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NTT DoCoMo: i-mode Wireless Internet Services
03 September 2003
Nahoko Mitsuyama

Document Type:  Operational Management Report
Note Number:  DPRO-96594
  Download PDF

Launched in 1999, NTT DoCoMo's i-mode service is a success in Japan, with subscribers numbering more than 38.65 million. Consequently, many operators have looked to it as a wireless Internet role model.


Table of Contents

List of Tables

List of Figures


Company Overview [return to Table of Contents]

Today, NTT DoCoMo is one of the most valuable telecom companies in the world. It was formed in July 1992, when the cellular communications services of Nippon Telegraph and Telephone (NTT) were carved out from the former telecom monopolist's other lines of business. At that time, the government was also considering breaking up NTT into a long-distance carrier and two local carriers in an effort to promote competition in the telecom sector. In July 1993, NTT DoCoMo was reorganized into nine regional companies (see the figure "NTT DoCoMo Group of Companies"), and on 22 October 1998, NTT DoCoMo (a holding company that also operates in the Central region) was listed on the Tokyo Stock Exchange. NTT DoCoMo operates cellular networks based on the Japanese personal digital communication (PDC) and wideband code division multiple access (WCDMA) standards. On 1 December 1998, it took over NTT's unprofitable Personal HandyPhone System (PHS), with the aim of turning it around within five years. NTT DoCoMo also operates a paging service and paging equipment sales business (Quickcast) and an international dialing service.


[return to List of Figures]
Figure 1
NTT DoCoMo Group of Companies

Figure 1: NTT DoCoMo Group of Companies.

NTT DoCoMo has plans to convert its regional subsidiaries into wholly owned subsidiaries by way of share exchange, as stated in a memorandum of understanding (MOU) dated 8 May 2002. This is seen as a precursor to merging into a single operating unit, which would facilitate decision making and bring about improved efficiency.

NTT DoCoMo has 26 overseas subsidiaries, including major ones, such as DoCoMo Europe, DoCoMo U.S.A., DCM Investments and NTT DoCoMo Telecomunicações do Brazil. Overseas R&D centers, such as the Munich-based DoCoMo Communications Laboratories Europe, is mainly involved with leading-edge technology in network infrastructure and security. DoCoMo Communications Labs U.S.A. is engaged in fourth-generation (4G) mobile communications, Internet and software technology R&D. NTT DoCoMo also has a large R&D center located in Yokosuka Research Park, Japan. This advanced center focuses on wireless/network technology, multimedia and 3G cellular equipment development. NTT DoCoMo's sustained commitment to fundamental research has put it at the forefront of the wireless revolution.

In October 2001, NTT DoCoMo became the first cellular operator in the world to offer commercial 3G services (based on WCDMA) called Freedom of Mobile Multimedia Access (FOMA). Initially, the service was available only in the Tokyo metropolitan area, Yokohama and Kawasaki. However, by March 2004, the service is expected to cover 99 percent of the population nationwide.

[return to List of Tables]

Table 1
NTT DoCoMo's 3G Milestones
Date 3G Service Coverage
Source: NTT DoCoMo.
30 May 2001-30 September 2001 Introductory service in 23 wards in Tokyo and limited areas in Yokohama and Kawasaki. 22 percent population coverage.
1 October 2001 Coverage within 30-km radius from Central Tokyo.
December 2001 Service commenced in Tokai and Kansai areas (50 percent of populated areas in Japan are covered).
April 2002 All major cities nationwide, with approximately 92 percent coverage of the populated areas in the Kanto-Koshinestu region.
March 2003 91 percent population coverage nationwide.

Back in 1992, only a few of NTT's staff exhibited interest in joining the fledgling NTT DoCoMo, because many were concerned about its viability. However, the company has since been wildly successful, capturing 57.45 percent (or 44,361,000 cellular connections) of the cellular market in Japan at the end of June 2003. The company's i-mode wireless Internet service — launched in February 1999 — has swept through Japan with tsunami-like force, and its enormous popularity and success have been the envy of cellular operators worldwide who have been struggling with their own wireless Internet service based on Wireless Application Protocol (WAP). The service enables Internet access via small, lightweight and trendy cellular handsets replete with color screens and Java-capabilities. Initial problems, such as network outages in 1999 (due to NTT DoCoMo grossly underestimating the demand for i-mode services) and faulty handsets, were rapidly resolved, and i-mode has not looked back since.

As of December 2000 (barely two years after its launch), there were 17,161,000 i-mode subscribers (equivalent to 50.15 percent of NTT DoCoMo's total cellular connections base). By 30 June 2003, the number had risen to 38,648,000 (87.12 percent of NTT DoCoMo's cellular base), and i-mode comprised 60.00 percent of the wireless Internet market in Japan (in term of users). Initially, i-mode was available only on the PDC cellular system, but it is now available on the PHS (February 2001) and FOMA networks as well.

