I-mode plays away from home: can i-mode be successful in Europe? - Industry & Market Update - NTT DoCoMo's i-mode wireless service

NTT DoCoMo's i-mode service in Japan now has over 30 million subscribers. It is a mobile data model that has yet to be bettered anywhere else in the world (although its cheap e-mail service has eaten into NTT DoCoMo's more lucrative voice offerings).

The reason why i-mode has worked in Japan is largely attributed to its ability to attract content providers through revenue-sharing deals (where the mobile operator only takes a small percentage of the money). And consumers are drawn to the services, which are cheap and charged to the customers' phone bill by the mobile operator on behalf of the content provider.

i-mode's favourable outcome is additionally thanks to the fact that it is marketed with an emphasis on services and the overall user experience -- with no reference to the actual technology.

Considering the business model's success in Japan, it is not surprising that mobile operators are now taking i-mode into Europe (supported over their GPRS networks).

KPN Mobile became the first European mobile operator to do so in Germany (with its partner NTT DoCoMo) through its E-Plus subsidiary in March 2002. It has now rolled out i-mode in the two other countries where it has European wireless interests (the Netherlands and Belgium) and has set a target of reaching approximately one million i-mode users across its three European markets by 2003.

The operator sold 27,000 handsets during the first two months after its i-mode launch. So far, it has only been able to offer the NEC N2li handset to its customers. But the new Toshiba TS2li i-mode handset will be available for E-Plus subscribers in Germany by autumn 2002.

E-Plus has signed up with 85 content partners and is following the NH DoCoMo business model of giving a large proportion of the revenue to the content supplier. E-Plus keeps a monthly basic subscription fee of [euro]3 and takes only 14 per cent of the revenues itself for bill management and credit risk -- along with additional revenues from the traffic. The services from the content providers are priced at up to [euro]2 per month.

The same revenue approach is being used in the Netherlands and Belgium, and other European mobile operators launching i-mode will roughly follow the same revenue distribution path.

KPN Mobile launched i-mode in the Netherlands in April 2002 and it managed to sell more than 7,000 handsets in the first month following its rollout. It also opened i-mode to Belgium in October 2002. The NEC N2li handset is being used in both markets and the Toshiba TS21i will be available to KPN Mobile customers by the end of this year.

There are presently two other operators who intend to launch i-mode in Europe. The first is Bouygues Telecom, which concluded an i-mode licence and technology transfer agreement with NTT DoCoMo in April 2002, and will launch in France by the end of this year.

The second--Spain's Telefonica--has also reached an agreement with NTT DoCoMo to rollout i-mode by 1Q 2003 and the service will be introduced under the operator's mobile internet brand name--e-mocion.

Market differences

If mobile operators are to successfully transfer i-mode from Japan to Europe for the long term, it will be despite very real and significant market variations. According to Ovum, a telecoms consultancy, which published a report in June 2002 titled i-mode: can it survive outside Japan?, they are as follows:

Firstly, NTT DoCoMo in Japan has an extremely powerful position in the value chain, which has meant that it has been able to dictate network equipment and handset specifications to manufacturers, and impose its will on market players. In Europe, the links between operators and handset manufacturers aren't as close and operators don't control the rights to wireless internet standards in the same way that NTT DoCoMo owns the i-mode standard -- cHTML.

Secondly, when i-mode was introduced in Japan, internet penetration was low (22 per cent) and the new service was the only method of accessing the internet for users without PCs.

In contrast, wireless internet offerings in Europe have to compete with a large installed base of PCs which already offer a rich internet experience. This means that the wireless internet is only an add-on for most people, rather than a primary source of access in Europe. Because of this, European operators have to convince consumers that the wireless internet 'extension' is something that customers really need when they are mobile.

Thirdly, i-mode handsets carrying Asian brand names are not as popular as other makes in Europe -- especially amongst i-mode's primary target groups (young and fashion-conscious mobile customers). But according to Ovum, popular game consoles, televisions and cameras from the same Asian manufacturers may eventually help to reach a larger number of users.

