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To: John Biddle who wrote (32563)	2/18/2003 7:00:58 AM
From: John Biddle	Read Replies (2) \| Respond to of 196981

Japanese rivals shed light on competing 3G strategies The continuing battle to attract mobile-data subscribers highlights the pitfalls and advantages of differing systems and payment models DUNCAN LAU CHIU PUI columns.scmp.com Japan is a showcase for the mobile-data industry. There are more than 70 million mobile-phone subscribers in Japan, with more than 55 million using mobile data. It is expected that the revenue share between mobile data and voice will be 50/50 in 2005 compared to about 18/82 in 2002. KDDI now has 4.7 million 3G subscribers while DoCoMo has 150,000. J-phone has just started its W-CDMA based 3G services in December. With about 11 million subscribers in total, KDDI has a much smaller subscriber base, and launched its CDMA2000 1X-based 3G service only in April 2002. DoCoMo launched its W-CDMA based 3G Foma service in October 2001. Despite having over 40 million 2G subscribers and over 58,000 content sites, DoCoMo has only a 0.3 per cent 3G penetration rate. The foremost problem for DoCoMo has been coverage. Whenever a new network such as 3G comes into service, its coverage will not be as good as the existing one. The same will be true for both DoCoMo and KDDI. The problem with DoCoMo is that its W-CDMA phones are not compatible with its existing 2G networks. For some areas such as underground railway stations, the Foma network has no coverage. In the present market, this will simply be unacceptable to subscribers. Conversely, the 3G phones of KDDI have a dual-mode capability so that when the phone is out of the 3G coverage areas, it will switch back automatically to the 2G network. Subscribers will generally accept this and there is a world of difference against having no coverage altogether. The second problem is the handset itself. Foma phones are significantly larger than the nifty, slim I-mode phones, because they offer lots of features such as video conferencing. In comparison, KDDI uses CDMA2000 technology, which allows their 3G phones to be of a similar size to its 2G phones. The third problem is battery life. Foma phones, with their many features, have a relatively short battery life. If users make much use of video conferencing, the battery life is even shorter. The other plus for KDDI is that it offers a seamless migration path for subscribers to switch from 2G services to 3G. Subscription rates of the two services are the same. With the dual-mode phone, the coverage of the two networks can complement each other. With their 3G phones heavily subsidised, subscribers need only pay between HK$1,200 and HK$1,500 to change to the new 3G network. This is their only expense. With the extra services and speed provided by the KDDI 3G network, no wonder it is adding over 700,000 subscribers every month. DoCoMo Foma is working to ratify the problems. In this quarter, it will release a dual-mode Foma phone that allows the fall-back to its 2G network when 3G is unavailable. With a maximum speed of 384Kbps, Foma certainly has a lot of potential when teething problems are resolved. Many countries have tried to imitate the I-mode model but few are as successful as Japan. Japan has a very homogeneous market. The three mobile operators have a strong say in handset design. The handset manufacturers can work closely with the operators to produce a handset optimised for their network. Such an end-to-end business model allows handset manufacturers, content providers and mobile operators to work seamlessly to offer a level of user experience unrivalled by any other standards such as WAP. Hong Kong and the GSM world have a heterogeneous business model, with mobile phones supplied by many manufacturers. Software that will run on one phone will not run on the others. This has caused difficulties for mobile content and application developers. In Japan, the business relationship between the Content Providers (CP) and the Mobile Network Operators (MNOs) is standardised. MNOs charge the CP 8 per cent to 12 per cent of the revenue generated from the content. The xHTML content structure allows CPs to host the content on their own servers with a standard leased line between the servers and the MNO Gateway. The CP-friendly set-up has spurred large numbers of content providers, with more than 3,000 sites from DoCoMo's partners and over 55,000 unofficial sites. The collaboration between the MNOs and CPs allows each to concentrate on its core businesses. Many CPs in Japan charge subscribers a small monthly fee, in the range of HK$15 to HK$20, which allows the subscriber a certain amount of content. For a medium-sized CP with three million subscribers, this can earn tens of millions of dollars every month. This type of model is possible because Japan has a large population of mobile-data subscribers. With a mobile-data penetration rate of 77 per cent in Japan, this comes as a stark contrast to the 2 per cent Hong Kong has with its GPRS subscribers. Everything starts small. Japan has a more homogeneous and regulated market than Hong Kong. This has contributed significantly to their growth. Hong Kong has a more heterogeneous market and faces more difficulties. One year after I-mode started in February 2000, the number of subscribers rose to five million, representing a penetration of about 12 per cent. The number grew to 31 million in February 2001, a penetration of 50 per cent. In Hong Kong, the number of mobile-data subscribers is small but has grown by 50 per cent since last May. With more feature-packed phones and innovative developers and users, Hong Kong can make it to be one of the major forces in mobile content and applications. Hong Kong is not lagging Japan in every aspect. There is no MMS (multimedia messaging service) in Japan, which is looking to Hong Kong as a model. Hong Kong should take pride in being one of the first countries to achieve inter-operator MMS. With many camera-equipped phones available, MMS is set to thrive here. Duncan Lau Chiu Pui is chairman of the Hong Kong Wireless Technology Industry Association.