[return to List of Tables]

Table 2
Overview: NTT DoCoMo
Source: Gartner.
Corporate Headquarters NTT DoCoMo
11-1, Nagatacho-2-chome
Chiyoda-ku
Tokyo 100-6150
Japan
Ownership Publicly listed subsidiary of NTT, which is itself a public-listed company. NTT is the majority shareholder, with a 62.96 percent stake. Other major shareholders include Japan Trustee Services Bank (4.15 percent) The Master Trust Bank of Japan (3.99 percent) UFJ Trust Bank (1.11 percent) and State Street Bank and Trust (1.01 percent).
Number of Employees 20,792 as of 31 March 2003.
Date Wireless Services Launched 1979 (Hi-cap), 1993 (PDC), 1995 (PHS), February 1999 (i-mode), October 2001 (FOMA).
Estimated Revenue Operating revenue: ¥4,809 billion (financial year ending 31 March 2003).1
Average Revenue per Subscriber For the financial year ending 31 March 2003: PDC — ¥8,120 per month (including data contribution of ¥1,750); FOMA — ¥7,740 per month; PHS — ¥3,530 per month.
Network Infrastructure
System Deployed WCDMA, PDC800/1500 and PHS. Wireless LAN (WLAN) 802.11b service ("Mzone") on commercial basis (starting 1 July 2002).
National Coverage National.
Number of Base Stations Data not available.
Network Enhancements PDC Packet data transmission speed upgraded to 28.8 Kbps in May 2002, commercial 3G service (FOMA) in October 2001.
i-mode Pricing Elements
Individual Business Tariffs Monthly basic subscription (¥300) and data download charges (¥0.3 per packet, with each packet equivalent to 128 bytes). Separate monthly subscriptions apply for certain i-mode sites.
An e-mail (up to 20 full-size characters) costs ¥1/message (to send) and ¥0.9 (to receive). An e-mail of 250 full-size characters costs ¥4 (to send) and ¥2 (to receive).
Data download charges on FOMA are set from ¥0.02-¥0.20, depending on the subscription package chosen.
Corporate Dialing Plans Intranet, LAN access and virtual private network (VPN) solutions are available.
(1) NTT DoCoMo changed its accounting scheme from Japanese one to USGAAP in fiscal 2002.

At a time when cellular operators worldwide are faced with the issue of declining average revenue per user (ARPU), the introduction of i-mode has enabled NTT DoCoMo to soften the adverse impact substantially. Its total monthly ARPU (voice and data) declined by only 7.3 percent between the first quarter of 2001 and the first quarter of 2002, although voice ARPU declined by 17.2 percent over the same period. This was because the decline in voice ARPU was mitigated by a 80.7 percent increase in i-mode data revenue over the same period. Contribution of i-mode to total ARPU has increased steadily over time, but it is showing signs of a slowdown in the first quarter of 2002. The table "Analysis of NTT DoCoMo's Monthly ARPU" provides a breakdown of NTT DoCoMo's ARPU.

[return to List of Tables]

Table 3
Analysis of NTT DoCoMo's Monthly ARPU
  Total Monthly ARPU (¥) Voice Contribution (¥) i-mode Contribution (¥) Contribution of i-mode to Total Monthly ARPU (percent)
Source: NTT DoCoMo, Gartner.
1Q01 8,650 7,770 880 10.2
2Q01 8,770 7,300 1,470 16.8
3Q01 8,570 7,060 1,510 17.6
4Q01 8,540 6,960 1,580 18.5
1Q02 8,020 6,430 1,590 19.8
2Q02 8,150 6,520 1,630 20.0
3Q02 8,170 6,460 1,710 20.9
4Q02 8,200 6,430 1,770 21.6
1Q03 7,990 6,120 1,870 23.4

NTT DoCoMo's data contribution to revenue had once led those of its competitors, but it has caught up with them gradually. J-Phone's data contribution to ARPU was 21.1 percent (for the latter half of fiscal 2002, ending 31 March 2003), while KDDI au lags behind with the data contribution of 15.5 percent (for the financial year ending 31 March 2003).     NTT DoCoMo has also managed to keep the customer turnaround rate low (monthly average of 1.22 percent for the financial year ending 31 March 2003), whereas cellular operators elsewhere have to grapple with customer loyalty issues brought about by increased competition.

Having controlled the local cellular market with a commanding 57.45 percent market share (as of June 2003), NTT DoCoMo has cast its eyes overseas in search of growth opportunities. To date, it has made several key strategic investments overseas, and it seeks to license its i-mode technology elsewhere while simultaneously promoting the new WCDMA technology. But before we analyze NTT DoCoMo's business model and strategy, we will first look at the technology and services available on i-mode.

Technology [return to Table of Contents]

i-mode is basically Internet access service operating on a packet-based network (PDC-P) overlaid on top of NTT DoCoMo's PDC cellular system (see the figure "i-mode Network Architecture"). Connections accessing the Internet are routed through an i-mode gateway, as opposed to a voice call, which is routed to the normal public switched telephone network. i-mode access is now also available on the FOMA network.

[return to List of Tables]

Table 4
i-mode Technical Details
Source: Gartner.
Data Speed 9.6 Kbps, upgraded to 28.8 Kbps in May 2002. Speeds of up to 384 Kbps are available on NTT DoCoMo's FOMA network.
Data Exchange Protocol Compact HTML (cHTML). This is a stripped-down version of the popular HTML format used in traditional Internet access. A convergence between cHTML and Wireless Markup Language (WML) toward Extensible HyperText Markup Language (xHTML) is expected to happen in the future.
Transmission Mode Packet switched.
Internet Access Mode Always "on" (as opposed to dial-up).

[return to List of Figures]
Figure 2
i-mode Network Architecture

Figure 2: i-mode Network Architecture.

Source: NTT DoCoMo/Gartner.

In January 2001, NTT DoCoMo launched its "i-appli" service applications that include video games and online financial services. This service is available on Java-based handsets. Users can download and store a variety of dynamic and graphics-rich applications via these new handsets. The capability of the handset to manipulate applets has been well received by consumers. i-appli users hit 17.13 million as of the end of March 2003. Of all the subscribers having Java-enabled handsets, 50 percent download programs written with Java, and approximately 60 percent of i-mode access is generated by Java users. The i-appli handsets also feature Secure Socket Layer (SSL) protocol that provides encryption for secure transmission of personal information. As such, the new phones can also be used for financial services and m-commerce.

The table "Latest NTT DoCoMo i-mode and FOMA Handsets" below shows some of the latest i-mode handsets that have been introduced recently. i-mode handsets are far more advanced than those of the Global System for Mobile Communications/general packet radio service (GSM/GPRS) world, and they have contributed to the service's popularity.

[return to List of Tables]

Table 5
Latest NTT DoCoMo i-mode and FOMA Handsets
Handset Model Launch Date Handset Features
Source: NTT DoCoMo.
mova F505i 11 July 2003 • Enhanced i-mode, offering packet data transmission speeds of up to 28.8 Kbps, three times faster than the original PDC-based i-mode.
• 1.28 mega pixel built-in Charge Coupled Device (CCD) camera. 16 times digital zoom.
• Main display: 2.2-inch, 262,144-color Quarter Video Graphics Array (QVGA). Sub display: 1.1-inch, 256-colors Organic Electroluminescence Display.
• Fingerprint reader for client certification.
• 6-minute video recording for one record, totally 67 minutes at maximum.
• Detachable memory (16MB mini Secure Digital [SD] memory card), which can stock approximately 1,010 photos or record 29-minute video.
• Macromedia Flash capable.
• Two-dimension bar code reader.
• Infrared Data Association (IrDA) standard port.
mova N505i 4 July 2003 • Enhanced i-mode, offering packet data transmission speeds of up to 28.8 Kbps, three times faster than the original PDC-based i-mode.
• 320K pixel built-in Complementary Metal Oxide Semiconductor (CMOS) camera. 3-times digital zoom.
• Main display: 2.4-inch, 262,144-color QVGA. Sub display: 1.1-inch, 65,536-color Thin Film Transistor (TFT).
• AccessReader capability that enables one to capture a URL or a telephone number by taking its photo.
• 6-minute video recording for one record, totally 67 minutes at maximum.
• Detachable memory (16MB mini SD memory card), which can stock approximately 2,300 photos or record 1.5-minute video up to 14 records.
• Macromedia Flash capable.
• Two-dimension bar code reader.
• IrDA standard port.
mova SH505i 20 June 2003 • Enhanced i-mode, offering packet data transmission speeds of up to 28.8 Kbps, three times faster than the original PDC-based i-mode.
• 1 mega pixel built-in CCD camera. 8-times digital zoom.
• 2.4-inch, 262,144-color QVGA display.
• Detachable memory (16MB mini SD memory card), which can stock approximately 985 photos or record 30-minute video.
• Macromedia Flash capable.
• Two-dimension bar code reader.
• IrDA standard port.
mova SO505i 4 June 2003 • Enhanced i-mode, offering packet data transmission speeds of up to 28.8 Kbps, three times faster than the original PDC-based i-mode.
• 1.3 mega pixel built-in CCD camera. 16 times digital zoom.
• 2.2-inch, 262,144-color TFT liquid crystal display (LCD).
• Detachable memory (Memory Stick Duo), which can stock approximately 985 photos.
• Macromedia Flash capable.
• Two-dimension bar code reader.
• IrDA standard port.
mova D505i 23 May 2003 • Enhanced i-mode, offering packet data transmission speeds of up to 28.8 Kbps, three times faster than the original PDC-based i-mode.
• Main display: 2.2-inch (approx.), 262,144-color Thin Film Diode (TFD). Sub display: 1.1-inch 65,536-color TFD.
• 630K pixel built-in CCD camera. 8-times digital zoom.
• Detachable memory (Memory Stick Duo), which can stock approximately 970 photos.
• Macromedia Flash capable.
• Two-dimension bar code reader.
• IrDA standard port.
FOMA Handsets
N2102V 18 July 2003 • 64-Kbps digital videophone.
• Two built-in CMOS cameras (320K pixel and 110K pixel).
• PictureVoice capability that allows a user to add voice to a picture message and send it as "i-motion mail."
• AccessReader capability that enables one to capture a URL or a telephone number by taking its photo.
• Better voice quality for "i-motion" (sound and video-clip distribution service) by adopting Advanced Audio Coding (AAC) in addition to Adaptive Multirate (AMR).
• Main display: 2.2-inch 65,536-color TFT. Sub display: 1.0-inch 65,536-color TFT.
• Adopts FirstPass for client certification.
F2102V 3 July 2003 • 64-Kbps digital videophone.
• Two built-in CCD cameras (330K pixel and 110K pixel).
• Detachable memory (16MB mini SD memory card).
• Two sound speakers.
• Better voice quality for "i-motion" (sound and video-clip distribution service) by adopting AAC in addition to AMR.
• Main display: 2.2-inch 65,536-color TFT. Sub display: 1.1-inch monochrome STN.
• Adopts FirstPass for client certification.
N2701 11 June 2003 • WCDMA/PDC dual-mode handset.
• Two built-in CMOS cameras (310K pixel and 100K pixel).
• 2.2-inch 65,536-color TFD display.
• Simultaneous voice and packet data transmission.
• "i-motion mail" moving-picture-mail capability.

