Wireless

Sought-after content, revenue sharing: Secrets of i-mode's success!

Rajendra Prabhu

When it comes to achieving heady success in mobile Internet worldwide, one name clearly stands out - Japan's NTT DoCoMo. Its hugely popular i-mode service is folklore among telecom circles. Not content with its achievements, DoCoMo has ventured to successfully export the technology to other parts of Asia, as well as Europe and the United States.

The business model of i-mode has been so successful principally since DoCoMo has been able to provide sought-after multimedia content to customers; the service itself has a simple and an easily extendable revenue scheme and DoCoMo offers a flexible pricing structure that suits its intended demographic. DoCoMo's investments in partner companies have been nothing short of brilliant.

Convergence Plus recently spoke to Takeshi Natsuno, the founder of i-mode and managing director, i-mode Strategy at NTT DoCoMo, Japan, to learn what has made the technology so successful and popular in Japan and overseas. Excerpts from an interview:

Convergence Plus: The success of i-mode is sharply contrasted with the prevailing pessimism among operators in other countries. What has made i-mode so successful?

Takeshi Natsuno: NTT DoCoMo synchronizes the entire i-mode value chain in order to develop ever-better mobile service for subscribers. Our close collaboration with equipment manufacturers, content providers and other platforms ensures that wireless technology, content quality, and users' experience evolve at the same optimal pace.

We base our development efforts on a unified vision of wireless and Internet technology, rather than on a much less promising view that separates the two. In particular, NTT DoCoMo has adopted a wireless communications model using the variations of de facto Internet standards such as HTML. By basing our content on iHTML -- a subset of HTML -- we give our customers access to the existing network of conventional Web servers, and therefore, provide them with a seamless Web service. Simultaneously, our use of iHTML has greatly simplified the creation of i-mode sites for our content providers. We have also adopted other important standards, including GIF, Java, MIDI, and HTTP, to name a few.

Convergence Plus: How does i-mode create value for your customers?

Takeshi Natsuno: NTT DoCoMo creates a great deal of value for customers, business partners and shareholders through the i-mode platform. The success of i-mode is largely attributable to our company's ability to co-ordinate all stages of the mobile services value chain to meet customer needs. We collaborate closely with equipment manufacturers, content providers and operators of other platforms to ensure that wireless technology, content quality and users' experience evolve at the same optimal pace.

Ultimately, our strategy guarantees that our customers, partners and shareholders have their interests aligned with those of the end-users, enabling all parties involved in the value chain to maximize value. Our unique ability to synchronize the value chain gives us a competitive advantage that we can export and apply to other markets around the world, adjusting our business model as needed on a country-by-country basis, and taking on new responsibilities as mobile service value chains evolve and data traffic increases. No other operator presently has the know-how to achieve the high level of value chain coordination that we maintain.

Convergence Plus: Can you please elaborate how i-mode benefits your customers, content providers and your shareholders?

Takeshi Natsuno: Let me elaborate how i-mode benefits customers. As i-mode's advanced technology is surprisingly simple to operate, it offers fast and convenient services and quickly becomes part of the users' daily lives. Furthermore, through i-mode, NTT DoCoMo provides subscribers with access to a wide and continually expanding variety of content. We also enhance customers' experience by enforcing stringent criteria with respect to available content. This attention to quality ensures that our service supports only the best available Web sites. Finally, via i-mode's 'packet switched' technology, we give our users an Internet connection that is always turned 'on.' Besides allowing easy access to Web sites, this feature also enables us to bill customers in a more cost-effective manner for them -- by the amount of data downloaded, rather than by the time spent online.

It benefits content providers as well. NTT DoCoMo minimizes risk for many i-menu content providers by bearing the responsibility for the settlement of i-mode information charges. By ensuring that content providers are reimbursed on time, all the time, we create a stable environment for them and thereby, attract them to our service. We further facilitate the formation of partnerships by using a subset of HTML, the de facto Internet standard, as our language of choice for content.

Also, content providers and other partners benefit from cobranding opportunities available through i-mode and from linking to NTT DoCoMo's brand name. Moreover, our partners know that i-mode is not just a product but also a highly versatile platform with an exceptional, long-term business potential. Featuring an infrastructure that is completely scalable and flexible in order to support the next generation of services, i-mode represents a tremendous financial opportunity for our partners for many years.

As for benefiting our shareholders, the business model that we have adopted for our i-mode service creates value for shareholders in two ways. We generate direct revenues from usage fees, mobile device-based advertising, and collection and settlement fees. We also realize capital gains in the equity markets by making strategic investments in companies around the world. The proof of the model's power can be verified by the growth in our subscription numbers, and the monthly average revenue per user (ARPU) due to the increased data traffic.

The model has succeeded principally because we have been able to provide sought-after multimedia content to customers. Also, our service has a simple and easily extendable revenue scheme and offers a flexible pricing structure that suits its intended demographic perfectly. Finally, we have chosen our investments in partner companies wisely.

Convergence Plus: What is the level of i-mode's penetration in Japan?

Takeshi Natsuno: Initially, i-mode had more than 10 million subscribers after only 532 days in service. It attracted over 20 million subscribers by 4 March 2001, over 30 million subscribers, as of 25 December 2001 and over 34 million subscribers as of August 2002. The number of handsets able to handle Java applications totals almost 15 million as of the beginning of August 2002.