International brotherhood is the
theme for the World Cup this month, co-hosted by one-time rival nations
Korea and Japan. Mobile operators are also getting into the act. Through
a tie-up by Tokyo-based KDDI and SK Telecom of Seoul, soccer fans
traveling to games in both countries can use CDMA 2000 phones to take
snapshots and mail them home to friends.
roaming service is the latest example of the increasing integration of
mobile services in these two countries as well as China (where
subscribers can also get coverage for visits to the World Cup games).
In 2002, cross-border roaming may seem like a no-brainer. But
in East Asia, some of the world’s largest and most advanced mobile
Internet societies have evolved in relative isolation.
Korea and China all pride themselves in their cultural uniqueness and
economic independence. During the 1990s, governments rolled out
different flavors of digital cellular, which in turn left them confined
to selling products and services in their home countries. Now with the
prevalence of wireless data and the move toward 3G, these separate paths
are converging and the cross-border exchange of ideas is accelerating.
Operators, who dominate the value chain, are leading the way.
Shedding their past as solitary wallflowers, they are partnering
aggressively throughout the region with an eye toward China and other
KDDI and SK Telecom, in addition to their
CDMA 2000 roaming alliance, have both established joint ventures with
local operators in mainland China. SK Telecom, the most prolific
deal-maker, has roaming partnerships with NTT DoCoMo of Japan as well as
GSM and CDMA operators in China. (SK Telecom has a range of service
relationships to accommodate operators with different technologies. For
instance, SK Telecom’s deal with China Mobile lets Chinese GSM
subscribers lease CDMA handsets when visiting Korea.)
Roaming Coverage for
While international coverage provides
benefits for frequent travelers between the three countries, the more
profound impact will be felt from the portability of business models,
technologies and products that support growth of new industries. The
sheer size of the markets in Korea, China and Japan, which together have
more than 200 million subscribers, means that this convergence and
adoption of mobile services can have a powerful influence
internationally as well. Standards such as Qualcomm’s CDMA 2000 and Sun
Microsystem’s J2ME, for instance, could establish an advantage over
competing platforms due to the advocacy they are receiving from
operators and content developers here.
Japan still leads the
region in pioneering the latest technology and applications, with Java
handsets and multi-media services such as video clips, music and game
downloads becoming standard issue for the high-end of the market. Korea
is close behind, however, and its entrepreneurial culture may make it
better suited to propagating new business concepts internationally.
China’s technology is a few years behind but the country
continues to cleverly adapt ideas from its neighbors and reconstruct
them in a way that wins users in its own vast market. Foreign partners,
looking for any foothold they can get into China, are eager to help lead
the way. Matsushita and NEC of Japan recently announced a joint venture
with Huawei Technologies based in Shanghai. The new company, called
Cosmobic, will focus on development of 3G handsets in China.
first building block for success is the business model. It was in Japan
that operators established a viable business model for revenue sharing
by operators and content providers. In China, operators have adapted
this model to promote a broad content industry for SMS.
Inspired by NTT DoCoMo’s i-mode, China Mobile created a revenue
sharing program called Monternet (a combination of the words Mobile
Internet with Chinese characters that translate to “China Mobile
Dream”). Under the Monternet system, the operator hands over 85 percent
of SMS service fees directly to original content providers. (Despite its
influence as a leader, DoCoMo actually has been slow to establish a
business presence in China, focusing more on its investments in
operators rolling out i-mode in Europe and the United
Sina.com, a pan-Chinese portal that has roots as a
software development company, has introduced 500 different types of SMS
services since Monternet started. Mont Gu, a deputy general manager of
Sina.com in Shanghai, credits this system with providing the right
financial incentive for content providers.
SMS applications are a key part of its strategy for revenue
diversification to move away from reliance on web advertising. This is
particularly important in China, where it is difficult for content and
software developers to get paid for their work due to widespread
Another application developer in China that branched out
to SMS is Tencent, the creator of the popular instant messaging service
QQ. Tencent offers a mobile subset of its product that provides
cross-platform messaging and client access between personal computers
and cell phones.
