We recently submitted this article – as pasted below – to our friend, and long-time outside adviser, Alan Moore. It’s an honor and privilege for us to be included on his SMLXL site, noting that we’re also thrilled to be invited recently to join as an Opinion Leader on the Canvas8 platform.
As a result of a recent conversation with Alan he kindly invited me, in an evil ‘dare ya’ challenge sorta way, to submit this post focused on what I had casually called a unique operator approach by SoftBank Mobile here in Japan. Thinking now about how I could structure that, in a somewhat logical and concise way, it occurs to me that a little history would be in order to set the stage.
For starters, the roots of this network were built by an energetic – read disruptive – player called J-Phone back in the late 90’s. This gutsy crew actually rolled their J-Sky data service several months before DoCoMo launched i-mode and they continued to push the next-gen. services envelope by introducing the world’s first camera-phone in 2001. Carving a niche in the youth market with slick ad campaigns and fun product offerings like picture mail, shortly followed by movie mail, they were ultimately acquired by Vodafone in 2003. There have been many keystrokes over the years – during and since – related to the choices made and lessons learned, no doubt plenty of material for a master thesis or two, suffice to say the perpetual #3 player struggled for several years. It is fair to note that the V-Live platform, including some early handsets and many contents featured on-deck at launch, was built on direct experience and relationships developed during the Vodafone adventure in Japan.
At any rate, market forces and shifting strategies resulted in a massive write-down and sale to the 3rd owner, in almost as many years, SoftBank. A very well established company in the PC world with a fixed-line DSL network and majority owners of Yahoo! Japan, which controls over-whelming market share here in the online search, ads and auctions space. It should be noted that SoftBank had already secured a spectrum license from the ministry and had stated goals of building their own competing network when the agreement was finally reached to purchase Vodafone’s mobile operations. As an aside, it was also SoftBank who bought the former fixed-lined division of J-Phone when Vodafone entered the market.
To the point now finally from my opening statement related to the ‘unique operator approach’ by SBM. Simply put, they are a more of media, content and services company than your typical telco which generally operates very much like a public utility. If it could be said that Vodafone shifted the former start-up style run & gun J-Phone hard right, towards a more corporate focus on enterprise customers and common global standards, then certainly it appears SoftBank has tacked back closer to center. They have various media related properties, ranging from main-stream news to celebrity blogging and the TV Bank streaming portal with a paid subscription platform called Gyao. Digital contents and services range from job listings to online gaming, music, fashion, sports, fortune-telling, health, travel and even shopping combined with a popular social netowrking approach in a product called S-Town.
Certainly one of the more significant moves they made was the early and aggressive introduction of flat-rate price plans, while already available by all players for some years to various degrees, which also included on-network voice calls and was well-timed with the introduction of number portability. Without digging through 10 years of official stats, it’s a fair guess their continued position of gaining the most subscriber contracts on a monthly basis for nearly two-years running sets a new record. Funny that.. even in Japan people shop with their wallets.
Of course customer acquisition usually comes with a price. While they have managed to grow surprisingly well, the ARPU – an industry standard benchmark representing Average Revenue Per User – has clearly suffered in comparison to the competition. This was actually the genesis of my original chat with Alan. God-Bless the bean counters who might well be excused for pointing out – in very round figures – that 15M users under Vodafone with about $60 per month per user compared to current results showing 20M clients spending around $45 works out to be ‘pretty much’ the same. Lets cut to the chase, fact is that as an extension of their other previously well-established properties, namely keyword search, related ads and auctions, the company secured another extremely valuable end-point in order to gain additional non-telco related revenues. Ultimately the best location = where your customers are.
Aside from the typical bundling advantages with fixed and mobile service plans, which the other operators do as well, one recent development is something that we had speculated about over 5-years ago, WiFi. SoftBank has in effect built a mesh network with their custom routers for fixed-line customers and the latest 802.11 enabled handset lineup clearly indicate that it’s an important part of their plan going forward. Apparently there is still some rather disruptive DNA in those wireless pipes.
Perhaps this case of an entity, that was not an established telecom player, adopting a mobile network strategy as a viable extension to enhance their existing core offering may well serve as yet another example from Japan that will be replicated in other markets.
– WWJ Editors