G* and NTTDoCoMo
I really think that G* can reach its full potential only if
it forms a strategic alliance with Japan's NTTDoCoMo to
extend its satellite voice capability to the "wireless
Internet." For those who have missed reading the article in
the Economist...
"NOBODY doubts it any more. The marriage of the mobile
telephone and the Internet is a match made in heaven. Hardly
a day passes in America and Europe without the announcement,
to a suitable fanfare, of a new alliance or strategic
partnership between dot.coms, telecoms firms and computer
companies, all jostling for advantage in the brave new world
around the corner.
Yet despite the buzz, the embarrassing truth is that the
American wireless industry is about 18 months behind Europe;
and, when it comes to the wireless Internet, Europe is
itself 18 months behind Japans. For while the Europeans and
Americans have been talking, NTTDoCoMo, Japan's dominant
mobile operator, has been turning the wireless Internet into
reality.
Launched quietly just over a year ago, DoCoMo i-mode service
has succeeded beyond the wildest dreams of its inventors.
After taking six months to reach 1m subscribers, i-mode is
gaining new customers at the rate of more than 25,000 a day
and should pass the 5m mark this month. Little i-mode
handsets in honey platinum and lime gold have become a
fashion accessory for Japanese teenagers, often worn around
the neck like a piece of jewellery. The most popular (and
expensive) have a clamshell design, opening to reveal a
screen several times larger than the display of a normal
mobile phone. The latest have full-colour displays,
recognise spoken commands, and have plug-in keyboards for
writing longer e-mails.
At present, data-transfer speeds are quite slow, making the
service suitable only for text and simple graphics. But, by
this time next year, DoCoMo expects to have introduced a
third-generation (3G)network based on the latest W-CDMA
technology, which will speed data rates 40 times and allow
high-quality streamed video and audio.
Remarkably, DoCoMo has achieved this almost single-handedly,
learning as it went along. In contrast, the industry in
Europe and America spent ages negotiating a standard before
coming up with the wireless application protocol (WAP) for
text-based Internet services. Still 67%-owned by NTT, Japan
former monopoly fixed-line operator, DoCoMo has no right to
behave like a fleet-footed innovator. Yet not only has it
shown a clean pair of heels to the rest of the world; it has
also delivered a better service, and one that is truer to
the spirit of the Internet than those of highly rated overseas rivals.
Although WAP uses the technology of the Internet, it does
not let users roam freely around the World Wide Web. A
subscriber gets only a restricted set of proprietary
text-based services, such as news and weather, that have
been bundled together by the mobile operator.
It is also slow. Every time you want to gain access to
information, you must dial in and wait. Each new page takes
more waiting while you look at a blank screen. It is a
useful addition to the mobile phone, but it is not like the
Internet as people know it from their PCs. The advantage for
the wireless service provider is that it keeps control of
who provides which service and has an influence over who
gets any revenues.
DoCoMo wanted something more adventurous. With PC
penetration low in Japan and less than 12% of the population
having access to the Internet, DoCoMo thought i-mode might
become the main way on to the web. Ke-ichi Enoki, a
long-serving NTT engineer who was given the job of launching
i-mode, decided that his service must use existing web
content. To that end, DoCoMo has built a proper
Internet-style packet-switched network alongside its
existing digital circuit-switched network and equipped its
handsets with a browser that understands HTML, the language
of the web.
As long as an i-mode telephone is receiving a signal, it is
connected to a full array of web-based services, including
e-mail, games, news and online banking. Users pay $2.80 a
month, plus a charge that depends on the amount of data they
send or receive about for sending a 500-letter e-mail or 20
for downloading a weather report. Website owners must adapt
their sites for the i-mode, butthat is quick and easy,
because the system uses the HTML language.
As a result i-mode can get to nearly 6,000 websites; and
more arebeing added, at a rate of about 20 a day. All can
be reached by keying in the right address or by using one of
ten competing i-mode search engines. In addition 327 partner
sites are accessible through the i-mode portal and the menu
on the handset. Mr Enoki describesthe growing number of
subscribers and the dazzling variety of independent
applications as a classic positive-feedback loop.
DoCoMo expects great things from its portal site, from which
it earns a 9% commission on transactions such as ordering
cinema and airline tickets; but most sites pay it nothing.
That does not worry Mr Enoki, who says that, as long as
websites augment the value of i-mode, he is happy. He gives
as an example a service provided by Bandai, the firm that
gave the world Tamagotchi pets. For a monthly subscription
of only ¾100, Bandai sends a new cartoon to your i-mode
screen each day. DoCoMo would never have thought of that,
but it already has 700,000 ecstatic subscribers.
For the moment, revenues from i-mode are modest. Mr Enoki
reckons that it adds about a quarter to the monthly bill of
the average user. With 5m customers, that should mean it
contributes about $1.5 billion to the firm total sales.
Keiji Tachikawa, DoCoMo president, is cautious when looking
further ahead. Although he expects data and voice traffic to
be equally split within five years, it may not be until 2010
that data is responsible for more than half the firm's
revenues. For Mr Tachikawa, low pricing is the key to
building demand for the service, mainly because i-mode has
so far been a consumer product. Not until next year, with
the new 3G network, will DoCoMo promote it for corporate
intranets.
Does this mean that DoCoMo stratospheric valuation might be
a trifle exaggerated? Its market value has tripled since the
middle of last year to $370 billion, making it the most
valuable telecoms company in the world. Yet Mr Tachikawa
dismisses claims of overvaluation.After 3G, i-mode will
become the mainstay of the business, he says. Whereas the
volume of voice traffic is limited by how much people
talk, data has almost infinite potential. This is the future
that investors are buying.
What is more, Mr Tachikawa is so happy with prospects in
Japan and the rest of Asia that he is uninterested in Europe
or America. Despite the acquisition firepower his share
price gives him, he plans to create only a web of pan-Asian
alliances based on technology transfer and minority stakes,
such as the 19% of HongKong Hutchison he recently bought. He
dismisses rumours that DoCoMomay bid for Britain Orange.
A bum WAP
What are the lessons of i-mode for the Europeans and
Americans? First, because they lack a DoCoMo-style advanced
packet-switched network, they must get on with the
commercial launch of their own 3G networks. WAP is no
substitute for the full riches of the web, and may even turn
customers off. Second, they should abandon the idea of
being a gatekeeper for wireles Internet services. The
network should be open, because that is the best way to
create the services that give the system its value. Third,
for the same reason, providers should price and position
services to maximise consumer take-up for consumers, not
businesses, have caused the exponential growth of the
web. In short, the wireless Internet will not be so
different from the Internet we already know. Operators who
seek to own and control it take note."
For more information on I-Mode, click on the following link:
nttdocomo.com
pcyhuang
huangcapital.com
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