Gambling With Japan

Gambling With Japan

Denise Culver

Picture John Zeglis, chairman and CEO of AT&T Wireless, on a stallion, galloping through city streets shouting, “The Japanese are coming! The Japanese are coming!”

That’s the kind of excitement NTT DoCoMo hoped to generate yesterday when it announced that its partner, AT&T Wireless, in which the Japanese company owns a 16 percent stake, will begin carrying DoCoMo’s i-mode wireless Internet service in the United States early next year.

i-mode lets wireless users do all the things m-commerce analysts have been promising will explode into billions of dollars in revenues by 2004: check e-mail and stock quotes, locate things like restaurants and find entertainment information – all from wireless phones.

According to NTT DoCoMo execs, the company, which so far has only served Japanese customers, wants to begin branching out by serving customers in the Seattle area sometime next year, with an eye toward expanding nationwide in 18 to 24 months. To accommodate the plans, AT&T Wireless will set up a subsidiary in May for i-mode service.

Apparently, NTT hopes to charge as much for its i-mode service here as it does in Japan. More than 20 million Japanese users pay about $70 a month for voice and $17 for i-mode transmission fees. While the company is considering flat rates for the United States, NTT wants to bring in the same amount of money per customer here as it does in Japan, regardless of the billing system used.

To do so, the company largely is banking on the difference between the color displays used for i-mode and the black-and-white displays used by U.S. mobile carriers. Also, NTT is planning a number of special i-mode sites for U.S. users to encourage more frequent usage.

This is an interesting, albeit probably forced, gamble on AT&T Wireless’ part.

The forced aspect is simple: When someone owns 16 percent of your hide, you tend to do what they ask you to, especially when you’re taking a beating from every side.

The interesting gamble part is more complex.

If i-mode is successful in the States, it will be a mega-coup for AT&T and for m-commerce (not to mention the fact that I’ll have a ton of crow to eat). Almost any analyst that has made outrageous predictions for mobile commerce has done so while casting a wishful glance and a hopeful eye toward Japan.

It’s certainly not going to be a cakewalk, though.

Americans are not Japanese. We don’t do things the way the Japanese culture does, so NTT is going to have to be willing to think American if it’s going to succeed here.

Furthermore, the pricing scenario is going to look scary to the young ‘uns that are used to carrying around a cell phone for pennies a month (or having mom subsidize it). That color screen is going to have to have a great deal of appeal before money is going to be taken away from other expenditures to make up the difference.

There’s also the significant question of logistics. The fact remains that the U.S. simply doesn’t have the cellular network to carry i-mode to the extent that Japan does. America is a huge country, and people here have a demand for service that extends across all of its territory. NTT has never before dealt with such concerns.

All of these issues – and others that haven’t even been addressed, but certainly will surface as the days pass – lead to the other possible outcome for the gamble: failure.

If this doesn’t succeed, it almost certainly spells the end for mobile commerce in the United States. Applications that fail here once are rarely revisited with success a second time, because we have long, unforgiving memories (Did I hear someone say “cynical?”), and we don’t like to look silly.

So before John jumps up on that horse and begins to ride it too far, he might consider how much that 16 percent stake is really worth. After all, we defeated the first guys that came through. It might be ugly for AT&T if the next battalion that comes hits the shore is defeated, as well.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.