WW-38 -- Russia, Japan, and the Wireless Internet

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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. 38
Tuesday, January 8, 2002
Saratov, Russia

INDEX

+++ Viewpoint: Russia, Japan, and the Wireless Internet

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+++ Viewpoint: Russia, Japan, and the Wireless Internet

Wireless Watch is taking a somewhat extended year-end vacation, and, after
a stint on the beach in Thailand where it was 31 degrees Celsius, your
correspondent now finds himself cooling his heels (and several other
portions of anatomy) in Saratov, a Russian city of about 1.1 million
located some 1,000 kilometers southeast of Moscow.

It's cold today -- minus 18 -- but clear and sunny, so the post-Thailand
shock isn't as bad as it was upon arrival, when it was dark, frigid and
minus 20-plus. It's not just for pleasure that Russians drink all the
vodka -- that, plus mink coats, fur hats, and stout boots, is how this
nation stays warm for six months out of the year.

While the journey to Russia focuses primarily on a sister-in-law's wedding
to a local, it's also a great opportunity to do a little keitai-related
research away from the Land of the Rising Sun. While Wireless Watch's
mandate is to comment on the business of wireless in **Japan**, it's
healthy to take a look around the rest of the world every so often and
remember that there are massively large cellphone markets elsewhere too.

Few here seem to have heard of DoCoMo or i-mode, and the wireless Internet
seems a little irrelevant given the tremendous challenge of rebuilding
Russia's infrastructure, services, and economy after 73 years of communist
neglect and a further decade of economic instability. According to the
2001 CIA World Factbook:

Russia remains heavily dependent on exports of commodities,
particularly oil, natural gas, metals and timber, which
account for over 80 percent of exports. Russia's agricultural
sector remains beset by uncertainty over land ownership
rights, which has discouraged needed investment and
restructuring. Russia's industrial base is increasingly
dilapidated and must be replaced or modernized if the country
is to achieve sustainable economic growth. Other problems
include widespread corruption, capital flight and brain drain.

But it appears, perhaps ironically, that cellular communications may be a
success story in Russia's emergence from the past. Saratov is one of the
more competitive markets, and five operators here offer cheap services on
a variety of networks, including GSM 800, CDMA, AMPS, TDMA and the old
(analog) Nordic Telephone System standard (developed by Ericsson and
others some 30 years ago).

A typical monthly bill for basic fees and usage is USD$50 -- still high,
but much cheaper than even just a year ago and affordable for a growing
slice of the population. The CDMA handsets are from Samsung, while Nokia
and Siemens supply many of the GSM models. Why aren't the Japanese makers
in here??

We suspect there are some lessons from the evolution of Japan's cellular
industry for Russia. Like Japan in the early 90s, the market here was
tightly regulated and handsets and services were very expensive. With
deregulation and competition, prices have plummeted, as they did in Japan.
At first seen only as (expensive) business tools, cellphones here have
quickly become popular consumer accessories, and it's no big deal to use a
celly in daily life. With the launch last year of CDMA services, some
Saratovians eschew a landline phone altogether and rely just on their
keitai.

And in the future? We see no reason why wireless Internet services like
Japan's can't be effective and useful (cost of infrastructure
notwithstanding). Dial-up via landline is still slow, and people here are
just as interested in the Internet as the Japanese were/are.

Of course, content has to be local, and if any operator in Saratov does
get around to launching a wireless portal, we bet it won't take long for
an enterprising mind to offer a road route planning service that plots a
course to avoid the worst of the (chronic) potholes or an outdoor danger
alert service that plots actual temperature versus wind speed to calculate
windchill factors and warn when it's best to simply stay indoors and
consume some of that vodka!

-- Daniel Scuka

(Wireless Watch will return in the usual format next week.)

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

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