It's Quiet on Tokyo's Mobile Street. Too Quiet.
Checking headlines around the Web yesterday and today, I was struck by the eerie silence on Tokyo’s mobile street. There is a ton of coverage on the Livedoor/Fuji TV take-over battle, but that’s largely a Web/media topic and not really related to mobile. Where’s all the silence coming from? And could it be related to Vodafone, Softbank or flat-rate mobile voice calling? To be sure, we’re not totally lacking mobile news; DoCoMo have posted a couple of releases in the past two weeks, including the 22 February announcement of Mobile FeliCa, see WWJ’s video coverage here and the 8 March notice on the launch of the N700i and P700i 3G FOMA handsets. Similarly, KDDI have some releases up (but only in Japanese; nothing in English since 8 February), notably on their new W31S music-player form-factor celly from Sony Ericsson.
Also, there was today’s joint release from all three carriers and some 30 other companies on the founding of the Japan E-mail Anti-Abuse Group (JEAG). This is pretty interesting and worthy of a Viewpoint on its own, but Japan’s massive spam problem isn’t exactly new news.
Otherwise, there’s a deafening silence on the mobile front, and WWJ suspects it’s just the calm before the proverbial storm. Where’s all the silence coming from?
First, since the February subscriber figures became public, with the stunning news that the company lost a whopping 53,200 subscribers, Vodafone has been keeping a very low profile. In January, Big Red lost even more — 58,700 — leading to Black Monday (7 February) and the sudden announcement of a new CEO. If they lose a similar number this month (we’ll know early in April), WWJ may conclude that the ship is sinking faster than the crew can bail.
The acid test will come in April, traditionally the start of the new school year when high school grads head off to university. A spiffy new cell phone is one very popular gift from otosan (dad) and if they can’t stem the loss then, when will they ever? Doubtless, head office will be looking to see that the March/April subscriber count gets them at least back up to where they were in January.
More confirmation that Vodafone is hurting came with the 24 February news that the company would adopt Mobile FeliCa. This in itself is a wise idea and will help boost competitiveness in the market (as well as ride the coat tails of all the FeliCa marketing DoCoMo is doing), but we wonder who pushed the decision since FeliCa is Japan-specific and not part of any global technology platform. In fact, it’s a tacit admission that Japan is different and hewing to a local-market agnostic, completely universal set of mobile services developed by Vodafone central planners has been a mistake.
And if Vodafone KK fails to avoid the looming iceberg, what then? Which brings up the second big source of thundering silence: Masayoshi Son and Softbank.
You’ve got to suspect that he’s watching what happens with Vodafone like a hawk. If the subscriber count goes down, and London decides their Japan OpCo has become too big a liability, look for Son to swoop on the remains and make an offer that Vodafone Group can’t refuse. WWJ suspects this may be one of the biggest stories brewing right now, and — although very unlikely — if it comes to pass, it would be Japan’s mobile industry news of the decade.
How would he do it? Let’s speculate for a minute…
First, remember that Softbank is a marketing company par excellence. Customers who use Yahoo’s cheap, flat-rate broadband Net access and VoIP telephony love Softbank and are happy to see traditional telcos (that would be NTT et al) and their high, metered prices suffer.
Apparently, Son sent an email to all Yahoo Japan subscribers back in September asking them to directly pester the government to grant Softbank a chunk of coveted 800 MHz bandwidth, usable for 3G mobile services. This was a very savvy move since (a) he knew 800 MHz had already been allocated to DoCoMo and KDDI and that the ministry will never simply unallocate it, but that (b) by going to the street he’d generate a lot of sympathy.
Once he owns the company formerly known as J-Phone, he’ll have a 3G license. It won’t include the 800 MHz spectrum that he’s been badgering the government for, but the prize will include a solid subscriber base, some very cool technology and a great little organization (despite the recent bad subscriber news).
Next, set up city-wide networks (in Tokyo and Osaka) using WiMAX technology offering fixed-wireless services that don’t use 800 MHz but that offer all the IP connectivity consumers could want (if others can do it, so can Son). And when customers find out that includes mobile VoIP calling with packets and voice calls at a single fixed fee just like Yahoo’s famous flat-rate broadband, Son will grab a chunk of market share faster than you can say “profitability.”
When he can show Softbank’s overseas investors (Did someone say Ripplewood?) that he can create a total consumer package (“Yahoo Total Flat”) that bundles PC access, home VoIP, mobile VoIP and all the data Yahoo customers could ever chew for, say, 9,999 yen per month, he’ll get the funding for a Vodafone purchase in a flash. Tokyo mobilers will flock in a flash to anything that offers flat-rate mobile data and voice — and Son knows it.
And where will the mobile terminals come from? Try Samsung or LG. There has never been a Korean terminal in Japan’s mobile market, for very complicated cultural and regulatory reasons, but if that barrier is to be broken, Son’s the guy to do it. And based on how fast Japanese have taken to the recent post-deregulation flood of Korean cultural imports (Korean TV soap operas have become super popular), there’s no reason why Japanese consumers won’t take to well-designed, low-cost Korea-sourced terminals as well.
Of course, none of this may ever come to pass if Big Red gets back on track, and they can do that by refocusing on mobile terminals — the ultimate and only user interface that matters. Stop enforcing compatibility with overseas standards that don’t matter in Tokyo and let the Japanese makers do their best to innovate, differentiate and perfect their products for Japan — customers will love it and stop migrating to DoCoMo and KDDI.
In the meanwhile, it’s still quiet out there. Too quiet.
— Daniel Scuka