The International Telecommunication Union (ITU) isn’t particularly renowned for exciting, fun-to-read reports. The global standards body tends to produce authoritative but somewhat plodding publications that delve into the arcana of topics like radio spectrum management and regulatory trends. But a recent case study examining how Japan’s mobile Internet works and highlighting some of the key technology and applications driving 3G is refreshingly non-academic, not to mention pretty darn accurate.
I picked up a tip from Dr. Arnd Weber, a mobile Internet researcher at Karlsruhe’s Forschungszentrum (federal research center), who passed along the link to a fascinating ITU report entitled “Shaping the Future Mobile Information Society: The Case of Japan,” released in February 2004 (URL link at end of article).
The report comprises part of the documentation for a New Initiatives Workshop held 4-5 March, 2004, in Seoul, Korea, co-hosted by the ITU and Korea’s Ministry of Information and Communication (MIC). The Japan case study was prepared by Lara Srivastava, a telecom policy analyst at the ITU, in collaboration with Akihisa Kodate at Waseda University and was based on research and meetings held in Tokyo last fall.
Rarely has an academic report hit the nail so squarely on the head as to how the mobile market operates and why Japan’s wireless Internet is such a success and a test-bed for the world.
In a section entitled “Market peculiarities,” the report states:
One of the most distinguishing aspects of the Japanese mobile industry is that it is operator-led. Equipment manufacturers and operators work in closely-knit groups and supply the market with handsets and portable devices in a coordinated effort…. The operator’s brand is dominant rather than that of the manufacturer. The Japanese subscriber must first select the service provider and then choose his or her mobile device. The subscriber’s choice of handset is thus limited to those on offer and branded by the service provider selected. This differs remarkably from the European case, where the handset brand rests firmly with manufacturers such as Nokia and Ericsson, as does the responsibility for research and development.
The operator-led nature of Japan’s mobile market is one of the most fundamental differences between Japan and elsewhere. This is responsible not only for the handsets being some of the world’s best but also for the content, applications, and services that are delivered via mobile being easy to use, fun, and useful.
The report also notes the importance of Yokosuka Research Park (YRP), key location for NTT DoCoMo R&D as well as the R&D labs of several terminal and infrastructure makers, and points out that:
Japanese mobile operators play a leading role in research and development activities. The Yokosuka Research Park (YRP), just outside Tokyo, is well-renowned and houses one of the largest R&D centres in the world for 3G technologies. The close relationship between manufacturers and operators in Japan accounts in part for the sophistication and availability of handset technology and the take-up of value-added services.
The authors appear to recommend that a similar cooperative R&D relationship be fostered between device makers and carriers outside Japan, and further that carriers elsewhere should look to emulate the content billing split between Japanese content providers and carriers.
This split was initially set at 91% content provider and 9% carrier on NTT DoCoMo’s second-generation i-mode system, and has been widely credited with helping make i-mode and the other mobile webs the successes they are now. This ratio, however, is undergoing change as providers and carriers realise how valuable new 3G content, such as Chaka Uta downloadable music, can be.
Obviously, in Japan, KDDI’s flat-rate data pricing (to be copied by DoCoMo starting in June) will make the traffic fee a non-factor in mobile content usage, with the likely result of boosting, proportionately, the amount (and value) of content for which users are willing to pay, as the report mentions.
Sure enough, since KDDI’s launch of flat-rate data pricing last fall, content ARPU at the carrier generated by “EZ Flat” users is up to 1,470 yen compared to 610 yen for non-flat-rate users, according to Makoto Takahashi, general manager of KDDI’s Contents Media Division.
While being an overall excellent history of how and why Japan’s mobile Internet leads the world, the report is sadly not without some flaws. Statements such as: “Equipment manufacturers and operators work in closely-knit groups and supply the market with handsets and portable devices in a coordinated effort. The mobile operator retains ownership of the handset” could be misinterpreted; yes, the mobile operators retains brand ownership of the handset, but actual ownership resides, of course, with the purchaser who buys it.
Also, while correctly stating that “The early adopters of mobile services are usually young users, who account for the largest proportion of data traffic,” the report repeats the too-oft-repeated misconceptions that “low PC and Internet penetration” and the “large number of long-distance commuters using public transport” are the “most important” contributing factors to the mobile’s Internet’s success.
These are important factors but by no means the most important; quality of the terminals, extremely easy-to-use data services that foster and enhance social networking, and price are much more significant.
Finally, the report’s conclusions happily give us at WWJ a nice boost as independent confirmation that watching what goes on in this market (and reporting it to you) is well worth the effort:
Mobile phones have now become the most individualized and intimate of information and communication technologies: nowhere does this apply more than in Japan. The mobile phone is far from completing its evolutionary path, and a study of the Japanese mobile sector with its cutting-edge technologies can provide a unique glimpse into the future.
In Japan, users continue to demand increased mobile functionality and service providers are eager to please. At the same time, it is recognized that the rise of the mobile phone has affected social norms of behaviour. The integration of the mobile phone in the social context is perhaps more developed in Japan than in other countries. Despite technological developments occurring at breakneck speed, a study of the Japan case points to the benefits of self-regulation and individual restraint for a balanced mobile world.
All in all, “Shaping the Future Mobile Information Society: The Case of Japan” is well worth reading in its entirety. If you’re pressed for time, skip through to Sections 3.5 “New applications, services and terminals,” 4.2.1 “In-vehicular systems,” and 5.2 “A question of content.” These sections provide some of the best of the author’s research and are helpful for understanding what Japan teaches for markets overseas.
— Daniel Scuka
Shaping the Future Mobile Information Society: The Case of Japan, available via: