Japan is a showcase for the mobile-data industry. There are more than 70 million mobile-phone subscribers in Japan, with more than 55 million using mobile data.
It is expected that the revenue share between mobile data and voice will be 50/50 in 2005 compared to about 18/82 in 2002.
KDDI now has 4.7 million 3G subscribers while DoCoMo has 150,000. J-phone has just started its W-CDMA based 3G services in December. With about 11 million subscribers in total, KDDI has a much smaller subscriber base, and launched its CDMA2000 1X-based 3G service only in April 2002. DoCoMo launched its W-CDMA based 3G Foma service in October 2001. Despite having over 40 million 2G subscribers and over 58,000 content sites, DoCoMo has only a 0.3 per cent 3G penetration rate.
The foremost problem for DoCoMo has been coverage. Whenever a new network such as 3G comes into service, its coverage will not be as good as the existing one. The same will be true for both DoCoMo and KDDI. The problem with DoCoMo is that its W-CDMA phones are not compatible with its existing 2G networks. For some areas such as underground railway stations, the Foma network has no coverage. In the present market, this will simply be unacceptable to subscribers. Conversely, the 3G phones of KDDI have a dual-mode capability so that when the phone is out of the 3G coverage areas, it will switch back automatically to the 2G network.
Subscribers will generally accept this and there is a world of difference against having no coverage altogether. The second problem is the handset itself. Foma phones are significantly larger than the nifty, slim I-mode phones, because they offer lots of features such as video conferencing. In comparison, KDDI uses CDMA2000 technology, which allows their 3G phones to be of a similar size to its 2G phones.
The third problem is battery life. Foma phones, with their many features, have a relatively short battery life. If users make much use of video conferencing, the battery life is even shorter. The other plus for KDDI is that it offers a seamless migration path for subscribers to switch from 2G services to 3G. Subscription rates of the two services are the same. With the dual-mode phone, the coverage of the two networks can complement each other. With their 3G phones heavily subsidised, subscribers need only pay between HK$1,200 and HK$1,500 to change to the new 3G network. This is their only expense.