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Home > Tech Reiews > Japan Technology Review Last Updated: 15:24 03/09/2007
Japan Technology Review #31: January 28, 2002

Recent Trends in Technology-Driven Companies -Part 6-
Market Trend of the Third Generation Mobile Communication Services

By Hajime Yamada (GLOCOM)

In October, 2001, NTT DoCoMo, Inc. started marketing Third Generation (3G) Mobile Phone Service. The market trend of the 3G Service has drawn attention widely as a new service of data communication with the speed of one Mbps at maximum.

In Japan, three providers, NTT DoCoMo, J-PHONE Co., Ltd. and "au" of KDDI Corporation, have been designated as operators of the 3G Services. NTT DoCoMo and J-PHONE provide the services by W-CDMA (Wide-band Code Division Multiple Access) system, while "au" employs cdma2000 system.

Japan Telecom Co., Ltd., the parent company of J-PHONE, was taken over by Vodafone Group, a British mobile communications enterprise, in September, 2001. Then, it has been decided that 3G Services in Japan will be provided along with the Vodafone's global strategies. J-PHONE therefore has not started 3G Service yet. On the other hand, it introduced a still image transmission service called ‘Sha-mail' with Second Generation (2G) technologies. The number of its subscribers, most of whom are in their twenties, has been rising. On December 25th, 2001, the number of ‘Sha-mail' users in Japan exceeded three million.

On the other hand, "au" has provided services by cdmaOne, one of 2G technologies. At the end of November, 2001, the number of cdmaOne users already exceeded ten million. What "au" has chosen was to keep up this cdmaOne and to improve its data transmission speed, rather than to introduce the cdma2000 system hastily. A high-speed data communication service with about 144 Kbps is planned to start in the spring of 2002.

NTT DoCoMo is one of the largest mobile communications enterprises in Japan with about 40 million subscribers. Partly because that DoCoMo is one of developers of the technology, the company has positively supported W-CDMA system, and became the first in the world to start the service. This system uses a totally different technology from that of 2G Services, and therefore all the facilities require installation of new equipments. DoCoMo is preparing investment for the equipments that is said to cost as much as the total amount of one trillion yen. The service is to start wherever the installation is completed, and as of October, 2001, the service was provided in a limited area around Tokyo with the speed of 384 Kbps at maximum. In December, the service expanded in Nagoya and Osaka areas, and is expected to spread all over Japan in the spring of this year.

On the contrary, "au" can utilize, with slight modifications, its existing nationwide cdmaOne facilities, which will provide a high-speed data communication service all over the country simultaneously. Therefore, "au" has an advantage to NTT DoCoMo that needs a great amount of investment. As for speed, however, DoCoMo's data transfer speed at 384 Kbps is faster than that of "au"'s 144 Kbps. The future development at the market, concerning which would gain more subscribers, is closely watched.

In May, 2001, NTT DoCoMo launched an experimental 3G service free of charge. It involved as many as 4500 users. In October, DoCoMo started billing, and the number of subscribers became 11000 at the end of the month. The number increased by 3000 in a month, and the users of 3G Service counted 14000 at the end of November. Such an increase rate of subscribers is considered less than expected by market analysts and mass media. By the way, the number of subscribers of the 2G Services by DoCoMo increased by more than 310,000 in the month of November only, which is a hundred times more than that of 3G Services.

Why were the 3G Services so slow-starting? The first reason is that the service area was limited only around Tokyo. This problem will be solved after this spring when the nationwide services will start to be provided.

The second reason is the high billing rate. DoCoMo charges 0.2 yen a packet for its data communication. In this rate, transmission of one Megabyte data will cost 1600 yen. The monthly bill will become quite costly if anyone frequently uses this data transmission means. DoCoMo has already aware of this problem, and has offered billing options that would reduce the packet rates to one-tenth by paying higher basic fees. Other providers present 2G Services for fixed monthly rates of less than 5000 yen regardless of transmitted data amounts. In order to compete with such prices, 3G Services must lower the monthly usage fees in the future.

While DoCoMo has made little progress in starting 3G Service, wireless LAN services have been spreading rapidly in Japan. Wireless LANs are made available in such places as coffee shops, railway stations, universities and hotels that attract many users. These are generically called Hot Spot Services. Experimental area services that enable usage of wireless LAN within busy shopping areas covering two to five kilometers around are also being conducted.

Data transmission speed by the wireless LAN reaches 11 Mbps at maximum. Its speed is by far faster than that of 3G Services. Moreover, the wireless LAN systems fully utilize the Internet technology in order to reduce the investment for facilities, and therefore a monthly usage fee will cost no more than several thousand yen.

As I have explained above, 3G Service is facing many other services as competitors. In Japan, a number of commentaries have been published expecting the development of 3G Services, but the situation indicates that a warning signal is lit in its future.

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