Takeshi Natsuno, Managing Director for DoCoMo Strategy
Keynote this morning from NTT executive, talking about i-Mode.
He's showing us subscriber data for wireless Internet in the world. NTT dominates
in the world, and then next five are Japan and Korea. Everyone else, including
Europe and US are tiny in comparison. For many reasons, this hasn't been repeated
in other geographies.
He outlines the functional footprint of the 504 series. Interesting, the Nokia
3650 which is $150 in the US now has more functionality. He's showing powerful
Java-based games, it's pretty sweet. He says the game software industry for
phones is becomming as big as older game industries.
They just announced the series 505 phones. He's really pushing Macromedia
Flash as the major breakthrough for their phones. But these devices have a
richer display, 1.3 megapixel camera, memory stick, and bio-metric authentication
input device! Phew. The Flash demo's are really nice --- smooth, vector graphics
compared to the nastly bitmappy Java apps that he just showed.
38 million active iMode subscribers. More and more iMode has VPN support and
can integrate into corporate environments. Therer are over 2,300 official commercial
content/service providers in their network, with over 62,000 voluntary iMode
sites. His 38 million number means that they are the biggest ISP in the world,
now bigger than AOL.
Consumers pay for devices and access because they've made it safe and easy
for content providers to provision services into their network. It becomes
a virtuous circle as subscriber growth happens more content companies and higher
quality content comes online.
They went from zero subscribers and content to this world given three key
1) Technology. Selected best available content technology -- real HTML (cHTML),
MIDI, Java, Flash.
2) Business model. Designed business model around content service providers,
not for the needs of telecom operators or handset manufacturers. Micro-payments
model, user friendly portal for content selection, easy install and use process.
3) Marketing. Drove marketing around ordinary people, appealing to a mainstream
audience not techies.
What he's not noting is the degree to which a) their incredible centralized
control enabled the rapid and easy establishment of standards, and b) the advanced
nature of their installed network technology enabled them to move much faster
than US and European markets.
More data. Aggregate ARPU has stayed strong only because of iMode. Voice ARPU
has continued to decline while data ARPU has made up for that decline.
Two years ago, strategic decision was made to add Java to the phones. They
now have 17.4 million active Java subscribers, with over 600 Java app suppliers.
There is also a market for Java-based corporate applications. There are 6,000
independent Java content/app sites available over iMode. Despite Sun, they
made Java in devices successful.
As a result, they say significant packet usage boosted by Java handsets, in
addition to higher value/priced applications where they get a commision. Latest
Java phone subscribers are using 4x the packet usage than normal phone users.
He expects that with the introduction of Flash in their phones, they'll see
a very significant boost to packet usage beyond Java.
Overall, digital content marketplace on iMode is about $1B in 2002, and the
percent of customers paying for digital content is about 53% of subscribers.
He's comparing Japan versus other markets. He says it's fundamentally about
a content-centric value chain all the way through the model. In other markets,
the fragmentation in operator, handset vendor and content value chain makes
coordination difficult. Operating a controlled but dynamic eco-system is the
basis for NTT's success.
Going forward, always trying to improve the evolution in the handset and network
capabilities; in content capabilities; evolution of the core user experience.
But these evolving dimensions need to be synchronized.
What about 3G and Broadband?
The network speed component is only one dimension of the value-chain. The
entire eco-system needs to evolve with it, and that can only happen when enough
user critical mass is available. It's back to the chicked-and-egg problem that
they faced when they started iMode.
On their 3G platform, they offer MPEG4 video, and it's evolving into being
a multi-point video phone and better platform for content. 384Kbps currently.
But they only have 380,000 users of 3G today because not enough applications
have been developed for it. But they're driving customers over with a cost-savings
value proposition, and then layering in specific 3G content services. 505i
phone is the first to come close to enabling 3G applications. But it will take
3 years to get to 2 million users, largely do to lower area coverage.
1) US/Europe follow iMode model with content-centric value chain model.
2) Big migration from 2G to 3G starts in Japan in 2004.
3) Deeper convergence between Internet and telco
4) De factor standards most important.
My question: will devices evolve to be true consumer electronics devices that
combine stereo music, DV/camera and video communications, eventually displacing
portable music and camera markets?
He thinks it will in the long run, but it's no where near making this transition
today. The music and camera capabilities are very far behind, and are really
mostly applied in the special context of mobile communications. That will change