Products and Services [return to Table of Contents]

NTT DoCoMo's i-mode offers a kaleidoscopic array of services that encompass many aspects of a consumer's lifestyle. As of March 2003, there are 3,462 official i-mode sites and 64,207 voluntary or unofficial i-mode sites. From July 2000 onward, English i-mode sites were made available in Japan.

NTT DoCoMo allows its subscribers to access unofficial Web sites, and this has increased the attractiveness of i-mode. The "walled garden" strategy adopted by cellular operators elsewhere during the early days of wireless Internet services is now rightly seen as an inhibitor to service adoption.

i-appli sites stand at 550 as of March 2003. As can be seen below, the number of sites is still increasing. E-mail access is a hugely popular application, as are ringing tones, wallpaper and character downloads, and entertainment applications (for example, games).

[return to List of Tables]

Table 6
NTT DoCoMo's i-mode: Selective Data
  1H01 2H01 1H02 2H02 1Q03
Source: NTT DoCoMo.
Total NTT DoCoMo Connections (m) 37.321 39.635 41.462 42.874 43.861
Total i-mode Subscribers (m) 24.989 30.182 33.493 36.209 37.758
Total i-appli Users (m) 3.995 10.481 14.237 15.658 17.130
i-mode Penetration (percent) 67.0 76.2 80.8 84.5 86.1
Number of Official i-mode Sites 1,760 2,932 3,064 3,389 3,462
Number of Unofficial i-mode Sites 45,810 51,744 55,371 61,180 64,207
Number of i-appli Sites 119 233 338 515 550

NTT DoCoMo has adhered to strict guidelines for i-mode sites to maintain the quality of content available through the i-menu and to encourage continued diversification of i-menu Web-sites. Some of the main guidelines are as follows:

NTT DoCoMo has also created a subsidiary called NTT DoCoMo.com to provide advice on content production to information providers. It is also possible for NTT DoCoMo to invest in the information providers' businesses. The breakdown of content is as follows:

[return to List of Tables]

Table 7
i-mode Content Breakdown: 1Q03
Category Percentage to Total Access
Source: NTT DoCoMo.
Melodies/Images 39.0
Games/Fortune Telling 19.0
Entertainment 21.0
Information 11.0
Database 5.0
Mobile Banking/Credit Cards/Securities/Insurance 5.0

To access i-mode services, consumers need only to pay monthly basic subscription fees (¥300) to NTT DoCoMo and monthly subscriptions to i-mode information providers (in the range of ¥100 to ¥300). However, some of the sites are free of charge. Consumers also need to pay NTT DoCoMo ¥0.3 per packet of data download. Affordable rates and the packet-based charging scheme have been contributing factors to the success of i-mode. The following are some of the available i-mode services:

E-Mail

i-mode allows subscribers to send e-mails to i-mode cellular phones and Internet e-mail addresses. Messages of up to 250 full-size or 500 half-size characters can be sent. Pictograms are supported by e-mail. Group e-mails (up to 12 recipients) are also available. E-mail charges are calculated based on the amount of data transmitted and not by airtime. The cost of sending an e-mail ranges from ¥0.9/message to ¥4.2 per message. Receiving an e-mail will incur charges ranging from ¥0.9/message to ¥2.1/message. E-mail service supporting photo attachments ("i-shot") is also available since June 2002. The cost for an i-mode user to receive an "i-shot" URL is ¥2-3 and approximately ¥17 to download a photo.

i-mode subscribers are also able to receive an AOL e-mail address (@aol.com) free of charge by registering for the AOL service. E-mails sent to the @aol.com address are forwarded to the user's @docomo.ne.jp address. Mails of up to 250 full-size characters can be read on i-mode, but mails exceeding this size (up to 25,000 full-size characters) will have to be accessed on the AOL site by using the Web function. Sent e-mails are limited to 2,000 full-size characters.

Entertainment Services

a) Ringing Melodies Download and Karaoke

Subscribers are able to download ringing melodies, access karaoke releases, access music chart rankings and obtain music lyrics from content providers, such as Sega, Yamaha, Bandai and Kyocera Multimedia.

b) Cellular Phone Screen Savers

Animated cartoon characters can be downloaded to the i-mode phone. Popular sites include Charappa! (Sesame Street Characters and Japanese cartoons), Always Snoopy (Peanuts characters), i-Disney (Disney characters) and the Standby Display Collection (photos of pin-up girls and pets).

c) Games/Gaming

Game sites include those from Hudson, Bandai, Takara, Panasonic and Namco. There are a wide variety of board games, shooting, racing, sports, slot machine games, simulation and role-playing games. i-mode phones can also be fully linked to the popular arcade game Virtua Fighter 4 (VF.NET).

d) Fortunetelling

Various options are available including horoscopes, tarot reading and voice analysis. Users can also get advice on friendship and compatibility anytime. Content providers include So-net, Bandai, i-Disney and NEC.

