The secret of NTT's i-mode success

NTT DoCoMo's i-mode service is hugely popular

By Jeremy Scott-Joynt BBC News Online business reporter

As far as most Europeans and Americans are concerned, mobile phones are for talking or texting.

i-mode

Picture messaging

Easy direction finding

Networked games

Horoscopes

Dating services

Financial services

Efforts to transfer the free-for-all content-filled web onto the tiny screens and slow data speeds of the cellular world have not been conspicuously successful.

Wap, the standard adopted across Europe for mobile-based information services, is widely regarded as a flop.

Combined with the slump across the telecoms business generally, the failure of Wap - and the slow take-up of faster data services called GPRS - is scaring operators who have sunk billions into licences and equipment for the even more advanced third-generation services due in a couple of years.

Mobile users in Japan
(Jan 2002)

NTT DoCoMo: 39.9m

KDDI: 12.0m

Tu-Ka: 3.9m

J-Phone: 11.8m

Total: 67.5m

The blue-skies euphoria of recent years at the industry's number one trade show, 3GSM in Cannes, has now shifted to a gritted-teeth hunt for ways of making money faster.

From ridiculous to sublime

But head for Japan and the picture looks very different.

Close to 50 million people use data services on a daily basis, 60% of whom use the "i-mode" standard provided by the runaway market leader, NTT DoCoMo.

Indeed, three-quarters of DoCoMo's 40 million customers are i-mode subscribers.

Nearly 50m people use one of these every day

Their phones are tiny, the colour screens the size of a credit card. Yet that has not stopped a plethora of independent companies coming up with services that people clearly want to use.

I-mode has driven DoCoMo's finances to the point where the mobile company is responsible for over 85% of its parent company's profits.

From its inception three years ago, i-mode's performance has painted a picture sharply at odds with that seen in the "mobile internet" elsewhere.

And its imminent arrival in Europe at long last - after numerous false starts - will finally show whether its huge success can be transplanted, and its lessons learnt by overseas peers.

Under the surface

While Japanese mobiles look on the surface broadly similar to their Western equivalents, their insides are very different.

Japan's mobile internet
(Jan 2002)

i-mode: 30.8m
(NTT DoCoMo)

EZweb: 9.2m
(KDDI, Tu-Ka)

J-sky: 9.5m
(J-Phone)

Total: 49.4m

Europe's GSM mobile standard is used in more than two-thirds of mobile phones worldwide. Japan's PDC standard exists nowhere outside Japan.

But that does not mean i-mode cannot transfer elsewhere. As long as handsets can carry the software programming needed to use the service, pretty much any kind of network can bear it.

Only now are handsets becoming available that will permit GSM to ape DoCoMo's success. In the past few months networks have been upgraded to carry data fast enough to make it worth the user's while.

Cutting the cake

The lesson that DoCoMo learnt early is the obvious one: that content and services sell. Technology does not.

It is the services - picture messaging, easy direction finding, finance, games, and hundreds more - which took i-mode to critical mass and beyond.

Pretty pictures: DoCoMo sees picture mail as the next big thing

That, and a payment model which meant that independent companies automatically get a sizeable slice of the one-off payment which each service adds to a user's bill at the end of the month.

That model stands in sharp contrast to Europe's Wap services, where getting beyond a "walled garden" of operator-sanctioned services was too complicated for the average punter.

That made sure that they kept most of the money. But DoCoMo and its peers saw that a smaller slice of the cake was fine - as long as the cake just kept on growing.

So everyone is happy. The user knows how much he or she is spending. The service provider gets paid. And DoCoMo sees usage and user numbers, and therefore overall revenue, spiralling skyward.

Even with the world's second-biggest economy in the depths of a seemingly endless recession, DoCoMo and rivals J-Phone (part owned by the UK's Vodafone) and KDDI are still rolling out new services to widespread acclaim.

Stepping up

The effect is that most Japanese are now entirely at ease with seeing the mobile as a doorway to a world of data, and ready - over time - to step up to the even faster, richer third-generation services.

Needless to say, that is a situation which European carriers, burdened with 3G-related debts and a public whose appetite for data was spoiled by the bad taste of Wap, view with envy.

I-mode starts in Europe over the next two months, initially on Germany's E-Plus network and KPN's services in the Netherlands and Belgium.

And their competitors will be keen to see whether it will finally give users a reason to get excited about data - and offer operators a ray of light.