The recent success of content in China has
attracted interest from Tokyo-based Cybird, the most successful content
provider in the Japanese market. Cybird is exporting its quiz game
service “Nandemo Shindan” (“The Examination About Everything”) through a
partnership with portal Chinadotcom and China Mobile.
a big opportunity for SMS-based contents in Asia right now. The usage is
very high not just in China but in Hong Kong, Taiwan, Singapore and the
Phillipines,” said Toshi Iwata, Vice President of International Business
Korea is another country trying to build
a strong base of content modeled after Japan’s example. But despite the
high subscriber base for 2.5 G service, mobile Internet services are
still not widely used in Korea.
“Even though half the phones
have wireless Internet capability, the average customer only uses it
once a month,” said Brian Uh, Director of Marketing for XCE, a
middleware and application development company in South Korea. Uh
believes the situation is changing, however, as operators enlist a
growing number of content providers. XCE has partnered with SK Telecom
to create handset middleware and game applications that can be
XCE is one of many companies in South Korea that is
betting that Java middleware and applications will be the next big
opportunity for entrepreneurs in the international market place. The
company developed XVM, a virtual machine and applications for SK
Telecom’s java handsets. XCE is working with SK Telecom and
independently to sell its software services internationally.
said that his company and others believe the “Java boom” that is now
catalyzing the phone market in Japan and Korea will go worldwide in the
next few years. There are currently 300 Java applications offered by
mobile operators in South Korea and 5000 in Japan. Uh said there is a
development community of more than 65,000 coders in his country focusing
on mobile Java. He wants to plant the seeds for business relationships
that guarantee their software is not limited to their home
“We are focusing very aggressively on our overseas
marketing plan this year,” said Uh. He sees two international
opportunities for his company. First of all, XCE wants to export XVM as
a standard virtual machine that operators can adopt as they upgrade
their network for Java services. The company is already preparing to
introduce its platform in Singapore and Israel. He believes that China
will also introduce Java phones next year as CDMA networks gain
The second opportunity for XCE is as an aggregator
of Java content that sits on top of its virtual machine. XCE and SK
Telecom are nurturing content providers in Korea to create a pool of
Java applications that can then be exported. XCE is already introducing
games by Korean development partners to be used with XVM in Singapore
and Israel. In the future, the company hopes to be able to import killer
applications by overseas developers into the Korean market as well.
Failure Teaches as Much as
As mobile entrepreneurs in Asia come closer
together it will be important that they learn not just from the
successes of neighboring countries but from the disappointments as well.
Japan’s DoCoMo is praised for its role in teaching other countries how
to effectively spawn a new industry for mobile content. But more
recently, it also showed what not to do with the troubled rollout of its
3G service FOMA. After spending billions of dollars for Wideband CDMA
network construction and an extravagant promotional blitz featuring pop
star Hikaru Utada, DoCoMo only signed 105,000 subscribers to FOMA in the
first six-months of service. KDDI, on the other hand, launched its own
CDMA 2000-based 3G service with little fanfare this April and gained
334,000 customers during the first month.
For industry watchers
here in Japan, the reasons for DoCoMo’s failure and KDDI’s success are
obvious. In order to recover some costs for creating a new network,
DoCoMo charged between 30,000 and 50,000 yen for FOMA handsets. In
addition, its packet billing system applied to broadband services was
very expensive and customers can expect to pay between 30,000 and 40,000
per month for frequent use of 3G services.
And to top it off,
FOMA coverage has been limited to the Tokyo area, which means the phones
are useless when traveling anywhere else in Japan. The FOMA naming also
may have confused consumers, who were already familiar with i-mode and
did not understand its relationship to the new brand.
the other hand, upgraded its existing network to CDMA 2000 to offer
nationwide service without need for a major investment. Its handsets and
service fees for 3G are not significantly higher than older models, so
customers can enjoy multimedia services without making any of the
trade-offs required for FOMA. It also used its existing “au” brand to
promote new applications. This gave consumers enough context to
understand that they were getting the same services as before, plus
add-ons like movies and music.
Although it is still too early to
tell, the success of KDDI seems to be a vindication that users actually
do want the multimedia services enabled by 3G technology as long as they
are offered at the right price with the right network service support.
This is just another lesson to be studied and appropriated by neighbors
across the region.
Dmitri Ragano is a
consultant for Frontage-Razorfish in Tokyo,