Transaction Services

a) Mobile Banking

Mobile banking sites offer full-banking services, including fund transfer, account balance confirmation and withdrawal records. Sites for mobile banking include those of UFJ Bank, Sumitomo Mitsui Banking, Bank of Tokyo-Mitsubishi, Mizuho Bank, Resona Bank, Saitama Resona Bank and Citibank.

b) Credit Card/Securities/Insurance

Subscribers are able to receive stock movement information as and when they want it, conduct stock trading, check their credit card bill and pay their life insurance contracts. Participating companies include Daiwa Securities, Nomura Securities, Visa, JCB Cards, Nippon Life Insurance and Meiji Life Insurance.

c) Travel Services

Services such as airline confirmation, hotel reservations and car rental are available. Partners include Japan Airlines, All Nippon Airways, Northwest Airlines and Nippon Rent-A-Car. Routes and travel conditions can also be accessed easily, as are public transportation route information/timetable and town information.

d) Ticket Booking

Concert information and ticket purchases for concerts and sports events are available from PIA, Lawson Ticket, E-Plus and others.

e) Mobile Commerce (m-commerce)

i-mode subscribers are able to order games, CDs, video compact discs (VCDs), books and magazines online. Sites include those from HMV, Itochu, Kinokuniya, Cybird and Neowing.

Gourmet/Lifestyle Info

This category includes restaurant guides, mobile telephone directory (Yellow Pages), dictionary search (portable dictionary), business listings and Japanese cooking recipes. You can also access beauty and health information, shopping and package inquiries (FedEx, Nippon Express and Yamato Transport).

Information Services

This category provides news (for example, Nikkei, Asahi Shimbun, CNN, Dow Jones and Bloomberg), weather forecasts, sports news, television program listings, location services, car navigation ("i-navi") and much more. The "i-area" service links local area content from i-mode menu sites and i-mode handsets to enable users to access information about the area they are in.

In April 2002, the "c-mode" service was launched, and it is expanding nationwide. This is a cooperation between Coca-Cola, Itochu and NTT DoCoMo to provide services such as "C-mo" (vending machines that function as information terminals equipped with computers, display, speakers and printers) and "Club C-mode" (purchase of admission tickets to amusement centers, and pay-per-download maps and content). Users need to access the Club C-mode site to select the services desired. A two-dimensional bar code (C Ticket) will then be sent to the handset, and users need only to display the bar code at C-mo units for authentication to complete the purchase.

Apart from consumer services, i-mode also offers intranet and VPN capabilities to business corporations. This service enables the road warrior to access his or her corporate e-mail and scheduler while on the move. In Japan, a car's navigation system can also be connected via i-mode to get location information and nearby hotels and restaurants ("i-navi" link). Location services leverage on the DoCoMo Location Platform (DLP).

Services for FOMA

The following additional services are supported on the FOMA network:

In October 2002, three new services were added to M-stage series.

1)     M-stage V-Live: one-to-many video streaming service

1.     This service is also accessible via personal digital assistants (PDAs) connected to the PHS network. The platform employs a Moving Picture Experts Group-4 (MPE G4) standard for data encoding and an AMR standard for voice encoding. The service was extended to FOMA on 1 May 2003, thus a user can access to a V-Live content with FOMA visual-phone handset. Subscription to "Infogate" (portal site for PDA with 100 yen monthly charge) is required.

2)     M-stage Visualnet: multilocation video conferencing service

2.     This allows a FOMA subscriber to host a multilocation video conference with a FOMA visual-phone handset. 100 yen monthly fixed charge.

3)     M-stage book: electronic book distribution service

3.     A user can download electronic book contents by connecting PDA to the FOMA or PHS network. Subscription to Infogate is required.

i-mode Business Model and Strategy [return to Table of Contents]

There have been many attempts to explain i-mode's phenomenal growth in Japan. Some have lauded NTT DoCoMo's business acumen, while others have dismissed i-mode as a uniquely Japanese phenomenon that cannot be duplicated elsewhere. To date, plausible reasons put forth to explain i-mode's success include these:

While there is merit in the above assertions, due recognition must also be given to NTT DoCoMo's business model, which is central to the vitality and success of i-mode. In effect, NTT DoCoMo has successfully established a networked organization, that is, one that comprises autonomous and semiautonomous companies working in concert to deliver services to consumers in the most effective and efficient manner possible.

Within this structure, NTT DoCoMo functions as the nucleus, managing and controlling the network infrastructure and processes that enable the business ecology to thrive and prosper. NTT DoCoMo's management has rightly recognized that no one company can excel in all value activities (for example, data transport, portal management, transaction and billing, content creation and application development). Rather, it has chosen to concentrate on its strengths in data transport, portal management, facilitation of transaction/billing and aggregation of content.

