WW-52 -- Japan Telematics Snapshot

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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. 52
Tuesday, April 16, 2002
Tokyo

INDEX

+++ Viewpoint: Japan Telematics Snapshot

+++ Noteworthy News
---> Coca-Cola, DoCoMo, Itochu To Start "Cmode" Consumer Service
---> Survey Says 36 Pct. of Users Don't Use FOMA Features
---> Japan's Mobile Phone Subscriber Base Up 12% YOY in March
---> Broadcasters, DoCoMo to Explore Digital TV for Mobile Phones

+++ Sign of the Times
---> Emoji Mail on J-Phone

+++ Subscriber Statistics, Corrections, Credits, Administrivia

===============================================================================
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The Wireless Watch Video Newsletter will continue to be available at:
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3G Wireless Special

J@pan Inc magazine invites you to promote your company in our June 2002 issue,
which will feature a special advertising section focusing on wireless technology
and 3G.

This year, we're teaming up with Wireless Japan -- the only exhibition in Japan
exclusively focused on wireless technology. The event had more than 26,000
participants last year and would be an excellent opportunity for your company to
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===============================================================================

+++ Viewpoint: Japan Telematics Snapshot
(Lengthy today -- maybe better to print and read offline)

The telematics industry seems to be picking up here this year. There have been
numerous press releases this spring, and all the makers will have cars out this
year that offer maker-branded onboard systems that finally appear to be useful.

Toyota's Monet system provides navigation and traffic info, email, and Web
access; Toyota will launch an improved version under the G-Book brand around
mid-year. Together with Daihatsu, Honda, Mazda, Mitsubishi, Nissan, Subaru, and
Suzuki, Toyota is also a partner in the Helpnet roadside service notification
system (communication is provided via cellular phone).

Honda has its in-car, subscription-based Inter-Navi Net portal, Mazda runs a
Telematics Center providing navigation and traffic info, Nissan offers
CompassLink (also a subscription service), and Daimler-Benz has been offering
the ITGS (Intelligent Traffic Guidance System) since 1997.

The ITGS is pretty cool! It provides route guidance and navigation, en-route
traffic information, breakdown and emergency alerts, dynamic speed adaptation,
and lane control; it was implemented in Tokyo by debis Telematic Services,
Daimler Benz Research, Mercedes Benz AG, debis Systemhaus, and the Tokyo Police,
and uses a citywide network of road sensors installed at traffic lights and
intersections.

In addition to the car makers, Sony offers its MobileLink GPS-based navigation
and traffic info system, and the government has been installing VICS (Vehicle
Information and Communication System) infrastructure since around 1995.

VICS provides traffic and routing info via FM multiplex broadcast
(approximately 50 KB/5 minutes per station), radio beacons (approximately 8 KB
per beacon), and infrared beacons (approx. 10KB per beacon). By the end of
this year, over 5 million VICS-compatible receivers will have been sold; last
December, VICS-compatible units represented 47 percent of the total installed
base of 8,606,028 car navigation systems in Japan.

But while there's been lots of noise and smoke about how the new 3G networks
will factor into the telematics excitement, the reality is that even the 384
Kbps provided (in theory, anyway) by NTT DoCoMo's FOMA network may be
insufficient to boost telematics.

I spoke yesterday with Jiro Fujiwara, president and CEO of Omron Cellport
Telematics Inc., a JV set up to develop Cellport USA's cellphone cradle and
in-car gateway system for the Japan market. He emphasizes the fact that car and
fleet telematics systems to date have been too expensive and have suffered from
proprietary design and single-purpose receivers.

According to Fujiwara, a typical after-market car terminal costs 150,000 yen and
a fleet installation costs 200,000 yen per truck; even a simple receiver for the
Electronic Toll Collection system costs 30,000 yen, so less than 1 percent of
vehicles on the road have one. "To date, the systems available are closed,
vertical, and proprietary," he says.

