WW-48 -- Profiling Mobile Video in Japan

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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
=====================================================================

Issue No. 48
Monday, March 18, 2002
Orlando, FL USA
-->UPDATED MARCH 19, 10:30 EST
-->UPDATED APRIL 1, 10:35 JST

INDEX

+++ Our First-ever Wireless Watch Subscriber Survey
http://www.FreeOnlineSurveys.com/rendersurvey.asp?id=10174

+++ Viewpoint: Profiling Mobile Video in Japan

+++ Noteworthy News
--> DDI to Start CDMA2000 1x 3G Mobile Phone Service in April
--> NTT DoCoMo Ramping Payment Applications
--> Mobile Phone Shipments in Jan. Decline 28 Pct. YOY
--> KDDI Set to Unveil Write-offs, 3-yr Plans
--> NTT DoCoMo Develops Mobile Video-Conferencing Platform
--> Vodafone Caught in the Middle Over Comments
--> Japan's I-Mode to Launch in Europe with Soft Porn

+++ Events

+++ Sign of the Times: Another Great Phone...

+++ Our First-ever Wireless Watch Subscriber Survey
http://www.FreeOnlineSurveys.com/rendersurvey.asp?id=10174

+++ Subscriber Statistics, Corrections, Credits, Administrivia

===========================ADVERTISEMENT==============================
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+++ Our First-ever Wireless Watch Subscriber Survey

Access: http://www.FreeOnlineSurveys.com/rendersurvey.asp?id=10174

We're tired of guessing where you are, where you work, and what you
like. Here's your chance to tell us what you think in a short,
concise, in-depth survey that will take all of three minutes to
complete.

+++ Viewpoint: Profiling Mobile Video in Japan

There's been a lot happening in the area of video lately, so I thought
it was about time to put together a short profile of the video
services now available from KDDI, J-Phone, and DoCoMo. First, let's
look at the services that run on the 2G PHS networks.

For peripatetic audiophiles, there's NTT DoCoMo's M-Stage Audio
service that allows download and streaming of MP3-formatted audio
files at 64 Kbps, which is plenty for excellent quality. Subscribers
can choose from two Picwalk terminals -- a combo-PHS phone/playback
unit (the SH712m from Sharp) which stores sound files on DoCoMo's
ATRAC copy-protected MagicGate memory media (an OEM version of Sony's
Memory Stick), or a unique, wireless-enabled Walkman-type unit (the
P711m from Panasonic) that is not a phone and only uses the PHS
wireless interface to download music. This one stores files on an SD
card. Users pay 200 yen per month, plus 15 yen per minute airtime fees
and about 300 yen per song to the content providers.

For 2G video, you can choose between the video version of the M-Stage
Audio service, called, unsurprisingly, M-Stage Visual, and also
delivered via DoCoMo's PHS network, or KDDI/Au's EZmovie service,
running on the 64-Kbps cdmaOne network. The DoCoMo service offers
streaming and download-and-store of MPEG-4-encoded video clips using
the eggy, a dedicated unit made by Panasonic.

The eggy has 6 MB of memory, a built-in 350,000-pixel CCD camera, and
a TFT LCD display. Oddly, it doesn't have any wireless capability
built in -- you have to purchase a CompactFlash PHS data card
separately (the CF slot can also be used for a memory card). Still
images can be saved in JPEG format at two different resolutions and
forwarded by email (once you've, uh, bought the wireless modem that
is).

Subscribers' accounts are capped at JPY30,000 per month of
usage/content fees so that teens don't go and stream dad's paycheck
out the window... I've never seen any sales results on the eggy, but I
don't suppose Big D has sold a million of them and as best I can tell
it's merely a test bed.

The KDDI/Au cdmaOne EZmovie service is by far the most sophisticated
mobile video service available. Users can choose short streaming or
download-and-play, and clips are encoded in MPEG-4 format. It costs
700 yen per month plus packet fees and 200-300 yen per clip to the
content owner. EZmovie is available on the Toshiba C5001T handset.
Frame rate is quite decent -- around 10 fps -- and the clips run up to
about three minutes.

