WW-35 -- Japan is the World's Best Place to Get Connected

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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 business of wireless in Japan
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Issue No. 35
Monday, December 3, 2001
Tokyo

INDEX

+++ Viewpoint
Japan is the World's Best Place to Get Connected

+++ Noteworthy News
--> 20% of Telephone Calls go Mobile
--> Incoming President to Streamline Japan Telecom
--> NTT DoCoMo's Red-faced Recall
--> DoCoMo to Begin Convenient Cellphone Fixing Service

+++ Events (Advertisements)
Wireless Technology Summit 2001
December 5-7, 2001 Doral Golf Resort, Miami, FL

Fiberoptics Forum
December 13-14, 2001, Tokyo, Japan

+++ Sign of the Times
Spam Hits J-Phone

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+++ Viewpoint: Japan is the World's Best Place to Get Connected

It appears that Japan has become the world's best place to get
connected to the Net. A combination of aggressive competition in
fixed-line access via DSL and flat-rate pricing for wireless access
via PHS data card now makes getting online in Japan cheaper, faster,
and easier to do from outside the home than in any other country.

Last week, the Nomura Research Institute reported on a survey which
found, for the first time, that the majority of Japanese in the
15-to-59-year-old demographic are now using the Internet (the survey
has been conducted every six months since March 1997, and targets
2,000 men and women).

According to the survey results, 56.6 percent of Japanese access the
Net via PC, mobile phone, or PHS, a steep increase from 47.3 percent
in the last survey and 29.8 percent one year ago (heaviest users were
males in their 20s, of whom 83 percent use the Net). In contrast, 58
percent of all Americans had Internet access in their homes in July
2001, compared to 52 percent last year according to Cyber Atlas.

Clearly, the rise of flat-rate, low-cost (typically, JPY2,500-5,500
per month) cable, DSL, and fiber connectivity provided by the likes
of NTT East and West and by eAccess, Tokyo Metallic, Usen, Yahoo, and
other NTT competitors has been the main driving force behind the
access boom here.

Of course, this highly fragmented and immature industry still has a
lot of shaking out to do. Last Tuesday, Softbank president Masayoshi
Son (Softbank is majority owner of the Yahoo BB DSL service)
threatened to sue NTT on charges that the former monopoly telco was
deliberately delaying installation of DSL connections at local loop
switches. Looks like the competition is getting even more aggressive
(see link below for more on the broadband battles in Japan).

Outside the home, the Japanese have an ever-growing array of 32- and
64-Kbps PHS wireless data services from which to choose. DDI Pocket
and several others are experiencing tremendous success with flat-rate
pricing. DDI Pocket's 32-Kbps Air-Edge data service starts at
JPY5,800 per month for all you can use (the cards themselves cost
about twenty-five bucks), and offers an innovative time-out
protection feature in which the network maintains the connection even
if your taxi or train zips into a tunnel.

PHS operators are pleasantly surprised with the results. Giles
Richter, director for international alliances at the Mobile Content
Forum, relates that DDI Pocket, for one, thought that the only
subscribers for Air-Edge would be heavy users and techno-heads -- folks
that already use DSL or other broadband access at home and who wished
to maintain their hyperconnectivity when away from the hard-wired fat
pipe.

In fact, the company is finding that many subscribers have **no**
other means of access and use their PHS data card as their sole means
of connection both in and outside the home (Air Edge launched in
June). NTT DoCoMo has taken notice, and Big D announced its own
flat-rate PHS data plan last week.

In fact, with DDI Pocket and other PHS carriers planning to raise the
download speed to 128 Kbps by the middle of next year, it appears
that Japan may be the only place in the world where you'll be able to
rely on licensed-spectrum wireless carriers for all your personal
communication needs.

By using an i-mode-, EZweb-, or J-Sky-capable cellphone, you can
receive reasonably cheap voice and wireless Internet services,
obviating the need for a home phone line (and a growing number of
Japanese are making just this choice -- see first news item below).
And, next year, with a data card, you'll get even cheaper broadband
(OK, only 128 Kbps -- but that's plenty fast for most needs) wherever
you and your laptop or PDA go.

Now that's a pretty sweet deal, and we don't think that any
muddle-minded bureaucrat will be able to mess it up for the consumer.
But watch out for Bluetooth and 802.11(b).

-- Daniel Scuka

"Broadband Wars: Is ADSL Softbank's Waterloo?"
http://www.japaninc.com/mag/sub/2001/12/dec01_broadband.html
J@pan Inc magazine, December 2001 issue
(Password-accessible to JI subscribers only for 45 days)

Mobile Contents Forum
http://mobilecontentforum.org

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+++ Noteworthy News
(Long URLs may break across two lines.)

