For CIOs & Senior Wireless Executives 

Japan versus USA - Differences in Provider Strategies 
John Papageorge, President of  Media Overdrive (www.mediaoverdrive.com)

In America today, the wireless internet is just a lovely pie in the sky dream. Wireless is considered by many analysts to be an unrealistic industry--a failed experiment--that has garnered as much skepticism as the much maligned interactive TV market. 

Wireless is so failed, that WAP, the wireless application protocol that was supposed to be the American and European wireless solution, inspired the phrase "WAP is crap."

In Japan, however, wireless is thriving. It is real. It is cool and the kids love it. Japan's wireless industry is a big business that may be coming to America quicker than you can say, "Hello, Kitty."

What a difference the other side of the world can make.

NTT DoCoMo, the company behind i-mode (the wireless internet service), currently has over 27 million Japanese subscribers and may be the force that offers a Japanese solution to an American problem.

DoCoMo surely must know something. Last year the company made $39 billion dollars in revenue. In addition, DoCoMo is adding new subscribers at the rate of 43,000 a day. 

NTT DoCoMo has a relationship with AT&T to bring the lessons learned from Japan to the United States. The wireless industry's insiders agree that DoCoMo's success in the Japanese market will be an important roadmap for the United States. Understanding the technological challenges of transmitting data and creating secure, stable servers has been well documented. However, the greatest challenge facing DoCoMo will be, in a large part, cultural more than technological hurdles.

"Certainly cultural differences exist between Japan and North American markets," says Jeremy Pemble, AT&T spokesperson. "In Japan, most users take public transportation and have less wide-spread access/experience to landline internet services. In the US, most users drive (over 1/2 of all calls are placed in vehicles) and have deep penetration of landline internets. 

Nokia's Keith Nowak agrees with Pemple that Japan, with its population that spends many hours traveling and few fixed internet connections, is an ideal market for wireless to take hold. But according to Nowak, content is king. And it will be content that drives consumer demand. 

"We have learned from the Japanese experience that content is what makes the mobile internet compelling," says Nowak. DoCoMo succeeded in carefully, but aggressively, cultivating content developers to create new services and allowing customers to clearly identify the applications that are meaningful to them individually. "This has resulted in several strong applications to emerge," says Nowak. "Many of these applications are focused on entertainment, rather than the pure business applications that were once thought to be the only 'killer app.'"

The heads of DoCoMo, which is two-thirds owned by Nippon Telegraph & Telephone, understand that content drives technology. Just as MTV created mass adoption for the cable industry with music lovers calling up cable carriers to demand their MTV, DoCoMo's executives believe that compelling entertainment content will create consumer demand for wireless handsets.

DoCoMo went so far as to create a content holding company called Japan Digital Content, which finds compelling content and reserves the rights to use the content to configure to promote DoCoMo's technology initiatives.

Recently, Japan Digital Content came to the United States to discuss promoting a unique San Francisco band El Greco, featuring two Japanese singers and three members of the San Francisco Opera. A Japanese Pop-meets-David Bowie hybrid. The perfect group to cross promote DoCoMo's technology in both the United States and Japan. 

Japan Digital Content finds content--in the case of this San Francisco band-- promotes the group to Japanese labels, makes sure that the group is well represented and successful, which includes thorough merchandizing into T-shirts, posters, etc. (Remember this is the same culture that brought us the everything-brand "Hello Kitty.")

It's not the first time a technology company has invested in content to promote its products and services. In 1996, Intel for instance created a partnership with C/Net to form Mediadome, a site dedicated to showcasing entertainment properties that could best be experienced with high-speed Pentium processors. The idea was that this site would create consumer demand for faster and faster Intel chips.

But Tony Jones, General Partner of AquaSkye Ventures, believes that the Japanese are much better than the Americans at using content to market technology. And the more provocative the content...the better.
"The one opportunity that could actually expedite content creation and
mass adoption is through porting the sex industry," says Jones. "Much as the VCR was developed and as product that drove high volume acquisition rates."

Jones has invested in Media Overdrive, the voice messaging technology company, which is creating entertainment strategies for broadcast companies ranging from Comedy Central to the SCIFI Channel. Media Overdrive is focused on transmitting voice messages to both home phones and wireless cellular phones. 

Media Overdrive has been working with MTV to launch "MTV Phone Home," a program in which viewers would be driven to MTV.com, where they would opt-in with a phone number to receive voice messages from their favorite star or celebrity. Media Overdrive has also been in discussions with Japan Digital Content to promote DoCoMo's 3G wireless technology in the Untied States using similar voice-based fan club initiatives.

"Media Overdrive is operating today and is currently creating content and programming for companies like MTV and E*TRADE," says Jones. "When these new high-speed mobile handsets are here and proficient, we will already be in place with the relationships for the content and special marketing opportunities."

Developers Get in Free
Pemble believes DoCoMo's success depends on four foundations (open application environment, robust ecosystem, attractive marketing, affordable pricing model) that can be ported to the United States.

• Open Application Environment: Pemble believes that an open service to content developers and providers will broaden the user experience and translate to quicker mass adoption.

• Robust Ecosystem: i-mode is an ecosystem, i.e., a business model that includes technology, marketing, business development, distribution, etc. Pemble believes that carriers and manufacturers must develop a similar ecosystem for success in the United States. "DoCoMo bases their browser on an html-based mark-up language," says Pemble. "But most of the wireless/landline industry is migrating to XML-based technology."

