WW-14 -- A Tale of Two Cities

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J@pan Inc Magazine Presents:
W I R E L E S S W A T C H
Commentary on the week's wireless news from Japan
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Issue No. 14
Monday, July 9, 2001
Colleyville, Texas

++ Viewpoint

A Tale of Two Cities

A short visit to the US is all that's required to remember how
important data is to the future of cellular carriers.

As I write this, I'm on vacation in Colleyville, Texas -- one of the
multitude of more or less indistinguishable suburbs that extend
between the cities of Dallas and Fort Worth. The Dallas/Ft. Worth
region may not be one of the most important cellular markets here,
but it's certainly typical. The local papers refer to the area as
the "Metroplex" -- made all the more significant by the presence of
the DFW airport, a major regional hub and one of the busiest
airports in the US.

Let's look at the DFW consumer market, and consider a typical family
of four -- two working parents and a couple of preschool kids
(actually, my brother-in-law's family, but that's not important,
although they are the swellest of folks). They're paying $30.00 per
month for each of their Sprint PCS cellphones, which gives them 300
minutes of calling anywhere in the US -- including long distance.

An insert in yesterday's Fort Worth Star-Telegram showed Sprint PCS
offering 2,500 minutes per month for $39.99, broken down into 350
minutes anytime and 2,150 minutes off-peak -- again including long
distance anywhere Stateside. The family's phones are Sonys:
dualmode, about 400g, with longlife batteries that offer three to
four days of standby time (email is available, but not subscribed to
in this case, since it's "useless," they claim). The phones listed
for $189.00 retail when they came out last year, but my
bargain-savvy brother-in-law picked them up for $20 via a corporate
discount plan for refurbished models.

The B-in-L also reports that he and his wife almost never exceed
their 300 monthly minutes, which cover a breathlessly busy life of
commuting, coordinating the pickup of the kids from preschool, and a
hyperbusy social life.

In the same newspaper insert, competitor AT&T Wireless (exclusive
licensee of NTT DoCoMo's i-mode business model for the US) was
similarly offering 3,400 minutes for $39.99 per month; 400 anytime,
2,000 off-peak, and 1,000 to/from any other AT&T customer -- a not
insignificant offer considering AT&T is the No. 3 carrier (with 14
million subscribers) after Verizon and Cingular. (Neither Sprint nor
AT&T mentioned anything about mail or data in their ads, although
both carriers offer rudimentary services.)

Compare this situation to that of my wife and me, who use NTT DoCoMo
digital cellphones back in Japan. Although there are many different
calling plans, we pay JPY3900 (about $33.00) monthly, which includes
JPY1,000 of calling time. This time is based on JPY10 per three
minutes for calls within the same area code, but this rate goes up
for inter-prefectural or national long distance. Conscious of our
monthly limit, we only occasionally exceed our plan's calling time
(and then only by a bit). Our phones are Panasonic clamshell models
that cost JPY15,000 last November (about $127.00), weigh about 200g,
have color screens, and run about a week on standby.

<---------------------------ANNOUNCEMENT----------------------------

We'll be at Mobile Telecoms Japan in San Francisco!

Daniel Scuka, the regular writer of this newsletter, will be
participating in the Mobile Telecoms Japan conference in San
Francisco on July 11-13. The Japanese operators, Sun, Access,
Openwave, Google, AOL, Bandai, Funmail, and others will be making
presentations, so it should be interesting. The conference is
being chaired by Tim Clark, a long-time Japan hand who's extremely
knowledgeable about the mobile business in Japan.

Mobile Telecoms Japan
July 11 - 13, 2001
http://www.srinstitute.com/part_iter_site_page.cfm?iteration_id=129

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Clearly, neither Sprint PCS nor NTT DoCoMo has a hope in hell of
persuading either wireless family of boosting voice usage. We both
get plenty of chat time within our chosen calling plans for similar
costs on comparable phones, and for the corporate bean counters
tracking ARPU (average revenue per user), neither family offers any
hope of major new revenue anytime soon.

Both DoCoMo and Sprint face vicious competition, but Sprint in
particular faces the loss of customers to more cost-effective
calling plans, such as AT&T's. (DoCoMo, on the other hand, penalizes
subscribers for any early cancellation, so my wife and I are
unlikely to shift to KDDI or J-Phone anytime before the end of our
contract).

But DoCoMo has got one thing that neither Sprint -- nor any other US
carrier -- has, and that's data. More specifically, DoCoMo has
i-mode, and at JPY300 per month plus JPY0.3 per byte for data or
email (unarguably dirt cheap), the Japanese carrier can count on an
average of JPY2,000 per month of **additional** revenue per
subscriber (imagine Sprint convincing each subscriber to cough up
$20 per month extra!). Granted, my wife and I don't contribute our
share of that revenue to Big D's coffers, but then we're not typical
subscribers. We don't use the chat, mail, game, fortune-telling,
shopping, melody download, or information sites nearly as much as
the average user does.

Granted, there are significant differences between the two markets.
I heard today that more and more people here in the States are using
cable modems for high-speed access at home and their celly for all
voice (and only voice) calling, eschewing a wireline phone
altogether. But with the bottom-line revenue benefits of the
wireless Internet so starkly apparent, it's a wonder why US carriers
aren't pushing data with every last marketing muscle. Maybe DoCoMo,
KDDI, and J-Phone know something about customer service that the US
carriers don't?

-- Daniel Scuka

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STAFF
Written by Daniel Scuka (daniel@japaninc.com)

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