--> 20% of Telephone Calls go Mobile
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20011129b4.htm
Source: Japan Times, November 29

EXTRACT: Calls between mobile phones accounted for 20.5 percent of
all telephone usage in Japan in fiscal 2000, up from 15 percent a
year earlier, the telecommunications ministry said Wednesday. The
figure was based on a study of the roughly JPY144.7 billion worth of
calls made in the fiscal year to April with fixed-line, public, and
mobile phones.

COMMENTARY: The survey shows that NTT group companies had more than
80 percent of the calls between fixed-line phones, while 63 percent
of mobile phone calls were made via NTT DoCoMo.

In Japan, it still costs approximately US$650.00 to purchase a phone
line for home use (although the ministry has mandated that this fee
be eliminated in the next two years). Why wouldn't anyone opt for a
cellphone for 100 percent of voice calling? And a PHS card for data?
(See Viewpoint above.)

--> Incoming President to Streamline Japan Telecom
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=
FT3ZTPCZKUC&live=true&tagid=ZZZPCGI2B0C&subheading=telecoms
Source: FT.com, November 28

EXTRACT: Japan Telecom will streamline its operations to concentrate
on business areas where it has competitiveness, its incoming
president, Bill Morrow, indicated on Wednesday. Vodafone, which has
increased its stake in JT to 66.7 percent, is under greater pressure
to improve JT's performance as the Japanese group will now be
consolidated in the UK-based company's results. An improvement in the
financial performance of JT is also critical to a potential sale of
the fixed-line business, which many analysts expect within a year.

Morrow's remarks, which come in the wake of deteriorating performance
by its Japanese subsidiary, reflect Vodafone's determination to
return Japan Telecom to profitability as quickly as possible. JT
warned earlier this month that after stripping out the results of
J-Phone, its mobile phone subsidiary, it would make a pretax loss of
JPY16 billion in the year to March on revenues of JPY455 billion.

COMMENTARY: J-Phone officials also say that they still plan to launch 3G
in Tokyo in June 2002, using dual-mode handsets that will be compatible
with the existing PDC network. This will allow subscribers to access
voice services on the existing nationwide (more or less) 2G network
(both modes will ring through to the same number). CSFB Japan analyst
Mark Berman says that dual-mode phones "will be critical" for J-Phone
in light of the fact that the company is entering the 3G market later
than DoCoMo.

Berman also points out in a recent report that customers may not
realize when they're using 2G instead of 3G -- giving Vodafone
(J-Phone) an advantage in services versus cost with respect to
DoCoMo. On the one hand, DoCoMo 3G customers have to wait for the
entire network to be built before they can enjoy nationwide
coverage.

Conversely, J-Phone dual-mode users will enjoy at least the
perception of 3G nationwide coverage much sooner (and at a much lower
cost to J-Phone). Berman adds, "The key then is how [J-Phone] goes
about making its subscribers believe they are getting the same
service as DoCoMo with only one-quarter the cost."

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------------------------------------------------------------------->

--> NTT DoCoMo's Red-faced Recall
http://cbs.marketwatch.com/news/story.asp?guid=%7B176957D7%
2D1042%2D4400%2DB309%2D450D883A5108%7D&siteid=mktw
Source: CBS.MarketWatch.com, November 26

EXTRACT: Having wiped the egg off its face for a five-month delay in
the commercial rollout of the world's first W-CDMA 3G mobile phone
service, which finally launched in October, NTT DoCoMo faces fresh
embarrassment thanks to a software glitch. The Japanese carrier said
it would suspend sales immediately of FOMA N2002 phones built by NEC.
DoCoMo discovered that about 1,500 of the phones are affected by a
glitch that freezes the phones when accessing a "small number of Web
sites" and erases certain data.

COMMENTARY: The N2002 model loses stored i-mode mail and data when
downloading certain applications, as well as various settings and
call record details (voice communications are not affected; nor are
other functions such as the phone's telephone directory or data
downloaded by the i-motion service). The company will accept the
model for free-of-charge replacement at any NTT DoCoMo shop or
affiliated retail shop.

This is the second recall of NEC 3G handsets (in Japan). The first
involved 1,400 devices on June 15, and was caused by problems with
the battery and with call hand-over when moving between cells.
Panasonic 3G phones have also been recalled (on May 30, just after
the 3G trial start).