Next, there's the new J-Phone Movie Sha-mail service that runs at 28.8
Kbps on the 2G PDC system. There is no content to download -- it's a
record-and-forward service where users generate their own content
(there's a CMOS camera on the handset). It runs on the Sharp J-SH51 or
Kenwood J-K51 handsets, and videos are encoded using the NANCY codec
from Office Noa. It costs about 35 yen to send each clip by email,
and there's a player client available from Office Noa that runs on
Windows, so you can email the clips to your home PC. Movie Sha-mail's
frame rate is 2 fps and the clips are limited to five seconds.

Finally, there's FOMA, and the i-motion service that runs on DoCoMo's
brand-spanking new W-CDMA network. You need an NEC N2002 or a Mitsubishi
D2101v handset to access i-motion content sites, and the clips
playback on a 2.2-in 120x130 dot, 65,536-color TFT (on NEC; the
Fujitsu model has a 262,144-color display). Clips download via FOMA's
384-Kbps packet-switched mode (that's **up to** 384 Kbps...) in MPEG-4
format, and it costs 100-300 yen per month for content access plus
packet fees (which vary between .02 and .2 yen, depending on the
discount plan). You can also use the built-in cameras to record and
forward your own short clips by email.

Clips are limited to 15 seconds, and can be limited by the content
provider as to whether they can be saved locally (up to 50 clips could
be saved, depending on length), or as to the number of times they can
be played back or when. Content providers use the SPOTxde encoder
software from Montreal-based VoiceAge (see news item below on porn).

In 2000 (the latest figures I could find), 67.8 percent of Japan's 127
million population were between age 15 and 64; that's 86 million
people. Today, some 68 million (or 79 percent of that 2000 figure) own
a keitai! Multimedia is one way that carriers expect to get new
converts, steal subscribers away from competitors, and upgrade
existing ones to packet-intensive usage.

--Daniel Scuka
daniel@japaninc.com

PS. If you haven't already done so, **please** take a moment to
complete the Wireless Watch subscriber survey (link below). We've had
a great response since beginning the survey last week, but we need as
many WW readers as possible to participate. We can't reveal any
results yet (so as not to bias new participants), but we've received a
lot of passionate comments; we'll share the full results with you in a
couple of weeks.
http://www.FreeOnlineSurveys.com/rendersurvey.asp?id=10174

PPS. I'm filing this week's Wireless Watch from Orlando, where I'm
attending the CTIA 2002 show. I hope to put together a first-ever
Special Edition of WW on Tuesday or Wednesday to provide highlights of
the show.

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======================================================================

+++ Noteworthy News
(Long URLs may break across two lines so copy and paste to your
browser.)

--> DDI to Start CDMA2000 1x 3G Mobile Phone Service in April
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/cover/174243
Source: Nikkei AsiaBizTech, March 12

EXTRACT: KDDI Corp. and Okinawa Cellular Telephone Co. said March 11
that they have completed development of CDMA2000 1X, an upgraded
version of cdmaOne. They plan to launch 1X service in all major cities
throughout the country on April 1. The two carriers, which now provide
Au-branded mobile phone service, also unveiled two new series of
mobile phones compatible with the new service, the A1000 series (two
handsets) and the A3000 series (three handsets). The A3012CA is the Au
Group's first model that comes with a built-in camera (with 350,000
pixels). To use the network's 144-Kbps data communication service,
users are required to subscribe to the optional high-speed packet
service for 600 yen per month.

Data transmission rates differ depending on which handset is used. The
A3000 series, for instance, receives data at a maximum downstream
speed of 144 Kbps and pumps it out upstream at 64 Kbps for both the
EZweb and straight data communications. With the A1000 series, the
downstream speed is 144 Kbps and the upstream speed is 64 Kbps for the
data communication service, but without a subscription to the
high-speed packet service, both upstream and downstream speeds run at
14.4 Kbps, the same as on the current cdmaOne network.