In areas where NTT DoCoMo lacks expertise, it has successfully co-opted partners via alliances and partnerships (see the table "Selected NTT DoCoMo Alliances and Joint Ventures"[March 1999-July 2003]). Alliances and partnerships also serve to reduce the inherent risk in deploying emerging technologies, of which wireless Internet access is one. Of course, NTT DoCoMo's dominant position in the Japanese market (leading to huge bargaining power) and its ability to dictate standards have made all these tasks much easier.

[return to List of Tables]

Table 8
Selected NTT DoCoMo Alliances and Joint Ventures (March 1999-July 2003)
Date Details
Source: Gartner.
March 1999 Alliances with Sun Microsystems (Java platform), Symbian (EPOC platform) and Microsoft (Windows CE) to boost its mobile computing capabilities and hedge its bets on the dominant mobile computing platform. Alliance with Microsoft includes application and software development.
August 2000 Alliance with Sony Computer Enterprises to link up i-mode services with Sony's hugely popular Playstation game consoles and access to games.
August 2000 Agreement with the Walt Disney Internet Group (the Web business of Walt Disney) for access to Disney's content (cartoon screen savers, songs, news and information).
September 2000 Took a 42.3 percent equity stake in AOL Japan for 10.3 billion yen to have access to Instant Messenger, AOL e-mail and content.
September 2000 Agreed to an Internet portal venture with KPN Mobile in Europe (launched in 2001). Venture will incorporate KPN's established Internet activities, like Het Net, Planet Internet, m-info and its WAP portal. NTT DoCoMo will take a 25 percent stake in the venture.
December 2000 Agreed to a joint research effort with Hewlett-Packard for 4G high-performance multimedia development (MOTO-Media).
December 2000 Joint venture with Sony, Sakura Bank, Sakura Information Systems, Japan Research Institute, Toyota Motor, Denso, DDI, Sanwa Bank and Bank of Tokyo-Mitsubishi to develop e-money (an electronic payment system on cellular handsets).
January 2001 Launched a wireless music distribution service with three other partners — Sony, Itochu and Matsushita Communications Industrial. The joint venture company will be named Trinotes.
January 2001 Teamed up with KPN Mobile and Telecom Italia Mobile to offer fast mobile Internet service in the Netherlands, Italy, Germany and Belgium.
February 2001 Teamed up with Sega to enable access to Sega's Dreamcast video arcade games via i-mode handsets.
November 2001 Joint action plan with Nokia to cooperate specifically in the promotion of open mobile architecture for WCDMA-based 3G services (in areas such as browsing, messaging and application execution environment).
June 2002 Collaboration with Oracle to make Oracle's database and global positioning system software compatible with DoCoMo's 3G, or third-generation, wireless technology.
December 2002 Announced jointly with AT&T Wireless that commercial launch of WCDMA in the four U.S. markets is planned by the end of December 2004 in San Francisco, Seattle, Dallas and San Diego. NTT DoCoMo and AT&T Wireless also agreed to form a special committee (Technology Committee) of the AT&T Wireless's Board of Directors to oversee the results of the four-city launch and make recommendations to the full board about the scope and timing of future WCDMA rollouts.
December 2002 Acquisition of additional shares in ACCESS, aiming at strengthening the ties. Consequently, DoCoMo's ownership percentage raised from 2.13 percent to 9.61 percent. In line with this, the two companies signed a licensing agreement under which ACCESS licenses to DoCoMo the browser it originally designed for DoCoMo's 3G handsets.
February 2003 Collaboration with Macromedia to jointly deliver Macromedia Flash technology to i-mode. The technology is embedded into 505i series.
March 2003 Agreement with Samsung Electronics to jointly develop i-mode handsets that are compatible with 2G GSM/GPRS wireless networks.
April 2003 Collaboration with Visa International, Nippon Shinpan, OMC Card and AEON Credit to start a pilot program from June 2003 to test a service for making credit card payments at bricks-and-mortar merchants via DoCoMo 504i and 504iS series mobile phones, which are equipped with IrDA ports.
April 2003 Agreement with Singapore Telecom Mobile (SingTel Mobile) to collaborate in relation to the field of 3G mobile multimedia services based on WCDMA technology.
April 2003 Agreement for the purpose of mutual cooperation in the provision of 3G services with Hutchison Whampoa in order to develop and promote 3G services based on WCDMA technology by DoCoMo, H3G UK and H3G HK.
May 2003 Collaboration with Japan Airlines (JAL) to test applications operating on 3G and wireless LAN networks for JAL ground staff use at Narita Airport from 2 June to 30 November 2003. The test involves the use of 20 PDAs and five personal computers equipped with FOMA data cards for simultaneous voice and data transmissions.

Currently, NTT DoCoMo's 10 leading application partners are Sun Microsystems, Microsoft, SAP, Sony Computer Entertainment, Sega, Walt Disney Internet Group (Japan), Symbian, 3Com and Hewlett-Packard.

To mitigate the uncertainties associated with entering a virgin territory, NTT DoCoMo has placed bets on several alternatives for software platforms (via alliances with Sun, Symbian and Microsoft) and games (Sony and Sega). Despite the numerous alliances and joint ventures, NTT DoCoMo has still managed to appropriate part of i-mode's gains for itself. This is achieved by having total control over the i-mode standard and ownership of the i-mode portal platform. NTT DoCoMo has so much market power that it is even capable to dictate i-mode handset specifications to the phone manufacturers. Furthermore, the handsets bear the name of NTT DoCoMo and not the name of the manufacturer!

