"First week in the future" - a Northstream on site report from 3G:s debut in Japan

On Monday October 1, NTT DoCoMo launched the world's first 3G service. Northstream analysts have observed the debut of 3G:s first commercial mobile-phone services in central Tokyo. Here are some of their initial reports: - Despite efforts by cautious sales people to point out the limitations of the service, the new video-equipped handsets seem to be an early success. - Japan might well be on its way once more to successfully combine consumer driven applications with advanced wireless technology. Again an important lesson that should be applied in the close future to the emerging GPRS market in Europe.

- I hardly got the handset out of the store. The sales person was so eager to make me aware of the limitations and possible problems at this early stage, says Anders Roos, Senior Advisor at the Northstream Tokyo office, who was carefully informed of the coverage limited to central Tokyo and possible technical glitches when he wanted to buy a phone.

- NTT DoCoMo is understandably anxious to avoid any consumer disappointment and is keeping a low profile both in the marketing of their new products and in their sales goals, which might well be wise tactics in a sector in desperate need of good news, says Mr. Roos.

The NTT DoCoMo 3G service is marketed as FOMA (Freedom Of Mobile Multimedia Access) and so far limited to central Tokyo. The service will then gradually be expanded to other urban areas. A nationwide service, covering 97 percent of the Japanese population, will not be offered until spring 2004. FOMA increases bandwidth from today's 9.6 kbps in i-mode to a maximum of 64 kbps uplink and 384 kbps downlink. According to the Northstream team in Tokyo, the increase in speed so far is clearly noticeable and seems to work without major problems.

However, as for any new system, a few bugs are haunting the service; the handset can lock up, a number of functions are still missing and it is not yet possible to connect the videophone to a laptop computer for Internet access.

As of now, the battery in the new handsets does not last nearly as long as i- mode's state of the art. But, when downloading files at a speed of around 200 - 250 kbps - which our quick trials show - the user may be OK with that drawback. On the capacity side, it is not yet clear how an increased number of users may affect the available bandwidth.

An typical drawback for early users of the videophone is the of lack other users; it can be hard to find someone with a similar handset to video chat with. A meeting place called "Knock! Knock!" (http://nooper.com/kk/) has therefore been set up to find and connect other videophone users.

NTT DoCoMo's strategy is to smoothly migrate i-mode towards 3G, and initially they see FOMA primarily as a way to enhance i-mode. The most widely marketed and popular among the three different handsets on sale has a small video camera attached to the phone that makes use of the new high-speed service. In spite of the high price (approx $ 700 - seven times the price of a regular i-mode phone) the new handset has quickly sold out in stores.

4000 handsets were sold the first day, a total of 20,000 have been shipped to 260 mobile phone marketing outlets. NTT DoCoMo expects to sell 20 - 25,000 handsets per month the first six months and is targeting 150,000 subscribers for its 3G service by the end of March - a target that does not seem overoptimistic given the control NTT DoCoMo has over the distribution, early consumer interest and NTT DoCoMo´s unprecedented success created with the mobile Internet service i-mode. Since the introduction of the service in 1999, the total number of i-mode subscribers has increased to 27.8 million. The number of subscribers to NTT DoCoMo's PDC service, as of September 2001, was 38 million.

While i-mode was initially targeted towards the business market, the success of the service was eventually based on its wide popularity among young private users. In its early stage the higher capacity in 3G might prove it a more useful tool among professional users. Japan's leading construction company TAKENAKA, has the FOMA service as the mobile network in a business solution field trial. TAKENAKA employees, mainly from their Tokyo Headquarters, will use FOMA handsets for video streaming, taking and transmitting still pictures, and real-time video monitoring.

Adding to the strength of the i-mode business case has been the ability of NTT DoCoMo to charge its users for both subscription and services. A new charging scheme has therefore been introduced with FOMA. The charging of the commercial version of FOMA will be different from the introductory phase, where the packets were priced at 0.05. According to NTT DoCoMo, there will be four different pricing schemes for packet data (these charges applies also to i-mode traffic): _____________________________________________________________________ Plan Monthly fee (JPY) Fee per packet (JPY) Packet Pack 20 2,000 (20 000 free packets) 0.10 Packet Pack 40 4,000 (80 000 free packets) 0.05 Packet Pack 80 8,000 (400 000 free packets) 0.02 No packet pack Free 0.2 _____________________________________________________________________ Source: NTT DoCoMo

For similar monthly packet usage as today with PDC (the network that the present i-mode operates on), the price will be lower with FOMA, but with the high available data speeds the total usage cost can easily become extremely high. Consequently there might be a reluctance to use multimedia services and other services that require a lot of data to be sent. One conclusion could be that the increased bandwidth with the greater scope for commercial use in combination with potential higher usage cost makes the focus on the corporate market more important for NTT DoCoMo, but this is too early to speculate in.

Although still in its cradle, the launch of the NTT DoCoMo services stands as an important example and symbol for players on the wireless market far outside central Tokyo:

- On a larger scale the launch in Japan is a very promising and an important step for all players in the global wireless market, says Jonas Twingler, a Senior Partner with Northstream.

NTT DoCoMo might well be on its way once more to successfully combine consumer driven applications with advanced wireless technology. With the first step into the new FOMA system services, features and charging schemes are already in place. This gives Japan an advantage compared to most importantly Europe, were the necessary technical infrastructure for GPRS is in place, but services and charging systems are to a large extent yet to be seen.

- By repeating its proven ability to combine widely popular and useful services with advanced third generation wireless technology, and by being able to charge users for it, a traditionally cautious Japan might well be leading the way once more, says Jonas Twingler.

- This is an important lesson that should be applied in the close future by the players on the emerging GPRS market in Europe. Indeed, DoCoMo's position is different than most European operators, but the fundamentals of their successes are still replicable.


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