Trying to attract cell users to next wireless generations
Toshiyuki Ohno hardly looks like a foot soldier in Japan‘s mobile phone revolution. But that is what he is, and so far it is a fairly lonely patrol.
For the last two years, Mr. Ohno, a 37-year-old software programmer, has tested handsets on a freelance basis for Japan’s largest and most innovative cellular operator, NTT DoCoMo, which began selling the world’s first third-generation phone service last Monday. Mr. Ohno tested the top-of-the-line $510 handset for three months in the service’s trial period and bought his own handset when the new phones reached stores last week.
With the world watching, DoCoMo stage-managed its introduction of the new service, distributing only 4,000 handsets to 260 shops in Tokyo. All the handsets were sold the first day, and most stores expected to wait a week more for replacements.
But the phones, which promise Internet connections fast enough to download audio and video files, snap and send photos and hold teleconferences, do not impress Mr. Ohno. Like others, he said he would not use most of the new functions because they cost too much. He bought one of the new phones, he said, partly because he got a discount and partly because he thought his friends would buy one, too. They did not.
”Everyone is impressed when they see my phone,” Mr. Ohno said, ”but they don’t want to buy them because they are too expensive.”
That is hardly the endorsement the telecommunications industry here had hoped for. DoCoMo plans to spend $8 billion the next three years to make this third-generation service available nationwide. The so-called 3G wireless technology generally refers to networks capable of connecting to the Internet at speeds 40 times the rate of current cellphones.
The company does not expect the 3G network to turn a profit until 2004, by which time it predicts it will have six million subscribers. The initial success of the new service in Japan will also partly determine how quickly DoCoMo might try to offer similar services through its partnerships with AT&T Wireless in the United States, KPN Mobile in the Netherlands and Hutchison 3G UK Holdings in Britain.
At the same time, competitors overseas, which spent about $100 billion in government auctions to acquire the needed radio spectrums to offer such services, will be watching DoCoMo’s experience to see if money can be made.
”Our deployment plan is quite conservative,” said NTT DoCoMo’s president, Keiji Tachikawa, who is mindful of the bad publicity his company received last year when the computers driving its i-mode wireless voice and text-messaging network crashed several times.
Mr. Tachikawa is also wary of drawing his highest-paying customers away from the i-mode service, which has 27.5 million users and is a cash cow. He, as are other mobile phone executives in Japan, is trying to increase the amount users spend on data services to offset slowing demand for voice services. But he does not want subscribers to abandon i-mode phones immediately, before the new system proves its reliability and has enough multimedia material to satisfy its customers.
The new 3G service is designed to steer customers into using more data functions like e-mailing a photo or downloading a song from various Web sites that will pay DoCoMo a royalty for linking to the network. Users who choose the highest-priced monthly service, at 15,000 yen ($125), get a large block of free minutes and a cheaper per-minute charge if they exhaust their initial allotment.
Lower-priced plans include fewer free minutes and higher per-unit charges. For example, the cost of downloading a one-megabyte song on the least-expensive monthly service plan would be 1,563 yen, or $13. Over all, DoCoMo expects 3G customers to spend about 10,000 yen ($84) a month, 20 percent more than current i-mode users.
Mr. Ohno is not taking the bait just yet. He still keeps his i-mode cellular phone, which costs about $30 a month to use, tucked in his right breast pocket. The phone, he says, has good sound quality. Unlike the 3G service so far, it can be used outside Tokyo. And at just more than three ounces, it is only about half the weight of his blue, clamshell-size 3G phone.
More important, the new phones have only a few compatible Web sites.
”DoCoMo already has pretty good handsets, so customers need some discriminating services if they are going to be convinced to buy new 3G phones,” said Lalita Gupta, an analyst at Morgan Stanley in Japan. ”This rollout is going to be a quiet affair.”