Today, NTT DoCoMo derives i-mode revenue from the following:

Future revenue streams could include the following:

Also central to i-mode's success is the capability of NTT DoCoMo and its partners to provide value (within the Japanese context) to their consumers on four key dimensions at affordable prices:

NTT DoCoMo has also wisely positioned i-mode as a consumer service (avoiding technology details) and marketed the service as such. Its consumer-centric approach has certainly been instrumental to i-mode's mass adoption within a short time frame.

Unbundled i-mode Access Provision

Following the discussion in the telecommunications industry and Ministry of Public Management, Home Affairs, Post and Telecommunications (MPHPT), NTT DoCoMo started offering a service that allows Internet service providers (ISPs) use of NTT DoCoMo's PDC-based packet network in November 2002. ISPs became able to offer their own services over the i-mode network with functions provided by NTT DoCoMo as follows:

ISPs' network and that of i-mode are connected by leased circuit at the speed of 1.5 Mbps or 6.3 Mbps with monthly charges. End users who have PDC-based i-mode service compatible handsets have access to this service. Users who have not registered for the i-mode service need to submit an application for the packet transmission service's Dual/Light Plan to gain access to ISP content. The basic monthly charge for this plan is 150 yen and packet transmission fee is 0.3 yen per packet. Users will also be required to submit an application to their ISP and preinstall information via the handset prior to service use.


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Figure 3
i-mode Wholesale Network Configuration

Figure 3: i-mode Wholesale Network Configuration.

Source: NTT DoCoMo/Gartner.

Global Initiatives

Having dominated the Japanese market, NTT DoCoMo set its eyes on overseas expansion. Its global campaign was aided by the fact that it did not have to open its checkbook to obtain a 3G license in Japan. In 2000, the Japanese government awarded 3G licenses to NTT DoCoMo, KDDI and J-Phone at no charge. This allowed NTT DoCoMo to free up its cash hoard for overseas forays.

NTT DoCoMo has taken several minority strategic stakes in overseas cellular operators (see the table "NTT DoCoMo's International Expansion") that enabled it to have a foothold in key European, North American and Asian markets. The intention, of course, is to promote i-mode and WCDMA via these companies. Hutchison 3G and KPN Mobile have secured 3G licenses in the United Kingdom and the Netherlands, respectively. KPN Mobile also has interests in Germany (E-Plus) and Belgium (BASE).

The investment in KG Telecom is also important, because Taiwan is viewed as a beachhead for eventual entry into the vast China market. The similarities in culture and language between the two countries can serve as a learning ground for NTT DoCoMo's China campaign. Though KGT's i-mode attracted more than 100,000 users by May 2003, Business in Taiwan may enter into a transition period. KG Telecom and FarEasTone (FET) signed a letter of intent to merge on 17 July 2003, which offers KGT shareholders to convert one KGT share into 0.46332 FET share plus NT$6.864 in cash. FET and KGT have a combined subscriber base of 7.7 million as of the end of the first quarter 2003, on par with Chunghwa Telecom and Taiwan Cellular. FET is providing its own mobile Internet service "i-style" and has 3G license in Taiwan. NTT DoCoMo has not announced its stance to this merger yet.

Those initiatives, though, caused negative financial impact to NTT DoCoMo due to drops of the stock prices of its partners. NTT DoCoMo's equity loss for fiscal 2001 ending March 2002 was 812.7 billion yen, including losses for AT&T Wireless, KPN Mobile and KG Telecom. NTT DoCoMo also needed to write down its equity investment in fiscal 2002 as follows:

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Table 9
NTT DoCoMo's Equity Loss
AT&T Wireless Services 67,584 million yen
Hutchison 3G UK Holdings 2,233 million yen
KPN Mobile N.V. 67,949 million yen
KG Telecommunications 5,709 million yen
DoCoMo AOL 6,089 million yen
5 Companies Total 149,564 million yen

Due to dilution in NTT DoCoMo's shareholding percentage in KPN Mobile N. V. (KPNM) and to loss of certain of its minority shareholder's rights (such as board representation during the year ended 31 March 2003), NTT DoCoMo no longer has the ability to exercise significant influence over KPNM (see the table "NTT DoCoMo's International Expansion" below). Consequently, NTT DoCoMo removed KPNM from the scope of equity method accounting.