Omron Cellport's approach is to integrate the (already ubiquitous) keitai into
Cellport's cradle device, which can then serve as the gateway for the CAN (Car
Area Network) and provide GPS data, maps, location data, weather information,
and restaurants to an onboard display.

This would seem to be a perfect venue for a shiny, new FOMA handset, no? FOMA
"doesn't offer enough speed" and is yet to be proven, says Fujiwara, pointing
instead to KDDI's cdmaOne and cdma2000 1X systems (which offer data speeds in
the 64-144 Kbps range). "That's great -- it's much faster," he says with a grin,
"compared to NTT, it's [also] cheaper."

This is the second time this month I've heard an industry insider say that FOMA
is a non-starter and that they are instead looking at KDDI's CDMA systems (see
link below).

Ironically, it seems that despite slow speeds and limited features, the level of
functionality offered by systems like VICS is adequate for many basic telematics
applications (if only the terminals could be cheaper). Even some of the diagrams
we saw at YRP show PHS (now some ten years old) being implemented into next-gen
telematics systems. Also, systems like Omron Cellport's that use existing
cellular systems eliminate the need for 3G infrastructure investment. DoCoMo
must be having a fit!

That's why Omron Cellport is so keen on its CAN and cradle/gateway device -- it
uses existing cell phones that provide data at a cost that people will accept
and that is adequate for basic telematics info. If telematics suppliers can
justify their solutions on a strict ROI basis, fleet operators -- especially the
SMEs -- will buy.

If telematics can reduce insurance, leasing, maintenance, fuel, or other costs,
they'll bite. No one will buy complex, systems-integrated telematics systems if
the justification is merely "But your drivers can send email back to head
office" or "You'll get real time updates tread wear straight into your Excel
spreadsheets."

--Daniel Scuka
daniel@japaninc.com

Wireless Watch Video, Apr. 8 edition
CEO of Arriya Solutions explains why he's focusing on KDDI and eschewing FOMA
for 3G enterprise application development:
http://www.video-link.com/wireless/index.asp

Detailed partial listing of telematics systems now in use (by company):
http://www.iijnet.or.jp/vertis/its-products/e-its-products/e-c-c7.html

"Telematics a-Go-Go: How the computerization of automobiles in Japan will
forever change the way we related to our cars"
http://www.japaninc.com/article.php?articleID=9

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

+++ Noteworthy News

Coca-Cola, DoCoMo, Itochu To Start "Cmode" Consumer Service
http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20020415/bs_dowj...
coca_cola__docomo__itochu_to_start__cmode__consumer_service
Source: Dow Jones on Yahoo, April 15

EXTRACT: Coca-Cola (Japan), NTT DoCoMo, and Itochu said Monday they will launch
this month throughout Japan a new consumer service that combines Coca-Cola
vending machines and DoCoMo's i-mode mobile phone Internet service. This comes
after a trial of the service, called "Cmode", was carried out by the three
companies in the Shibuya area of Tokyo from last September. From April 15, using
special vending machines, "Club Cmode" members will be able to buy admission
tickets to amusement facilities and local area information such as maps and pay
for downloads of i-mode content, including screen savers, ring-tone melodies and
game applications, the companies said.

COMENTARY: This report also says that the Coca-Cola Group plans to install 2,000
c-mode-compatible vending machines across Japan by the end of the year. Looks
like all involved figure that c-mode can earn some cash!

A few days ago, I heard from Andrew Scott, leader in the m-Services Group at
Telstra Research Labsin Australia, who said:

"Having tried to use the C-mode machine in Shibuya 109, and failing,
whilst a couple of Japanese teenage girls also tried for ten minutes
and failed also, I figure that it has major usability problems. I
don't think any of us even managed to get the QR Code to appear
on the screen. Lucky they also take coins!"