Handset replacement cycles are also much longer in Europe than in Japan. Finally, running an i-mode service over GPRS -- while combining cHTML and WAP in one browser -- may prove to be a major technical challenge to the Asian device manufacturers (only Toshiba and NEC are trying to do this at the moment).

Industry confidence

Despite the very real market differences that exist between the European and Japanese markets, mobile operators and vendors alike -- who have vested European i-mode interests -- are (not surprisingly) convinced that the new service will succeed. Nevertheless, they do acknowledge that i-mode won't have such a big impact as it has in Japan.

"We definitely see i-mode [potentially] as a very prosperous business solution," says Luis Ezcurra, general manager for service development for Telefonica. "Overall, we believe that our ARPU growth will eventually be extremely high as a result of it."

Carla van Lomwell, spokeswoman for KPN Mobile, believes that i-mode will be successful in the Netherlands, Belgium and Germany, and within other countries where operators are interested in transporting the service from Japan.

Meanwhile, Chris Bignell, PR advertising manager for Toshiba, states that he considers European i-mode to have done well already. "Today, there are over 100,000 i-mode subscribers in Europe, and there's definitely space in this European market for it to continue and expand as an effective means for operators to deliver and for subscribers to access mobile content," he says.

But a number of issues still have to be resolved before i-mode can succeed in Europe. These include handsets being GPRS, WAP and i-mode-enabled with coloured screens, a wide selection of handsets for customers to choose from and the involvement of western manufacturers.

i-mode handsets and content also have to be significantly cheaper than existing services, and the introduction of a prepay version -- along with an increase in NTT DoCoMo alliances and effective i-mode marketing -- need to be satisfactorily addressed.

Put off by WAP?

It has been claimed by Ovum that a number of past and existing WAP subscribers won't be attracted to i-mode as they will have little time for investing in a new phone and service when the first one failed to deliver on what was originally promised.

But this view isn't shared by all in the industry: "I believe that people who hove used WAP will still be attracted to i-mode," says Toshiba's Bignell, "as long as the industry highlights the content and services, shows how colourful and rich the handsets are in comparison to WAP, and the value for money they'll receive."

A view that Alain Cuq, managing director of ViaMichelin, supports. He believes that good communication will eventually highlight the i-mode content benefits to the subscriber and the new types of services (such as colour screens and polyphonic sounds) will provide strong incentives to change terminals.

ViaMichelin is a wholly owned subsidiary of the Michelin Group. Its i-mode content offering enables a customer to display and navigate coloured Michelin country and street maps via their mobile phones, with five levels of 'zoom' that allows users to consult maps in as much detail as required.

Meanwhile, Telefonica's Ezcurra states that the operator (and its customers) are very happy' with how WAP has progressed in Spain and considers it to be a very successful business model -- although he acknowledges that it did arrive later than expected. Telefonica now has five million WAP subscribers and about 1.5 million regular users of its e-mocion portal where 30 million sites are accessed per month.

He also says that the e-mocion portal will soon add i-mode content to its platform. Customers will then have to decide whether they want to upgrade their subscription and also buy a new phone to access i-mode premium content.

"If subscribers are to be attracted to i-mode content, we'll have to create an inspirational mood so a WAP user will want to upgrade," argues Ezcurra. "This can be achieved by advertising the additional content they can obtain and then customers who haven't been convinced will soon see from their peers what new services they could enjoy." He adds that the operator will still continue to provide WAP content to customers who don't want to upgrade to the new service.

Is SMS too established?

Some of the content delivered via i-mode is already available through premium SMS services. This may mean that a user won't see any real need to buy an i-mode handset.

Because of this, Ovum believes that providers may have more incentive to develop their content solutions for operators using an SMS platform as they will be able to exploit economies of scale, which won't make i-mode an attractive proposition to large content companies in Europe.

Nevertheless, ViaMichelin's Cuq states that the mobile internet is different from SMS applications and that i-mode -- along with other similar wireless internet platforms -- allows content providers to provide services that aren't usable through SMS capabilities. "And these are compelling services that will eventually lead to customers ditching their old handsets," he odds.