COMMENTARY: This is interesting, and shows that cdma2000 1X has at
least a fighting chance to give FOMA a run for its money. If KDDI can
deploy a wireless modem card (as it already has on the cdmaOne 64-Kbps
system) that can log on in a wider service area than FOMA offers, and
is cheaper, we think many Japanese will avoid FOMA. DoCoMo's 3G system
is still expensive and, as of January, still had lots of blackout
areas in the network. Also, even if the cdma2000 1X throughput is only
in the 80-100-Kbps range, that's plenty fast for basic Web surfing,
mail and intranet access. The key to success will be, we guess,
marketing. Last week, NTT DoCoMo mailed out coupons to all current 64-
Kbps PHS data card subscribers (including your loyal scribe -- who got
two since he has two PHS cards) good for a 5,000 yen discount on the
purchase of a FOMA P2401 data card (by Panasonic).

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--> NTT DoCoMo Ramping Payment Applications
http://www.epaynews.com/index.cgi?survey=&ref=browse&f=view&id=1015933
582621726189&block=
Source: Cards Worldwide on ePayNews.com, March 12

EXTRACT: NTT DoCoMo may issue a password-activated credit application
on its 3G SIM cards, and is also contemplating a separate chip on its
handsets to carry Sony's contactless Edy e-purse. If the payment
application gained buy-in from sufficient credit card issuers, DoCoMo
subscribers could use their handsets to make authenticated credit card
purchases on the i-mode service. Likewise, if the Edy e-purse was
included on i-mode handsets, subscribers could fund real-world
purchases by holding the handset within 10 centimeters of a POS
terminal, or activate a stored e-ticket to avail of fast-track transit
services.

COMMENTARY: This is really significant. To date, DoCoMo hasn't
deployed any user applications on the FOMA SIM card (or UIM card),
which is made by Gemplus (France). Sony's Edy contactless e-purse may
become the industry standard in Japan, and Sony's card-issuing arm is
to offer the cards at 1,400 AM/PM convenience stores, resulting in
about 1.4 million cards in use by early fall (Sony has shipped 70,000
Vaio PCs with a contactless card reader included). So, if your cell
phone can become a wallet, there are all sorts of implications for
greatly enhanced e-commerce on the wireless webs here, and to
establish a profit model for 802.11(b) hotspot services. With
802.11(b), the spectrum is unlicensed (so no one can charge you for
the airtime), but they can charge you for authenticating and
completing e-com transactions at suitably enabled hotspots. The
bitWallet consortium, founded in 2000 to develop the Edy e-purse,
includes Sony, Sumitomo Mitsui Banking Corp., Sanwa Bank, Sakura Bank,
NTT DoCoMo, and KDDI.

Wireless Watch video interview with 3G FOMA smart card maker Gemplus:
"Japanese handsets have smart cards too. Wireless Watch talks to the
smart card maker about W-CDMA/GSM roaming, applications and why you
need smart cards on FOMA."

Issue #44 Monday Feb. 18, 2002
http://www.video-link.com/wireless/index.asp

===========================ANNOUNCEMENT===============================

WIRELESS WATCH STREAMS!

We now produce a weekly streaming video version of the Wireless Watch
newsletter, courtesy of the media gurus at Video-link.com.

Here's the last two weeks' program line-up:

Mar. 18 -- Dr. Masayuki Fujise from Yokosuka Research
Park's Communications Research Labs talks about the
Intelligent Transport System and a killer fiber-optic-
based road-to-vehicle wireless system that will stream
multi-megabyte files to your car in under 10 minutes.

Mar. 11 -- It's March, and on Japan's wireless webs,
it's video season. We show you exclusive clips of
KDDI/Au's new EZmovie system, take a look at the latest
videoconferencing and video-download services on J-Phone
and NTT DoCoMo. Wireless entrepreneur and ex-Packet Video
man-in-the-know David Collier joins us for Q&A on mobile
video in Japan.

We'll post the latest webcast in various streaming formats each Monday
evening, around 17:00 JST.

Tell your friends, burn your bandwidth, and log on to the inside story
with the Wireless Watch Video Newsletter.

http://www.video-link.com/wireless/index.asp
======================================================================

--> Mobile Phone Shipments in Jan. Decline 28 Pct. YOY
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/news/174464
Source: Nikkei AsiaBizTech, March 13

EXTRACT: The Japan Electrical Information Technology Association
(JEITA) announced on March 12 that Japan's total shipments of mobile
telephones in January, including car telephones and PHS receivers,
fell to 3,274,000 units, a drastic decrease of 28 percent compared
with the same month a year ago.