Usability aside, Andrew also asked if c-mode doesn't directly compete with Edy,
DoCoMo's big e-money focus (see WW No. 51). There is no integration of Edy and
c-mode that I know of. Yes, perhaps c-mode does compete with Edy in one narrow
area of m-commerce -- vending machines -- but not in all the other areas. Edy
can be extended to any transaction by any merchant at any level of retail;
c-mode only works in the vending machine niche.

Survey Says 36 Pct. of Users Don't Use FOMA Features
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/cover/180191
Source: Nikkei AsiaBizTech, April 15

EXTRACT: About half of FOMA users said, "the service area is very limited," and
15.4 percent mentioned "high-speed communication" and "new functions such as
motion pictures" as being convenient. But at the same time 23.1 percent of users
thought, "there is no significant difference in usability compared to regular
handsets." As for the most popular new functions, 28.2 percent of users choose
"multi-access," 25.6 percent choose "motion picture," and 15.4 percent choose
"TV phone." However, 35.9 percent of users answered that they do not use any of
the new functions.

In the free answer part of the survey, almost all users mentioned the
inconvenience of the short standby time. Most said it does not last even for a
day. Many said phone conversations get cut off or the phone becomes out of reach
even within the service area more often than with existing PDC model phones.
Most users still use existing i-mode phones in addition to FOMA handsets.
(***This article is well worth reading in its entirety.***)

COMMENTARY: More bad news for Big D? I'm not certain. I've seen other market
surveys where FOMA users rated the video conferencing very highly (but stated
there are as yet few others with whom to video conference) and expressed
interest in watching i-motion videos (but stated the selection was thin, it was
hard to find videos on particular topics, and the cost was a little high). And
as for the call drops and other service issues, well, it's still a brand new
network. I would argue, "Give DoCoMo some time" and let the bugs get worked out
before pronouncing final judgement. And as more people sign up for FOMA, more
content providers will hoist aboard. I bet that within 12 months, we'll see a
money-earning mobile dating service based on the video conference feature.

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

WIRELESS WATCH STREAMS!

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

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

Apr. 15 -- MPEG 4 has the wireless video industry all wrapped up --
or maybe not. J-Phone is using the NANCY codec for Movie Sha Mail, and
this week we talk to the company that developed NANCY and hear their
CEO's plans to beat MPEG at its own game.

Apr. 8 -- The phone is still not an "IT sale" in Japan, but we talk to
one mobile application developer that is trying to effect change -- and
having some success. Hear why KDDI 3G is a better bet than DoCoMo's FOMA
for enterprise apps.

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

Japan's Mobile Phone Subscriber Base Up 12% YOY in March
http://sg.biz.yahoo.com/020409/15/2np9o.html
Source: Dow Jones on Yahoo, April 9

EXTRACT: Japan's mobile phone subscriber base grew 12 percent year-on-year to
74.819 million in March, the Telecommunications Carriers Association said in a
recent report, largely owing to strong seasonal demand. New subscriptions
following heavy promotion by wireless carriers to attract students beginning the
new school year and employees starting new jobs on April 1 mainly contributed to
the rise, analysts said. "Overall, it was a strong month for wireless, although
the trend of slowing subscriber growth continues," said Mark Berman, telecom
analyst at Credit Suisse First Boston. Berman said the pace of on-year growth in
Japan's mobile phone market is slowing, given that the penetration rate of
mobile phone subscribers is close to saturation at roughly 60 percent of the
nation's total population in March.

COMMENTARY: In March, DoCoMo added 650,000 subscribers, for a total of 42.705
million (57.08 percent market share), KDDI added 175,200 subscribers (CDMA, PDC,
and PHS), for a total of 19.05 million (25.56 percent market share), and
J-Phone/Vodafone added 313,800 subscribers, for a total of 12.232 million (16.35
percent market share).