[return to List of Tables]

Table 10
NTT DoCoMo's International Expansion
Date Company (Country) Equity Stake (percent) Amount
Source: Gartner.
September 1998 Tele Sudeste Celular Participacoes SA (Brazil) 3.6 95 million real
December 1999 Hutchison Telephone (Hong Kong) 19 US$410 million
May 2000 KPN Mobile (the Netherlands) 15 4 billion euros
July 2000 Hutchison 3G U.K. Holdings (United Kingdom) 20 £1.2 billion
November 2000 KG Telecom (Taiwan) 20 (expanded to 21.43 percent in June 2001) US$517 million
November 2000 AT&T Wireless Group (United States) 16 US$9.8 billion
May 2001 Hutchison Telephone (Hong Kong) — additional equity stake 6.37 US$30.44 million
December 2002 KPN Mobile (the Netherlands) Not subscribe new shares: As a result, NTT DoCoMo's voting interest will decrease from 15 percent to approximately 2.2 percent when KPNM issues new shares to KPN.
April 2003 Hutchison 3G U.K. Holdings (United Kingdom) 10-year shareholder loan worth £200 million to support constructing 3G network

Recently, the effort to export i-mode has received much needed impetus. i-mode-based services are provided in seven countries and regions outside Japan as of the end of July 2003 (see the table "i-mode Outside Japan" below). To strengthen the promotion of i-mode in Europe, NTT DoCoMo established DoCoMo i-mode Europe B.V. in the Netherlands in July 2002, aiming at providing consultation to its partners in Europe regarding technology and marketing, as well as support in the setup and operation of i-mode services. Other important tasks of this new consulting firm areto promote i-mode service in Europe, encouraging operators to choose i-mode as their mobile Internet service, and to provide consultation to European operators who are willing to set up the i-mode service.

After NTT DoCoMo experienced equity loss in its foreign partners, it started to focus on winning a licensing pact rather than acquiring minority strategic stakes in order to expand i-mode business outside Japan (see the table "i-mode Pact" below).

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Table 11
i-mode Outside Japan
Launch Date Company (Country) Network Note
Source: Gartner.
26 June 2003 Telefonica Moviles Espana (Spain) GPRS HTML/WML1.X dual-browser handset
15 November 2002 Bouygues Telecom (France) GPRS HTML/WML1.X dual-browser handset
15 October 2002 BASE (Belgium) GPRS HTML/WML1.X dual-browser handset
20 June 2002 KG Telecom (Taiwan) GPRS HTML/WML1.X dual-browser handset
18 April 2002 KPN Mobile (the Netherlands) GPRS HTML/WML1.X dual-browser handset
16 April 2002 AT&T Wireless (United States) GPRS "m-mode" based on i-mode technology
16 March 2002 E-Plus (Germany) GPRS HTML/WML1.X dual-browser handset

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Table 12
i-mode Pact
Date of Signature Company (Country) Expiration Note
Source: Gartner.
25 June 2003 Wind Telecomunicazioni (Italy) June 2008 Strategic i-mode partnership in the Italian market.
24 July 2002 Telefonica Moviles S.A. and Telefonica Moviles Espana S.A. (Spain) 23 July 2007 Strategic i-mode partnership and 3G development in Spain.
17 April 2002 Bouygues Telecom (France) 16 April 2012 Strategic i-mode partnership in France.

Challenges and Competitors [return to Table of Contents]

Since the service launch, i-mode helped NTT DoCoMo to capture the majority of new additions to cellular connections, peaking at 85.7 percent in August 1999. i-mode is a milestone in the competition history in Japan's mobile communications market, because it spurred competition in developing innovative, unique services rather than in cutting down air-time charges. Camera-embedded handsets and picture messaging are good examples of the results in the service development competition. As competitors developed innovative services, i-mode lost its power as a new addition facilitator. In the second quarter of 2003, only 32.0 percent of the newly added cellular customers selected NTT DoCoMo.

i-mode also created a step-by-step evolution in the mobile communications market in Japan. The mobile messaging market, which was originally created by pagers, brought about the smooth adoption of i-mode. Mobile Internet not only lets users send and receive e-mails, but also allows access to content. Handsets with big color displays thus became essential, and in turn, these handsets cultivated the need for downloadable Java-based programs. At the same time, the big and colorful displays facilitated the spread of photo-mail services. Handsets with a megapixel built-in camera are now paving the way to WCDMA. Users are getting to learn that 28.8 Kbps PDC packed is not fast enough to exchange megapixel photos. Thus, the battlefield for mobile Internet services in Japan is expected to move from 2G to 3G as early as 2004.

In the meantime, Japanese mobile operators come to focus on business user segment and machine-to-machine (M2M) communications as the growth of human-based connections slows down and total ARPU decreases. Providing solutions to business customers and M2M services making use of mobile Internet and mobile data will be another area for mobile operators to compete with.

On the international front, NTT DoCoMo is facing intense competition from capable global titans, such as Vodafone. Vodafone live! attracted more than 1 million users in the first six months since the launch. Its success can be partly attributed to its tariff structure, which avoids monthly fixed charges thus attracting prepaid customers who occupy more than 60 percent of cellular connections in Western Europe. Meanwhile, i-mode charges a monthly fixed subscription fee in every country. Vodafone provides advanced functions as well, such as built-in camera and mobile Java at the beginning. On the other hand, Telefonica Moviles in Spain started the first mobile Java service in the i-mode market outside Japan on 26 June 2003.

Strengths and Limitations [return to Table of Contents]

NTT DoCoMo Strengths

NTT DoCoMo Limitations

Insight [return to Table of Contents]

i-mode has been one of the few success stories for wireless Internet access. This has prompted many people to ask if it is exportable. This question misses the point completely, because i-mode, not unlike WAP, is fundamentally a technology platform on which value-added services are supported. As NTT DoCoMo's success has shown, cellular operators should be giving proper focus to the development of abundant content and applications, affordable access charges and ease of use.