Japan Sets Standard for How People Use Net on Cellphones
USA Today
July 7, 2000Look around this city for a minute and a dozen people --all staring at their mobile phone screens -- come into focus.
Takoryo Horii, 26, an office assistant, reads the headline news. Yurino Akamime, 19, taps short e-mails. Kouchi Kanda, 25, a waiter, kills time looking for a better job on the Internet postings accessed via phone.
''It's communication anytime, anywhere,'' Akamime says.
Japan loves fads -- 7-inch platform shoes, mechanical pets and Hello Kitty, to name a few. But after lagging the USA by years in use of the Internet, Japan now leads in what could be the next big thing: the marriage of the Internet with mobile devices, including phones. Japan has more Internet-enabled cellular phones than the rest of the world combined, analysts estimate. Its wireless giant, NTT DoCoMo, boasts the world's largest Internet-cellular phone network. And Japanese consumers are providing clues to the wireless world on what people do with cellular phones.
''Everyone is watching DoCoMo,'' says Takakuni Kuki, general manager of NEC's mobile network division.
More specifically, everyone is watching DoCoMo's i-mode service, launched last year. In just 16 months, 7.8 million subscribers have signed on. (It took America Online at least five years to get that many subscribers.)
I-mode lets Japanese consumers access the Internet from anywhere -- street, home, school or office. That isn't unique. Consumers in parts of Europe, the USA and Hong Kong are starting to do the same.
But i-mode stands out as the first to go mass market. ''It is arguably the first successful wireless data service in the world,'' says Ross O'Brien, telecom analyst at Pyramid Research in Hong Kong.
Outside the train station in Tokyo's hip district of Shibuya, nearly everyone clasps a mobile phone. One-third are likely to be i-mode phones. For 21-year-old Tokyo waitress Rie Arai, i-mode is her only access to the Internet and e-mail. ''I cannot live without it,'' she says.
That surprises even DoCoMo. It intended i-mode as more of a pilot project to test future demand than anything else. But so many people subscribed, ''We saw we could make a viable business,'' says DoCoMo President Keiji Tachikawa.
What a lark. Merrill Lynch in Tokyo expects i-mode revenue to hit $2 billion in fiscal 2000, accounting for about 5% of DoCoMo's revenue. DoCoMo's stock, even after the global tech rout this spring, has more than tripled since i-mode's launch. In April, i-mode had to stop advertising to discourage new subscribers until its network could be beefed up to handle them.
Whether i-mode's success can be duplicated in other countries remains to be seen. The Japanese have a special affection for cellular phones. They decorate them with stickers and knickknacks. Some even wear them around their necks. ''It's fashion,'' Miho Tokunaga, 18, says.
Japanese consumers are also likely to:
* Have lower expectations for the Net. Only about 15% of Japanese access the Net via PCs. So they aren't as accustomed to the big-screen experience as are Americans. ''Many people look at little phones and say, 'Thank you, but that is not what I'm used to,' '' says Ted Darcie, vice president of wireless research at AT&T Labs. Sending e-mail is especially challenging. A three-syllable word requires about 15 taps on the phone keypad.
* Pay more for Net access via PCs and thus be open to other options. Japan's Internet costs, while decreasing, are high. Just to get a home telephone line costs $700. Internet access costs $20 a month plus $2 an hour. (In the USA, unlimited access runs about $20 a month.) In contrast, it can cost as little as $28 to get a cellular connection in Japan. I-mode users pay for the amount of information received, not the time spent online. The average i-mode bill runs $15 to $21 a month, DoCoMo says. On top of that, users pay their regular charges to use the phone for talking.
* Suffer great inconveniences. Most Japanese banks and ATMs are closed at night and on weekends. That makes online banking helpful. Most Tokyo streets lack names, so residents fax maps to each other to give directions. With i-mode, maps can be downloaded onto phones. There is no room to read newspapers on packed commuter trains, but people can write e-mail or play video games.
* Love to be entertained. Other than e-mail, i-mode's most popular service is the downloading of cartoon characters to decorate phone screens. Toymaker Bandai charges 1 million people $1 a month for such cartoons -- and DoCoMo racks up revenue every time a cartoon is downloaded. ''Japan has these amazing followings that may not take off elsewhere,'' says Curtis Sasaki, a director of product marketing for Sun Microsystems, which is working to put Java on i-mode phones to improve data delivery and security.
Untapped potential
Business uses are catching on, too. Sapporo beer messages sales people via i-mode to alert them to customer calls. Tens of thousands of users forward their office e-mail to their i-mode phones.
More is in the works. Microsoft and DoCoMo recently started working on wireless software applications for Japanese business users.
Getting other companies interested in i-mode has been key, says Tim Clark, Internet analyst with Web Connection in Tokyo. About 15,000 Japanese Internet sites have been designed especially for the i-mode network. Japan Airlines, for instance, sells about 20,000 domestic tickets a month to i-mode users.
Video-game maker Hudson charges i-mode users $3 a month to download simple video games. DoCoMo collects the $3 from the 30,000 subscribers as part of the regular monthly cellular telephone bill and kicks 91% of it back to Hudson. That enables Hudson to sell cheap services to a lot of consumers as opposed to expensive services to a few. ''I-mode is a small business with big potential,'' says Hudson sales manager Haruhiko Ikeda.
Companies like Hudson can easily offer i-mode content. The sites are written using a version of HTML, the computer language that most Internet sites are already written in. Other Internet cellphone networks decided several years ago to use WAP, or Wireless Application Protocol. WAP translates HTML into content geared for cellphone screens. But the Internet site supplying content needs a WAP-enabled server to do so. Momentum is building behind WAP and more sites are coming online every day, but content providers had been slow to do WAP because there were few WAP phones, while phone makers waited for more content.
Eventually, i-mode and WAP standards may converge, Tachikawa says, and DoCoMo will lose the early advantage.
That isn't the only challenge facing DoCoMo. The mobile Internet is the rage. Within six years, about 700 million people will reach the Internet by mobile devices vs. 500 million by fixed-line devices like PCs, estimates London-based consulting firm Ovum. That's why so many companies, including Vodafone AirTouch, AT&T, Sonera Oyj of Finland, Sprint PCS, Nokia, Vivendi of France and Motorola, are pushing technologies and content that meld mobile devices and the Internet.
DoCoMo, too, hopes to expand its presence by sharing its i-mode expertise with others. Not only does DoCoMo know how to run mobile networks, but it also has experience managing, a rare combination. So far, it has taken a 19% stake in Hutchinson Telecom in Hong Kong, which launched a service similar to i-mode in May. DoCoMo is buying a 15% stake in Dutch cellular operator KPN Communications. It won't comment on reports that it is negotiating with Canada's Telesystems International Wireless, South Korea's SK Telecom and the USA's VoiceStream Wireless.
All of the companies are preparing for the near future when wireless data networks zip up to 200 times faster than they do today.
At a research center near Tokyo, 700 DoCoMo engineers toil at devices to use that speed. The future, according to DoCoMo, is one in which cars involved in accidents automatically inform insurance agents of damages, kids wear devices that warn drivers that they're crossing the street and pets can't get lost.
Already, Japanese consumers can buy P-Doco, a $150 device to go on Fido's collar and transmit his location to a PC or fax.
''If we only focus on humans, we limit our market,'' says DoCoMo's Tachikawa. ''We are targeting anything mobile, anything movable.''
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