[Guardian Unlimited] Japanese Craze That Could Wipe Out WAP

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From: Linda (joelinda1@home.com)
Date: Thu Jun 15 2000 - 19:15:59 PDT

[This is a decent article on i-mode, outlining the fee and billing structure which
"allows almost unconscious consumption". It's also an example of the best technology
not necessarily winning greatest market share.



Japanese Craze That Could Wipe Out WAP
18:30 PM GMT on Jun 15, 2000

The Guardian Unlimited

There is a new walk on the streets of Tokyo these days. It is too slow to be a stroll and too
purposeful to be a wander. In crowds, it often results in the odd stumble, bump and mumbled apology.
But it is no drunken stagger either. The legs know where they have to go, but the eyes are too
preoccupied to chart a clear course.

Suddenly it is cool not to look where you are going in Japan. Why? Because you are engrossed in the
latest way to surf the "wireless web" - a mobile phone and internet service called i-mode.

i-mode (the "i" is for information) is the first system to put cyberspace in subscribers' pockets
24 hours a day with cheap and continuous access to a range of information services. Technically
sophisticated, but simple to use, it is tipped as the next big thing to come out of the land of
the Walkman, the Game Boy and the PlayStation.

What's the big deal? Britons can already use their cell phones to get online and exchange email
messages using the wireless application protocol (Wap) system. Like i-mode, Wap phones do not
access the internet as we know it - rather a cut down version designed to work on small screens.

But, while Wap and i-mode are rivals, their contest is in danger of turning into a mismatch between
a weedy infant and a bodybuilding giant. In terms of cost, popularity, ease of use and commercial
success, Wap is being whipped. It may have been adopted last summer as the European standard, but
it has been slow to take off, whereas i-mode is here, now and changing millions of lives

Since its launch in February 1999, the system has transformed Japan from an online laggard into
one of the fastest growing online markets in the world. With 7 million subscribers, i-mode is the
country's most popular online portal. At current rates of growth it will make Japan the first
country in the world where mobiles are more popular than PCs as a way of getting into cyberspace,
and 600,000 new customers signing up every month have put i-mode on course to overtake America
Online (AOL) as the planet's leading online portal by the middle of 2002. The service is so popular
that its operator, NTT DoCoMo, had to halt sales and advertising temporarily last month because
demand kept crashing the system.

Meanwhile investors have made DoCoMo the hottest company in Japan. Last year, it overtook the motor
manufacturer Toyota to become the country's most valuable corporation.

In Tokyo's trendy Shibuya district, the system is changing the way people look, sound and spend
their time.

For Yoko Uenishi, a 17-year-old high school girl, a stylish i-mode phone completes a look that
includes bleached grey hair, white eyeshadow and precariously high-platformed sandals.

"I bought it because it looked cool and all my friends had one," she says. "But now I use it all
the time, especially when I want to kill time on the train."

Her phone - a tiny, ultra-light, metallic pink device that flips open like a Star Trek communicator
- is decorated with a designer strap and stickers of cartoon characters. To personalise it even
further, she has downloaded a Hello Kitty animation for the 3cm by 5cm screen inside and a pop song
melody that plays when she has a call or a new email. Each day, she picks a new image and tune, for
which 100 yen (60p) is added to her monthly phone bill.

Like most teens, Yoko mainly uses i-mode for email. She reckons she sends and receives about 15
messages a day - which means clicking away at tiny phone pad buttons until her fingers ache. But s
he also checks her horoscope each morning, books concert tickets and follows the latest chart news
- which, naturally, includes a new top 10 of downloaded melodies.

But i-mode is not just child's play. Through more than 13,000 sites, subscribers can book airline
tickets, trade stocks or find a lover. Date clubs are said to be particularly popular among would-be
adulterers because i-mode offers more anonymity than a phone and a less risk of being discovered
than a PC. One site provides information about the nearest available love hotel.

Keiji Matsuo, a broker at one of Japan's biggest securities houses, is a recent convert, but finds
that the service already fills up a large part of his day. Each morning, he gets a wake-up call from
i-mode, then uses it to check what happened on the New York stock market while he was asleep. The
latest analysts' reports are emailed to him when he is out of the office and he clicks onto the net
to show clients the latest share prices. Last thing at night, he checks the London markets before
he goes to bed.

"It's fun, it's useful, it's lighter than a laptop and quieter than a mobile phone," he enthuses.
"Best of all it is cheap so my wife doesn't get angry." He spends less than 5 (USD $3) a month on
i-mode, including the basic 2 (USD$1) fee.

