasonic products. The flip-style phone opens up like a clamshell. It weighs 150 grams, and when folded, it is 104 millimeters long, 56 millimeters wide and 35 millimeters deep, making it about the size of two cassette tapes stacked one on top of the other.
The phone has a high-resolution color screen and a tiny camera built into the hinge of the clam-shell that can take video and still images.
Mr. Ando dials one videophone from the other, and within seconds he has a videoconference running between the two phones, showing a sharp image of his face that doesn't blur when he moves.
He says that the phone's connection has been unreliable -- it often drops calls -- and the coverage area is spotty, but he adds that DoCoMo has been steadily improving the service. He also says the handset is clunky compared with the sleek, 67-gram phones that Japanese have grown used to, thanks largely to DoCoMo's engineers. He says that for him, the unit is too thick, too heavy and burns through batteries so quickly, "you need to always have a substitute battery."
As he speaks, he reaches with his right hand under his coat, where he has got a regular cellular phone in a belt holster. Then he pulls out another cellular phone with a slightly faster connection speed that he uses for e-mail. Holding both up, he explains that when he first started testing the 3G service, he thought that come October, he would give up the two regular phones for one 3G phone that could do it all and do it better.
For now, though, Mr. Ando says he'll pass on the new service. "I want FOMA to succeed," he says. "But it'll be a year or two before I buy it."
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