COMMENTARY: This marks the eighth consecutive month of decline in
shipment volume from the year previous. Note that PHS phone shipments
fell a steep 49.8 percent YOY, to 191,000 units. According to JEITA,
this was caused by makers limiting their shipments in view of the
decline in PHS subscribers. Ironically, the declining sales will
actually help the Japanese carriers, especially DoCoMo and KDDI, who
have to pay out less in handset subsidies when fewer are sold.
KDDI has already said it will write-down a significant chunk of cash
in March to account for excess handset inventory (see news item
below), and DoCoMo is eager to show a better profit margin, so a lower
cost of sales will help.

--> KDDI Set to Unveil Write-offs, 3-yr Plans
http://biz.yahoo.com/rf/020314/t41681_1.html
Source: Reuters on Yahoo, March 14

EXTRACT: Japan's No. 2 telecoms firm, KDDI Corp, is expected to unveil
plans on Friday to dispose of certain assets this year and set
three-year targets to trim spending and reduce debt. The Nihon Keizai
Shimbun reported on Wednesday that KDDI would book a special loss of
JPY200 billion to dispose of idle assets such as base stations and
write down the value of handset inventories, forcing the company to
miss a net profit target of 63 billion yen for the year ending on March
31. Investors and analysts have been keenly waiting for Friday's
announcement to see how aggressively KDDI would restructure itself.

COMMENTARY: In the Friday conference call, KDDI announced major
restructuring to include shutting down the PDC network (under the Au
brand, not the Tu-Ka brand), writing off substantial network and
facility plant and equipment, reducing fixed-line network switches by
half, streamlining IT systems and rationalizing call-center
operations. KDDI plans to aggressively market cdma2000 1X, and is
targeting 7 million users within 12 months of launch.
KDDI has already yielded No. 2 slot in the wireless Internet market to
J-Phone, and is likely to yield the No. 2 voice subscribers spot too
if they don't shake some of the bugs out. Great network, fast data
downloads, the only GPS-enabled handsets in Japan, but lots of trouble
with debt, marketing, focus and more.

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--> NTT DoCoMo Develops Mobile Video-Conferencing Platform
http://sg.biz.yahoo.com/020313/15/2kq5l.html
Source: Dow Jones on Yahoo, March 13

EXTRACT: NTT DoCoMo said Wednesday it has developed a 3G mobile
communication platform that enables several people to participate in a
wireless video conference, and aims to commercialize the platform in
future. DoCoMo said its mobile video-conferencing platform is the
world's first cellphone platform for video teleconferencing, and can
also work with some fixed-line video phones. The platform will work
with DoCoMo's P2101V and D2101V FOMA video phones, which are
compatible with the 3G-324M protocol, the IMT-2000 standard for
audio-video mobile communications. A maximum of 16 people are likely
to be able to participate simultaneously, said a DoCoMo spokesperson.

COMMENTARY: No word on who the system integrator is on this one, but
we heard a rumor in December that PacketVideo had suggested just such
a project to Big D, which was mulling it over. This makes sense. To
boost FOMA usage, one of the best thing they can do is integrate
3G-optimized services (videoconferencing, video mail, et cetera) with
landline infrastructure.

===========================ANNOUNCEMENT===============================

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** Gadget Watch (GW); Thursdays -- Looks at the latest gadgets being
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--> Vodafone Caught in the Middle Over Comments
http://www.thetimes.co.uk/article/0,,748-234713,00.html
Source: The Times, March 13

EXTRACT: Shares in Vodafone Group were caught in a two-way pull as
cautious comments from Japan's largest mobile operator were offset by
reassurances from the UK-based group that it will start rolling out 3G
services later this year. Early weakness in Vodafone could be traced
to NTT DoCoMo, which held a press conference in Tokyo to highlight its
commitment to developing mobile data services for the corporate
market. Analysts were dismayed to hear it hinting that further revenue
growth in the Japanese market is likely to be challenging.
Masao Nakamura, a DoCoMo vice president, flagged a saturation point of
80 million subscribers -- against 73 million today -- which would mean
lower mobile phone penetration in Japan than is presently the case in
Europe.
At the same time investors were reassured to learn that Vodafone is on
track to start providing 3G services to metropolitan areas in Germany
from this autumn.

