FOMA For The People
By Mike Masnick, Mon Aug 23 19:30:00 GMT 2004

After some early struggles, NTT DoCoMo's 3G offering has found its footing. Now it aims to go mainstream.

NTT DoCoMo was the envy of the wireless data world for years with its i-mode wireless data offering, that showed many how a collaborative model between a carrier and developers could work. There were high hopes when DoCoMo launched its 3G service, but like so many early 3G offerings, the initial results did not live up to the hype -- suffering from technology problems and bulky expensive phones (with dreadful battery life) that didn't excite potential users. DoCoMo clearly stumbled, allowing KDDI to gain significant market share with its 1xRTT (2.5G) offering. However, after sorting out the problems, and moving to flat-rate data pricing FOMA helped DoCoMo attract more new subscribers in June than KDDI for the first time in 8 months.

Flat-rate data pricing was just one part of the strategy DoCoMo has laid out to quadruple its FOMA subscribers. The second part of that strategy was to roll out cheaper phones. Older phones ran about 30,000 Yen (~$300), making them a bit more on the luxurious side of things. The news today, however, is filled with stories about DoCoMo talking to Motorola and Nokia about new phones for FOMA, which would let DoCoMo expand beyond the group of Japanese handset makers who supply the FOMA handsets today. This expansion of handsets is also part of DoCoMo's plans to reduce handset pricing down to approximately 10,000 Yen (~$100) to make them more affordable. While the cheaper phones will have fewer features, the hope is that they'll appeal to a much wider audience, allowing FOMA to expand beyond its early adopter roots. The challenge, though, is that these new phones need to not only be cheap, but appealing. It's become clear that while price is important to handset buyers, it's clearly not the only thing -- and with consumer tastes sometimes being hard to judge, there's a real question about whether any new offerings will hit that sweet spot.

While there has been some confusion over DoCoMo's specific strategy, it's clear that the company has decided now is the time to start pushing its subscribers to move up the chain to FOMA. The relationship with developers to create compelling applications has always been the core of DoCoMo's wireless data offerings. The flat-rate pricing solved the pricing hurdle, and cheaper, better, more mainstream phones may be the final hurdle DoCoMo needs to turn FOMA into the service it envisioned nearly three years ago. Of course, getting the service to the point that it attracts users is just one side of the coin. Any company can offer cheaper prices, but that doesn't mean it will be possible to profit from those cheaper offerings. The difficulties DoCoMo has had during those intervening years clearly has taken a toll, allowing KDDI to build up a strong presence in the market and to eat away at DoCoMo's margins. Getting the service and the phones to the point where they should be is a big step, but making the business work still looks like quite a challenge.