• Attractive Marketing Model: Pemble believes that DoCoMo smartly positioned i-mode as a service that offered consumers "information on the go." "DoCoMo did not position it as the 'internet,' says Pemble. "They offered it as something different and useful--mobile access to information/entertainment." 

• Affordable Pricing model: In addition, Pemble believes DoCoMo priced the service correctly and developed billing arrangements for content providers offering them a revenue share for popular content.

But Tony Jones, General Partner of AquaSkye Ventures, believes that there exists a dramatic cultural difference in accepted pricing structures between the United States and Japan. While the Japanese consumers are willing to pay to play for content to be delivered, Jones does not believe that American consumers will accept that pricing model.

"The cultural difference in pricing of the services will have to be addressed before there is mass adoption in the United States," says Jones. "Americans want simple pricing at the same per minute costs. NTT's pricing structure has different price points for different levels of service, such as video conferencing and downloading of rich media."

Pricing with Handsets:
Another obstacle facing the wireless industry at large is the price point for purchasing wireless-enabled handsets. Some wireless industry skeptics wonder if these new products will be unaffordable for consumers. 

Pemble believes carriers and service providers will subsidize handset prices allowing for mass adoption. Pemble also believes that carriers and service providers will also be influential in subsidizing a variety of devices (PDAs, laptops, consumer electronic goods) and middleware to support wireless capabilities.

Nowak agrees with Pemble that there is too much revenue at stake for service providers not to be interested in subsidizing the manufacturer cost for handsets. "The recurring revenue streams that customers pay as part of their monthly bill will offfset the subsidization paid at the outset of the contract," say Nowak. "With mobile internet services, wireless carriers will find new sources of revenue, increasing the average revenue per user. In short, Nowak believes that the opportunity for long-term revenue growth means subsidization will prevail.

DoCoMos subscriber base was huge (25 million--nearly 1/5 of Japan's population), many critics and analysts point out that there was a 30% return rate on phones. "The cells drop all the services, but most annoyingly
the phones drop standard telephone calls," points out Jones. "It's too early to tell on latest releases." 

Nowak disagrees with Jones, insisting that Nokia's i-mode phones had no higher rate or return than any other Nokia products around the world. "We can't speak for other manufacturers," he adds. 

Nowak believes that one big challenge for Nokia and other service providers will be to make sure that they have the tools and people in place so users are able to use their wireless internet products when they leave the store. "Many returns of electronic products--not just mobile phones--turn out to be that the user simply didn't have to knowledge to properly use the product," says Nowak. He believes that manufacturers who focus on making ease of use a priority will succeed, especially as handsets begin featuring more and more functionality.

Pemble believes that the early challenges with wireless handsets were based on manufacturer related issues that have been recently resolved with DoCoMo's new 3G service. "This is extremely complex technology that is packaged and delivered as simple, useful and reliable services," says Pemble. 

Pemble believes that the US can learn from DoCoMo's successes and failures as a roadmap to insure the sucess of wireless in the United States. "It's a small window into part of our future," he says. "Smart carriers, like AT&T, are paying close attention in order to maximize the eventual experience for the US market.

Explicit Challenges to Wireless Developers:

Pemple says that the bottom line for wireless and wireless developers is to create compelling and profitable applications and solutions. In addition, developers will need to navigate an uncertain landscape to find a common denominator that supports device and component capabilities (color screens, multiple browsers, frequencies and standards).

I-mode, the trade name for the wireless internet marketed by NTT DoCoMo, is based on cHTML (compact HTML). WAP, the wireless internet used most everywhere else, is based on WML. Both i-mode and WAP are evolving towards using XHTML. Nowak and Pemble both see this as the basis for the internet's future around the world.

Adding to the challenge facing developers is the challenges of developing robust, flexible middlewear (hard ware and software) that supports a range of data solutions ranging from mobile access to firewall protected information.

Nowak believes that manufacturers must cultivate relationships with content developers, providing them with resources and tools. Ahhh, then there's the carriers who -- as voice price drops -- will need value added services that customers want and are willing to pay for. 

Nowak also believes that as broadband services are more deeply integrated into people's lives that the ability to remotely access important content from their fixed PC will gain importance. "In this model, the fixed internet model and the mobile internet are not competing with each other, instead, they are complementary technologies," believes Nowak. 

Final Conclusion:
The wild card in the success of the wireless market in the United States is content. 

"Having compelling applications and content will drive the mobile internet," believes Nowak. "Nowak claims that Nokia's developer forum forum.nokia.com has a been a powerful resource for developers and boasts over 500,000 developers working on various applications for Nokia supported initiatives.

The wireless industry may need a rallying cry, athough it might not be "I want my MTV" but "I want my Shit Panic," a popular i-mode game in which players try to catch feces as it falls and flush it down the toilet. Americans brace yourself for a Japanese wireless invasion.

About the Author 
John Papageorge has worked in the role of Executive Producer and  VP of Business/Product Development for such companies as CNET, Macromedia, NBCI, Sun Microsystems and MSNBC. John launched the groundbreaking CNET/Intel project Mediadome in 1996, a site featuring a collection of the newest internet technology to showcase the entertainment properties of such prestigious studios as Paramount, Universal and Sony. In 1998, John launched Macromedia's successful Shockwave.com, one of the most popular entertainment and game sites on the internet. 

Currently, John is the CEO of the voice messaging technology company Media Overdrive (http://www.mediaoverdrive.com). Media Overdrive recently completed deployment of a successful voice messaging initiative for client E*TRADE. He is also the Vice President for Standard Alliance, the San Francisco-based iTV application and production company.