COMMENTARY: One of the other problems facing Vodafone is the shortage
of dual mode 3G/2G handsets. Vodafone CEO Erskine said he did not
expect there to be enough handsets that were compatible with both 3G
and existing GSM networks available this year. He said the restricted
availability of dual mode handsets meant mmO2 would not launch 3G
services until the middle of next year. In Japan, we heard J-Phone
state several times last year that its trump card for beating Big D's
FOMA network would be to offer dual mode handsets when J-Phone
opens its own W-CDMA system this summer. But a couple weeks ago, it
told analysts that the 3G system would now start with single-mode
handsets only.
Hmmmm. It's going to be tough -- real tough -- to gain any 3G market
share from DoCoMo unless there are some definite differentiating
factors (like national coverage via 2G on a 3G-compatible handset) on
which to base marketing.

--> Japan's I-Mode to Launch in Europe with Soft Porn
http://www.iwon.com/home/technology/tech_article/0,2109,218667|technol
ogy|03-14-2002::16:25|reuters,00.html
Source: Reuters on iwon.com, March 14

EXTRACT: When i-mode is launched on German mobile phones on Saturday
it will offer something even the Japanese can't get on their official
mobile Internet service: soft porn. Takeshi Natsuno, the man charged
with strategy for the world's first and most successful mobile
Internet service, can't resist titillating guests with the first
i-mode service outside Japan, as he downloads a picture from one of 60
Web sites to be offered by telecoms operator E-Plus. "I haven't seen
any content like this in official i-mode services in Japan," he said,
feigning shock as he flashed a handset screen displaying a woman's
bare breasts.

COMMENTARY: No, Natsuno-san hasn't seen any bare breasts on official
i-mode sites in Japan. But plenty i-moders have seen breasts -- on the
**unofficial** i-mode sites -- now numbering some 50,000. In fact
porn, adult content, "deai" matchmaking and dating services (guys pay,
gals don't), and plenty of other mature content is available on
Japan's i-mode (Why do you think there are 30 million users?). And the
fact that i-mode phones can access cHTML-formatted content on the
Internet at large is a bonus for Big D's comptroller: i-moders
get to surf the lascivious stuff, DoCoMo can keep its hands clean
("Hey -- those aren't our officially approved sites..."), and 0.3 yen
accrues to DoCoMo for every packet that zips over the network --
regardless of origin or destination.
We spoke last week to VoiceAge, provider of the encoding software that
content providers use to encode 15-second video clips for the new FOMA
i-motion service. They've had about 2,000 downloads of the encoder
software so far (at $50 a pop), and one overseas manager surmised that
a significant percentage of the downloads have gone to non-official
sites (there are only 37 content channels on the official ones). Wait
for it...
Back in Europe, Thomas Chambers, CFO of mobile phone OS giant Symbian,
told Reuters, "These are the killer applications," as he flicked
through the bare boobies.

+++ Events
No events this week.

+++ Sign of the Times: Another Great Phone...
http://www.symbian.com/news/2002/soneric-p800-2.html

Cool handset! You'll notice that it is "i-mode" compatible.
What in heck does it mean to be "i-mode" compatible? That it
has a browser that reads cHTML? A color display? Reads emoji?
We've said it before, and we'll say it again: i-mode is a
business model, not a technology!

...still though... cool handset!

+++ Our First-ever Wireless Watch Subscriber Survey
http://www.FreeOnlineSurveys.com/rendersurvey.asp?id=10174

======================================================================
+++ Subscriber Statistics, Corrections, Credits, Administrivia

WIRELESS WATCH EMAIL NEWSLETTER SUBSCRIBERS:
2,098 as of March 18, 2002

WIRELESS WATCH WEB:
January 1 - March 15: 10,002 page views (135 PV/day)

WIRELESS WATCH VIDEO:
1-15 March: 1,458 streams (97.2/day)

STAFF
Wireless Watch newsletter and Wireless Watch Video Newsletter
researched and hosted by: Daniel Scuka (daniel@japaninc.com)
Edited by: J@pan Inc editors (editors@japaninc.com)

Wireless Watch Video Newsletter produced and edited by:
Lawrence Cosh-Ishii (video@japaninc.com)in cooperation with
Video-Link.com

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