--> DoCoMo to Begin Convenient Cell Phone Fixing Service
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/
moren/157175
Source: Nikkei AsiaBizTech, November 28

EXTRACT: From next spring, DoCoMo will begin a service offering
downloadable software fixes to iron out cellular phone bugs,
initially to users of the company's new Digital Mova 504-series
phones. Customers experiencing problems with phones will be able to
download the software at DoCoMo affiliated stores, a process expected
to take just a few minutes without affecting other phone functions.
The operator will also build a detailed database of software
problems, which will be opened to manufacturers to help them develop
trouble-free products.

COMMENTARY: While 2001 is the Year of the Snake in the Eastern
zodiac, it's been the Year of the Recall for DoCoMo (and, to be fair,
for other operators as well). In 2001, software bugs have forced
DoCoMo to recall a total of 730,000 handsets according to the Nikkei
(but one Tokyo analyst said the figure is closer to 825,000); DoCoMo
has suspended sales of its phones six times (see news item on NEC
above). The Nikkei also reported that Matsushita Communication
Industrial alone has spent JPY7 billion to cover handset recalls;
Sony took a US$95 million charge in July for its handset remediation
efforts.

This is just one more argument, we think, as to why cellphone
purchasing (for corporations) has to become an "IT purchase" -- with
the handsets being held to the same standards of reliability and
interoperability as any other component of a company's IT system.

Consider how PDAs are moving from the individual hobbyist and
early-adopter market into the mainstream of corporate IT department
buying as they become more integrated into companies' overall IT
efforts. Now, if phones were considered in the same light, there
would be huge pressure on the carriers and makers to get the software
and onboard SI correct the first time. Hmmm.... perhaps that's why
carriers **don't** want IT departments buying the phones...

+++ Events (Advertisements)

Wireless Technology Summit 2001
December 5-7, 2001 Doral Golf Resort, Miami, FL

Join us for elite, unparalleled access to key industry information,
case studies, and analysis. The Wireless Technology Summit brings
you face to face with the leading industry decision makers for
unprecedented opportunities for deal making, discussion, and
networking.

For more details, access:
http://www.WirelessTechnologySummit.com/japaninc.htm

Fiberoptics Forum
December 13-14, 2001, Tokyo, Japan

Nikkei Electronics and US-based PennWell will co-host Fiberoptics
Forum 2001 in Tokyo, focusing on technology and market trends related
to opto-electronics.

As we usher in the broadband era, the significance of optical
communication technology is increasing. High-speed board design
utilizing the application of optical switching will become more
common in the next few years. Under such circumstances, the
Fiberoptics Forum will invite prominent engineers from the US to give
analysis of such hot themes as "Optical Communication Components/LSI
Exceed 40 Gbits/sec" and "Chip Industry Enters the Contest in the
Development of Optical Switching." In addition, analysts from the US
will forecast the future of market trends from the perspective of the
so-called "optical food chain" -- optical components/optical
devices/optical networking services.

Simultaneous translation (Japanese <--> English) will be provided.

For further information, access:
http://dk.nikkeibp.co.jp/dk/seminar/011213e.html

+++ Sign of the Times

Spam Hits J-Phone

The message below was broadcast to all Asahi Net subscribers last
week (Asahi Net is a medium-size ISP based in Tokyo):

=========================================
Mail sent to J-Phone mail addresses
=========================================
Since the beginning of October we have received many inquiries from
members who are reporting delays in sending mail to addresses
associated with the J-Phone service. J-Phone have announced that
their systems have been overloaded with spam mail and this burden has
resulted in delays in mail delivery. They are currently working on
strengthening their systems to cope with the overload. Until J-Phone
have completed their work, mail sent by Asahi Net members to J-Phone
addresses may continue to be delayed.
=========================================

There was a lot of discussion on the Keitai-L mailing list about this
problem. One posting confirmed that there's no delay for messages
from J-Phone handsets to J-Phone handsets; the difficulty seems to
occur when J-Phone handsets receive mail from elsewhere on the
Internet. We've seen similar reports of problems occurring as of late
with SMS systems on GSM networks (with "store and forward" services
turning into "store and forget").

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CORRECTION: Last week's Wireless Watch (No. 34) quoted an inaccurate
JPY-USD exchange rate in the 7th paragraph of the Viewpoint. The
corrected sentence reads:

On 2.5G i-mode, for example, it costs about JPY2,457
to send/receive one megabyte (1,048,576 bytes) of data;
that's about US$19.81.

SUBSCRIBERS: 1,563 as of December 3, 2001, an increase of 47 in the
past seven days.

WEB TRAFFIC: The WW portion of the JI site has served 82,165 page
views since inception in March 2001.

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

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