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After last week’s O2 and Telstra i-mode cancellation news came out, it took hardly any time at all for the obfuscation and mis-analyses to hit the Web.
The news, in case you missed it, confirmed that Australia’s Telstra would, and the UK’s O2 most likely would, end their i-mode services; Telstra will terminate i-mode support at the end of this year, while O2 will stop selling new handsets this month and phase the service out over the next two years.
O2 UK was reported to have 260,000 active users, a dozen i-mode-compatible handsets and some 150 sites; O2 Ireland has not stated their subscriber numbers, but the Times said total O2 subscribers were 546,000, implying that Ireland had 286,000 i-moders. Telstra reportedly has fewer than 60,000 subscribers.
After reviewing several dozen news reports, analyst reviews and industry-watcher postings, it appears that the failures are being blamed primarily on three factors: handsets, content providers and business model. Interestingly, it appears that both carriers put forth at least adequate marketing and sales campaigns for the platform itself during their i-mode launches and service expansions; O2 is said to have spent lavishly on i-mode in their second-most expensive campaign ever. So we can eliminate inadequate marketing as a root cause for the retreats.
Of these, the first two represent a failure in execution and are the easiest to account for. First off, and simply stated, neither carrier provided a full and compelling line-up of i-mode handsets. O2 has 12 i-mode models available versus 240 regular browser-equipped phones; who can blame the average punter who strolls into a shop and picks one of the 240 non-i-mode models?
Wireless Watch Japan readers will know that we have long argued that the handset is of supreme importance as the ultimate user interface and the heart of how mobile services are delivered and presented to the user in Japan. Yes, DoCoMo in Japan has the best and not all of these high-end beauties make it overseas but a growing number of “i”-coded models from makers like NEC, Samsung and others are available. Ironically, we also saw last week that Samsung plans to offer the fully featured SGH-730i model in Europe. If a carrier – any carrier – assumes the responsibility of building an i-mode service and aggregating the content for their customers, they also assume the responsibility of ensuring that a full range of tested and compatible handsets are available – it’s part and parcel of the overall i-mode concept.
Failure to execute does not mean that the model itself is at fault.
Second, many pundits pointed to the relative dearth of i-mode content, and to the uneven content partner offers that O2 and Telstra threw on the table. O2 offered 86/14, while Telstra offered an 85/15 split – both fairly close to DoCoMo’s original ‘gold’ standard of 91/9 in Japan. But these are nonetheless below the psychologically important 90 percent level and content providers must still bear hosting, development and marketing costs.
In Japan, DoCoMo (and all carriers) help providers immeasurably with marketing, for example, through a whole range of on-portal and off-line content marketing, new service promotion, Toku Suru and Weekly i-Guide links and advertising. Very little of this has been carried through in the UK and Oz services, and arguably the revenue split with providers should have been better than 91/9 in the absence of such strong support.
In contrast, France’s Bouygues Telecom, arguably the most successful i-mode operator ex-Japan, provides a range of third-party content marketing services; go to www.imode.fr to register your handset’s email addy to receive the weekly “iPromo” mail newsletter. There’s nothing similar at http://i-mode.o2.co.uk/.
And speaking of Bouygues, there are at least several i-modes outside Japan that are doing nicely, if modestly, thank you very much. These include Bouygues in France, O2 in Ireland, Far EasTone in Taiwan, KPN, Wind and StarHub.
Again, any lack of content or discontent amongst the provider community for O2 and Telstra can be attributed to another failure to execute.
The final charge levied at i-mode, the closed business model, does however have some legitimacy.
In 1999, at the start of i-mode in Japan, there was no alternative to the closed, ‘walled garden’ model. If you added Net access to a phone, there was very little content on the Web in general, what was there was hard to find and it wasn’t optimised for low-speed 2G data or restricted mobile devices. If any of these problems could be solved, there was still no economic incentive for any provider to invest in content because there was no billing system. Thus, i-mode – a complete carried-defined service definition that provided clear benefits for all parties – was the only option.
Led by DoCoMo, what the Japanese carriers essentially did was construct huge, closed-off ‘intranets’ that enabled content providers and mobile surfers to find each other (and exchange payment for content); further, the handsets were quickly optimised to enable more and better low-speed content and service offerings – initially colour screens and improved audio/ring tones, followed by downloadable Java apps, Flash and mini video clips. Later, in the 3G era, music, full videos, and e-commerce services came to the front. Everything – even 3G itself – was carefully managed and controlled (for better or for worse) by the carriers. This is the model that O2, Telstra and indeed all other baby i-modes outside Japan have tried to implement.
But today, with zippy 3.5G data speeds, hugely improved mobile devices (Smartphones, browser phones, PDAs, email terminals, etc.), a plethora of access networks (cellular, WLAN, Wimax, etc.) and a huge grouping of PC Web content providers aggressively moving into mobile, the walled-garden approach may have seen its day.
Heavyweights like Google, Yahoo, Microsoft and others are historically well positioned to make near bottomless investments in mobile devices, services, applications and business models, and these all rely on the PC Web model of completely open access (look what happened to AOL – the original PC Web ‘walled garden’ ISP). Further, the technology and networks are finally in place to make finding content and services via mobile almost as painless as on a DSL-connected PC.
No doubt, the looming ‘mobile and portable DSL’ era will eventually kill off walled gardens everywhere. So, is the i-mode era over? Not quite yet.
If you’re one of the nine or so carriers worldwide who have launched i-mode, and you continue to execute faithfully to the model, then you’ve still got a few years to provide a good service and earn decent revenues.
If you are considering launching an i-mode, and you can line up all the necessary factors in the value chain (and you really pay attention when the NTT DoCoMo consulting guys come over), then you, too, have a few years left to run a decent business.
But if you launch an i-mode and then fail to execute, and your strategy guys are blinded – like deer in the headlights – by the often self-serving mobile nirvana predictions of the Googles and Yahoos, then all you can really do is flail about needlessly – failing in the business, frustrating your customers, alienating your content partners and writing down yet more lost investments.
– Daniel Scuka
Some sage advise when entering new turf; Stop, Look and Listen.. it’s also good to secure a local guide. Japan is the cradle of mobile civilization – we have been dedicated to this space since 2001 – trust our archives here offer some useful material.
Domestic activities continue to set the pace, and sharp players are looking at global markets. We have hard-earned industry expertise and trusted network of contacts with access to advanced intell. and potential deal flow. Need a lift.. Ok, buckle-up!