It may not sound much, but analysts say i-mode is creating a revolutionary new pattern of consumption.
The buzz word is micro-niches - tiny purchases that can be made while walking along the street or
waiting for a train. Until now, these have been impossible because of the costs of distribution
and billing, but with i-mode the marketplace is in your pocket and the cash register is your monthly
phone bill.

Because i-mode offers continuous access to the internet, there is no need to dial up and wait for a
response and most sites can also be accessed with just a few button clicks rather than typing out web

Yet the service is far cheaper than using a personal computer and landline because charges are based
not on time, but on the volume of data downloaded. Receiving five short emails costs about 10 yen (6p),
while the charge for checking a train timetable or the weather is unlikely to be more than 10p. You do
not need a credit card - these transactions are automatically put on your phone bill.

This allows almost unconscious consumption. It is as though DoCoMo and partners have found a way to
package plankton and sell it to whales.

The toy maker Bandai, for example, earns about ?,000 a month from a website that simply provides a
different picture each day for i-mode users to download onto their screens. More than a million people
pay 60p a month for this service.

DoCoMo president, Keiji Tochikawa, says simplicity is the key: "We hope customers will use our next
generation of mobile phones to exchange information as naturally as they breathe air."

These microniches are already generating huge revenue. According to the Nomura Research Institute,
i-mode's 7 million subscribers spend an average of 1,600 yen (?60) per month on content. This means
big bucks for DoCoMo, which gets 9% of the fee for every cartoon character, melody or news service
that is downloaded.

On top of this, DoCoMo rakes in monthly subscription fees of 300 yen per person and 0.3 yen (a fifth
of a penny) for each 128-bit package of data received or transmitted.

For the first full year that i-mode was in operation, DoCoMo racked up record profits of 252.1bn yen
(?bn), a jump of 23% from the previous 12 months. Much more is to come, according to fore casts that
the wireless market will grow fivefold by 2003.

"This is just the beginning," said Kaji Nishigaki, president of NEC, which makes handsets. "Within
three years everyone will be on i-mode."

Currently the system is a prototype available only in Japan, but DoCoMo has plans to make it
smoother, faster and more widely accepted.

From next spring, it will the first company in the world to introduce a third generation mobile
communication system that it says will allow data transmission at 15 times the existing speed of
9.6 kilobits per second. By 2003, the company hopes to raise the pace further to a blistering two
megabits per second, swift enough for webcasts, interactive games and video conferencing.

This is frightening news for European telecommunication companies, which are at least a year behind.

Until recently, it was widely believed that i-mode would be difficult to export because of technical
standards, security concerns and cultural differences.

However DoCoMo has begun to move aggressively into overseas markets. Last year, it formed
partnerships with global giants Microsoft and Sun Microsystems. Last month it bought a bridgehead
in Europe with a 5 billion stake in KPN, a Dutch mobile phone company. It has also paid $5bn for
20% of Voice System, the US cellphone firm.

Further takeovers and tie-ups are expected as DoCoMo becomes evangelical about its system. It will
be hard to resist. As the world's most valuable telecommunications company, DoCoMo has an almost
bottomless war chest as well as the backing of its politically powerful former parent company, NTT.

Unless Wap gets moving, European consumers could be the next ones doing the i-mode walk.

In Japan, there has been no contest between i-mode and Wap. The EZ system (based on Wap) is faster
and technically superior, but i-mode is cheaper and has greater marketing clout. Who says the best
man wins? Remember VHS vs Betamax.

i-mode Company: NTT DoCoMo Speed: 9.6 kbps Subscribers: About 7 million Standard: cHTML Sites: 13,000
Outline: The cheapest and most popular way onto the wireless web. Uses packet switching system to
offer continuous connection. Able to tap into 30 million mobile phone customer base of DoCoMo.

EZaccess and EZ web Companies: IDO and Tu-Ka Speed: Up to 64 kbps Combined subscribers: Less than 2
million Standard: HDML (handheld device markup language) Site numbers: Less than 500 Outline: Second
most popular system, but far less content because the relative difficulty of HDML has deterred many
site designers.

J-Skyweb Company : J-Phone Estimated subscribers: Less than 2 million Code: MML (mobile markup language).
Very similar to cHTML Speed: 9.6 kbps Site numbers: Less than 500. Outline: Clearest colour images. In
third place at present, however it is seen as the main rival for i-mode because its programming code is
so similar and because it also offers continuous access.

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