At the same time, Ezcurra argues that -- although 30 per cent of Telefonica's SMS revenue is from premium content -- providers will still be happy to offer services for SMS, WAP and i-mode.

"After all, our customers will look for brands and content which they already know and trust," he says. "Then if the brand and content that they would like aren't available via their SMS or WAP handsets, they will have a choice to upgrade their subscription and handset to i-mode."

Content provider revenue disparities

It is interesting to note that 20 per cent of Japanese providers account for 80 per cent of the total i-mode content revenue generated each year. The vast majority of providers are making little money. This could put off potential i-mode content companies in Europe. Certainly, the providers who want to make a profitable move into i-mode content will have to make sure that they have compelling services.

But Toshiba's Bignell reveals that not every content provider will enter into I-mode to make a direct profit and may just wish to raise their profile. "For example, Amazon.com in the fixed internet world is there to make money through sales or advertising. But other companies will be prepared to make a loss on their web sites in order to raise their brand awareness and provide an additional service to their customers or attract new ones," he says.

Telefonica's Ezcurra backs this claim and also says that he has spoken to a number of i-mode content providers who have made a lot of cash already from their endeavors in the Japanese market and are now very keen to enter into Europe. "They are excited that we've decided to go ahead with i-mode as it opens their business opportunities even further," he says.

Be that as it may, an emerging factor that could severely jeopardise the long-term prosperity of European i-mode is the handset and service launches of multimedia messaging services (MMS) over GPRS (and java phones). Ovum says that a lot of mobile operators are instead pinning their hopes on MMS and java as their route to mobile data success and this could mean that i-mode is destined to be nothing more than a niche mobile data service.

(msecker@horizonhouse.co.uk)

RELATED ARTICLE: What is European i-mode?

i-mode is a packet-based service for mobile phones first offered by Japan's NTT DoCoMo in 1999. In terms of subscriber numbers, the mobile data service has been phenomenally successful -- 30 million subscribers to date -- and enables users to do telephone banking, make airline reservations, conduct stock transactions, send and receive e-mail, and have access to the internet via colour screens.

i-mode's performance in Japan has led to operators (such as KPN Mobile, Telefonica and Bouygues Telecom) launching their own European i-mode services during 2002. To do this, they had to sign licence and technology transfer agreements with NTT DoCoMo.

As in Japan, the core of the European i-mode business model centres on attracting content providers through revenue-sharing deals. The operator only takes a small percentage of the money, and the services are also cheap and charged to the customers' phone bill by the operator on behalf of the content provider.

KPN Mobile's i-mode subscription includes access to the service at [euro]3 per month plus a GPRS data bundle. The 200Kb basic data bundle costs [euro]2, and bundles of 1Mb and 5Mb are available.

The price of content provided by KPN Mobile's partners' ranges from nothing to [euro]2 per month. Some content companies provide their services free of charge for an initial period before reverting to a mixture of premium and no-charge services. At launch, approximately 50 per cent of the services were free (along with the e-mail offering).

Germany's E-Plus believes that subscribers will pay the extra [euro]2 for premium content to, for instance, receive football scores in real-time, rather than using the free round-up at the end of the day, as included in the basic subscription.

KPN Mobile has more than 50 national and international content providers. These companies offer more than 65 'certified' sites, which have been checked for quality, ease-of-use and customer service, i-mode customers also have access to numerous 'open' sites, which anyone can make and access.

But what does European i-mode offer mobile operators, content companies and customers that's any better than WAP over GSM or GPRS?

i-mode uses a simplified version of HTML -- cHTML -- instead of WAP's wireless mark-up language (WML). This means that content companies find it easier to develop and provide i-mode content than they do for WAP.

i-mode is also delivered over bigger coloured screens with better graphics, which means that it is considered to be a much more exciting user experience than WAP over GSM or GPRS.

COPYRIGHT 2002 Horizon House Publications, Inc.
COPYRIGHT 2002 Gale Group