On the wireless Internet scene, subscribers jumped 50.2 percent year-on-year to
51.925 million in March. DoCoMo gained 906,000 new i-moders for a total of
32.156 million, J-Phone added 383,300 to its J-sky user base for a total of
10.130 million, and KDDI won 299,900 new WAP 2.0 users, for a total of 9.639
million.

Also in March, J-Phone became the No. 2 brand after DoCoMo, beating out KDDI's
Au (CDMA) brand, on the strength of Sha Mail and Movie Sha Mail sales.

Speaking of J-Phone, we heard from one Deep Source that they will "absolutely"
launch 3G in June, but "don't expect much in the way of handsets." The company
appears to have reordered its spending priorities, with 3G coming first followed
by 2.5G -- i.e. the J-Sky system -- particularly on the applications and
processing capability side. New Sha Mail handsets will handle 16KB photos (up
from 6KB at launch), but there was no word on when. Finally, J-Phone appears not
entirely happy with Applix, one of the current HTML/HDML browser suppliers, and
they seem to be looking for an XML browser for the future. Note to J-Phone: Why
not give Access a call? We bet they'd love to sign up a new carrier customer
that isn't DoCoMo. ;-)

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Broadcasters, DoCoMo to Explore Digital TV for Mobile Phones
http://www.nikkeibp.asiabiztech.com/wcs/leaf?CID=onair/asabt/moren/179490
Source: Nikkei AsiaBizTech, April 10

EXTRACT: Nippon Television Network, Tokyo Broadcasting System, Fuji Television
and other major commercial broadcasters have teamed up with NTT DoCoMo on using
terrestrial digital broadcasting, which is due to begin as early as 2003, to
transmit TV programming to mobile phones. The broadcasters have worked
individually with NTT DoCoMo on trial digital broadcasts to mobile phones. Going
forward, the companies will form an organization to jointly research technology,
explore business models and conduct service trials, with an eye toward achieving
commercialization as early as the beginning of 2004.

COMMENTARY: Problems include the perception that people will not want to watch
TV on such a tiny screen, and how do the cellular carriers make money on the
service. I've seen video playing on EZweb, FOMA, and J-Sky, and it appears to me
that while the screen is tiny, it's not that tiny -- and in fact the LCD
displays on FOMA handsets are much bigger than on my 2G Panasonic i-mode phone.
So long as the clips are short, interesting, and imaginative, people will watch
them -- they just have to be **made for** cell phones. One possible solution to
the carrier revenue problem is letting them earn ad revenue from interactive
commercials that are tightly tied to mobile marketing campaigns -- Tsutaya has
already proven that this works extremely well.

+++ Sign of the Times

Emoji Mail on J-Phone

Next week (April 22), the Wireless Watch Video Newsmagazine features an
interview with Roy Tseng, a long time Japan keitai user (as well as ex-Webmaster
at J@pan Inc), who mentions that character-based email on J-Sky has become
hugely popular. The characters, known locally as emoji, are built into the
handsets and can be selected from an extensive menu (there are hundreds), making
input a lot faster than using letters, katakana, or kanji.

A typical message, like, "Meet me for a beer at 6:00 PM" could consist, for
example, of the emoji for a frosty beer mug (E047) and a clock showing 6:00 PM
(E029). Access the complete list of J-Sky emoji at the link below.

Roy says that over the years, he's used handsets from DoCoMo (P201, P205, P206,
N502i, N503i), from KDDI (Sony cdmaOne, Hitachi), and from J-Phone (SH-51 and
the new Movie Sha Mail model), as well as two FOMA phones during last year's
public trial. Watch the full interview -- with lots of demos -- next week!

J-Sky emoji:
http://www.dp.j-phone.com/emoji/e-moji.htm

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

WIRELESS WATCH EMAIL NEWSLETTER SUBSCRIBERS
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Apr 1-14, 2002: 2,458 streams (20,100 total mins); 2.5 views per unique; 20.0 mins. avg. visit

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Wireless Watch newsletter and Wireless Watch Video Newsletter
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