What's So Great About i-mode?

i-mode is hardly a clever new technology, so why the sudden international interest in teaming up with DoCoMo?
by Daniel Scuka

Why is i-mode -- NTT DoCoMo's run-away success mobile Net access service -- generating such intense industry buzz? And why is DoCoMo being courted with such reverent ardor by heavyweight Net content providers, platform owners, and mobile operators in North America, Asia, and Europe? In the past 12 months, AOL, Yahoo, Palm Computing KK, US telcos BellSouth and SBC Communications, Hong Kong's Hutchison, the UK's Hutchison 3G UK Holdings (proud owner of a spanking new 3G license), and Holland's KPN Mobile have all shared tie-up or capital investment headlines with DoCoMo, and invariably, i-mode has been cited as the Japanese partner's prime asset. Why? Is i-mode some stellar new example of engineering wizardry that gives DoCoMo a proprietary and unique technological lock on the mobile Internet?

Certainly, there is a lot to admire about i-mode's success. Eleven-million-plus subscribers, 15,000-plus official and non-official content partners, massive revenues from data packet transmissions, and a healthy boost to voice traffic as all those mobile surfers call in to make ticket or video rental reservations (after confirming availability via the small screen) all help validate i-mode as a pretty impressive achievement. NTT DoCoMo is, by the way, now the world's largest wireless ISP.

But there is effectively nothing that DoCoMo is doing that can't be replicated by any other wireless network operator, anywhere. There is no proprietary technology. There are no patents. The i-mode data rate is actually a humble 9.6Kbps -- far more sluggish than i-mode's next-largest competitor, EZWeb, an industry-standard Wireless Application Protocol (WAP)-based service that sends data and graphics along the airwaves at an impressive 64Kbps. Further, i-mode Web sites use a slightly modified version of Net-standard HTML (compact HTML, or cHTML), which is open, non-proprietary, and rather boring, whereas WAP services are expected to eventually embrace next-gen XML technology.

In essence, i-mode is a brand name and a business model, and it simply makes use of existing and not terribly sophisticated technologies to offer customers a value-added service transmitted on top of the existing cellular PDC network. Granted, the fact that the PDC cellular infrastructure could accommodate packet transmission was one technical advantage at the start, but domestic competitors have since introduced the same.

DoCoMo's advantages have little to do with technology or engineering, so why has i-mode taken off?

"The success of imode is how NTT DoCoMo set up the whole business model with content providers," says Tomoyuki Uda, business development manager at embedded systems specialist US Software. "Sakura Bank and Daiwa Shoken, for example, are providing huge content and services to support i-mode. Technology-wise i-mode is nothing new, but it's a unique business model -- the way DoCoMo set up an entire system in Japan by working with so many different industries like entertainment and transportation."

Most important, perhaps, was that i-mode was first to market, launching in February 1999, slightly before J-Phone launched J-Sky and two months before DDI/IDO's EZ Net services. It had an existing, well-known brand -- "NTT" -- that already had a huge customer base of cellular voice subscribers. That customer base, it should be noted, was rather pliant, and embraced i-mode precisely as the DoCoMo marketing department told them to (in fact, rather faster). Further, NTT has always been able to man-handle its suppliers to its advantage. The giant telco has tremendous industry sway so that handset manufacturers jump when NTT says "Hop." DoCoMo -- not the handset makers -- sets the specifications for all i-mode handsets sold. Can you imagine France Telecom dictating to Sweden's Ericsson what kind of WAP phones to make? NTT has zero incentive to assist any competitor.

More importantly, with i-mode, DoCoMo solved the pay-for-content problem, which was not a great technological feat -- the ecommerce charges simply show up on the user's phone bill. But that's a huge deal -- it basically does away with the micropayment problem that's been hounding dot-coms for years. Customers sign up to access any desired number of official content partner sites (banks, city and travel information, video rental, Disney, etc.) and DoCoMo slices 9 percent off the top of the monthly fees that premium site operators charge, which are billed on the monthly phone statement. Fees range from JPY100-300, so if a surfer signs up for four or five sites, she'll pay about the same as the price of four Starbucks' lattes (many sites are free).

Basically, i-mode has taken off because:

1. It's attractive to content providers because it manages their paid services for them (and DoCoMo isn't being too greedy about doing so).
2. The phones have a cool little "i" button to give the user direct access to the content sites -- there's no hint of the Internet nor any of its complications.
3. The content really is good.
4. i-mode chose to use cHTML while WAP's Wireless Markup Language was still in its infancy, which made it really easy for content providers and users to create sites.
5. In this land of great public transportation and long lines, i-mode gave its subscribers something cool to do while waiting or commuting.

But was it technical genius? No.

"There is nothing really magic about it at all, no proprietary technology, nothing that any other network operator couldn't replicate," says Thomas O'Dowd, founder of mobile Internet venture nooper.com. "Other operators don't really seem to be trying though. Ask anyone creating a mobile Net service here in Japan--they're going to i-mode first," he adds.

Instead, i-mode is an extraordinarily clever business, marketing, and service offering targeted at two super-dense population centers (Tokyo and Osaka) in a country that suffered (and suffers) from the world's highest-cost wired Internet access.

Mari Matsunaga, who was one of the senior staff at NTT DoCoMo largely responsible for creating i-mode, has just written a book (in Japanese) called The i-mode Incident. In it, she explains how a consulting company worked the initial service model (and why it doesn't get much credit for doing so), the debate over the two fee options (tenant vs. pay-per-packet), why compact HTML won over WAP's WML, how the minimum screen size (8 kanji characters -- since increased) and maximum handset weight (100 grams) were decided, how and why banks were targeted for initial inclusion as content partners, and why only seven journalists attended the first news conference but 500-plus attended the second. It's a must-read for anyone watching this industry (see note below).

But the question remains: why are the international partners lining up to write i-mode onto their dance card? Why not just adopt the i-mode model, and leave DoCoMo out of it?

It's safe to suppose that the mobile operators, for their part, are looking to DoCoMo to show them how to do it -- the business that is, not the technology. Palm Computing is talking to DoCoMo for the mundane reason that it wants to sell wireless Palm VII-style handhelds to the gadget-crazy Japanese and DoCoMo is by far and away the domestic heavyweight; there's no need to even talk to the other wireless network operators until after an i-mode deal is sewn up.

In the final analysis, both AOL and Yahoo are probably looking to partner with DoCoMo more for the bragging rights than for access to the 11 million i-mode customers, most of whom aren't surfing but talking. In the battle for eyeballs back home, the bigger the numbers of the international partners, the happier the corporate hype-meisters.

Note: This information was first reported on Japon.net on August 19, 2000.