Will Japan's successful mobile-Internet system take off in Europe?
A la i-mode
Mar 28th 2002
From The Economist print edition
Will Japan's successful mobile-Internet system take off in Europe?
Reuters
A trend-setting service
MOBILE-network operators in Europe have long looked enviously at Japan, which leads the world in the adoption of the mobile Internet. Tens of millions of Japanese consumers routinely use tiny phones with vivid colour screens to send and receive e-mail, download cartoons and consult weather reports. Better still, they pay handsomely for the privilege, which helps operators to offset falling revenues from voice calls. Now the Japanese model is coming to Europe. Earlier this month, NTT DoCoMo, Japan's leading mobile operator, launched its popular “i-mode” system in Germany in conjunction with KPN Mobile, which will extend the service to the Netherlands and Belgium over the summer. KPN faces stiff competition, however, because rival operators are copying i-mode's best bits.
I-mode's popularity in Japan, where it is used by over 31m subscribers, owes much to local factors, such as the high cost of dial-up Internet access, a fondness for gadgets and a lack of enthusiasm for PCs. But two of the reasons for i-mode's success can be easily replicated in Europe.
The first is its business model, which involves generous revenue-sharing with providers of content. Once approved by DoCoMo, each i-mode content provider can charge users up to ¥300 ($2.50) per month. DoCoMo collects these charges as part of the monthly bill, takes a 9% commission and passes the rest to the content provider. KPN has adopted a similar revenue-sharing model.
Other European operators have historically been unenthusiastic about revenue-sharing, so there is little incentive for providers to offer content via wireless application protocol (WAP), Europe's nearest equivalent to i-mode. But things are starting to change. A number of European operators are now introducing i-mode-style revenue-sharing to try to kick-start a WAP content market—among them Germany's T-Mobile and Sweden's Telia, which this week acquired Sonera, a Finnish rival, for about euro7.5 billion ($6.6 billion).
The second aspect of i-mode's success that European operators are starting to emulate is the notion of the operator-specific handset. In Japan, handset makers work closely with the country's three operators, each of which uses its own network technology. This means that a handset designed for use on one network will not work on another. But it has the advantage that operators can specify handset features in great detail, enabling them to differentiate themselves from their rivals, and ensuring tight integration between handset, services and content. Japan's smallest operator, J-Phone, has had great success with its camera-phones, which allow photos to be taken and e-mailed while on the move. KPN's European i-mode service requires a special handset made by NEC or Toshiba.
Other European operators are waking up to the idea of operator-specific handsets too. Later this year mmO2, a British operator, will launch an organiser-style handset called the XDA; other companies plan to launch handsets based on a design licensed from Danger, a firm based in Palo Alto, California.
Whether it makes sense for operators to get into the handset business remains to be seen. Tony Milbourn of TTP Communications, a handset-design firm based in Cambridge, England, points out that handset-manufacturing economics make sense only for quantities of at least 1m units a year. As a result, says Niklas Savander of Nokia, the world's largest handset maker, operator-specific handsets made in smaller quantities will be relatively expensive, and will probably be confined to top-of-the-market niches. (The XDA, for example, is aimed at business users.) Besides, Nokia now allows operators to customise its handsets' software, thus providing an easier and cheaper form of differentiation.
All of which leaves one big question: do Europeans actually want to use i-mode, or clones thereof? Henry Elkington of the Boston Consulting Group notes that cultural differences mean that the sorts of services that are popular in Japan, such as daily horoscopes or cartoon downloads, may not prove such hits in Europe. Moreover, Europeans are used to getting their Internet content free, and thus may be reluctant to pay for it on their phones.
In short, a clever business model and snazzy technology are necessary, but not sufficient, for the mobile Internet to take off in Europe. The remaining piece of the puzzle—new content and services that users will pay for—remains elusive. |
