nii report

What Have Stalled the Steps of US’s Mobile Internet- A comparative study of Japan and US’s mobile internet market : 

What Have Stalled the Steps of US’s Mobile Internet - A comparative study of Japan and US’s mobile internet market - Xiaoting Sun

Outline: 

Outline Introduction External factors: Economic backgrounds Public policies: Regulation, Spectrum licensing policy Strategies taken by MNOs: Position of the business target Perception of the mobile internet content Aggressive billing plan to get short term profits Innovation spirit Relationships with the manufacture and the content providers MVNO Conclusion

Introduction - Backgrounds: 

Introduction - Backgrounds Strong difference of the mobile penetration rate, 3G penetration rate, mobile internet penetration rate. When carriers in Japan are promoting the notion to wave the phone to pass the subway ticket gate, US customers are trying to learn how to get used to typing messages on the small keyboard, Mobile phones in Japan are powerful all-purpose personal accessories that modern people cannot live without. ITU World Telecommunication Indicators Database. Cellular subscriber (**) ITU Ubiquitous Network Societies: The case of Japan (2005)

Introduction – Backgrounds : 

Introduction – Backgrounds Mobile and 3G penetration rate in Japan

Introduction - Backgrounds: 

Introduction - Backgrounds Mobile Internet Penetration rate in selected countries.

Introduction - Cultural or Demographic Difference?: 

More than enough people who take subway to work. Introduction - Cultural or Demographic Difference? Some professionals argue that advantages of Population density High dependence on the public transportation The nature of the society - homogeneous Data revenue generated by the leading carriers in US: Verizon Wireless, Cingular AT&T, Sprint Nextel, T-Mobile has achieved a 75% jump from 2005. Data services have generated $8.6 billion. These do not mean US customers do not welcome mobile internet Consider the density of the big cities such as New York, San Francisco.

Purpose of This Study: 

Purpose of This Study Discuss some inhibitors of the mobile internet in US from: External Factors: Economic backgrounds Public policies: Regulation, spectrum licensing policy, Business strategies taken by MNOs: Position of the business target Perception of the mobile internet content Aggressive billing plan to get short term profits Innovation spirit Relationships with the manufacture and the content providers

Economic Backgrounds: 

Economic Backgrounds The entire economic slowed down since early 2000s. Economic recession and bursting of doc-com bubbles drained the pocket of the companies. The decrease of the consumer demand. Companies, investors were more cautious when making expansion plans. Big strategies such as laying out new network infrastructures are influenced. Cooperate Scandals, false accounting, criminal investigations happened at that time. A serial of bankruptcies: Enron, Global Crossing, WorldCom(60,000), etc Solicited hundreds of bankruptcies in the telecom sector. Devastated the telecom industry.

Public Policy in US - The Effectiveness of The Regulation: 

Public Policy in US - The Effectiveness of The Regulation The impact the Telecommunication Act of 1996 Aim: to establish a clear mandate to promote competition in all telephony networks. Favors CLEC, requires interconnection, mandate ILEC to open their network for CLEC. Problem: Has some intrinsic weakness that have encouraged the litigation and lobbying efforts from the carriers. Time consuming, resource consuming

Public Policy in US - The Effectiveness of The Regulation: 

Public Policy in US - The Effectiveness of The Regulation What are the weaknesses that leave incentives for lobbying effort? Aimed to prevent the regulator (FCC) from over using their powers. However, there are clauses that aimed at extending FCC’s privilege to issue new rules in case the existing ones failed to work. -- lobby to have them written in their favor. Some terms are ambiguous and left undefined, such as “just and reasonable rate” and the list of the network elements to be leased concerning with the unbundling issue. -- all parties debate over the final decision broad coverage, limited time, lack of information and related experience in the industry. -- the document has some contradictions.

Public Policy in US - The Effectiveness of The Regulation: 

Public Policy in US - The Effectiveness of The Regulation 4, The Act gave the State Commissions the same power as Federal Commission to regulate over the law. Complexity & Multiplicity Federal Congress FCC State Commissions DoJ Other central independent executive agencies City Authorities interplay Incumbent Carriers Failed to persuade Resort to confliction

Public Policy in US - The Effectiveness of The Regulation: 

Public Policy in US - The Effectiveness of The Regulation Intrinsic drawbacks, the asymmetric nature of the Act which favors the entrant CLEC Instead of being engaged in the market development and concentrated in innovation, the incumbent carriers have done everything they could to challenge the Act ILECs continued to hold 90% of the market share several years after the enforcement of the Act

Public Policy in US - Licensing Policy: 

Public Policy in US - Licensing Policy Auction based licensing policy Spectrum is always owned and controlled by the government. Auctioning Spectrum has been a billion dollar cash tree as an off-budget balancer for the Congress. Auction incurs extensive cost burden for the operators. Burn up the operators’ funds to build the necessary 3G network infrastructures Many carriers were in debt (UK&Germany)

Public Policy in US -Licensing Policy: 

Public Policy in US -Licensing Policy NextWave Event (Auction #35) has delayed the rollout of 3G service for more than a year. - frustrating FCC Court of Appeals for the Dist. of Columbia Supreme Court Carriers Biggest Auction At the end of 2000 Announced Invalid, return to Nextwave June 2002 Ask Appeal NextWave won the spectrum 1996- bankruptcy 1998 Spectrum was not released Refused to return the full deposit Lobbying effort, Sued FCC Final result Jan 2003 Repurchased from Nextwave, Later 2003 $18 billion Another Auction Sep,2006 $13.9 billion

Public Policy in US - Licensing Policy: 

Public Policy in US - Licensing Policy Spectrum Availability Only part of the spectrum are open to commercial use. Occupied by military services, analog broadcasting services. Spectrum Cap 45MHz for each carrier before 2003->55MHz Other countries’ experience Merit based (Japan), Royalty based (Hong Kong), no upfront fee, expedited infrastructure building speed. Prevent merging, enhance competition Low efficiency, Not enough for voice & data, subscribers.

Impact of the Strategies from The Mobile Network Operators (MNO): 

Impact of the Strategies from The Mobile Network Operators (MNO) All in all, public policies have caused some time delay and negative effects to the rollout of the next generation mobile wireless services in US. Inappropriate target positioning Japan US Youths and simple applications. Kill the idle time Enthusiastic, penetrate, spread Simple and entertainment related Business users Provide helpful business info Won’t watch TV or Youtube,text messages, switch 3G off Limited services, can be achieved with PC Slow adoption rate, low market demand ‘Wait and see’ policy, T-mobile purchased 3G spectrum in 2006 Successful

Impact of The Strategies From MNO: 

Impact of The Strategies From MNO Misperception of the Mobile Internet service Browsing the web with a much smaller screen - cumbersome Mobile is 7th mass media, right after internet: Always on mass media Always carried mass media Personal device Build in payment system Offers the input tool at the point of creative impulse i-mode did not start from webpage browsing, but rather a large variety of other services Much more than just browsing internet: Buy a cup of drink, watch digital TV, navigation, Google map, subway route checking, QR code scanning, send video clips, Mobile Cyworld, text msg, music download, and on and on… Marketing wrong right Lack of contents 74% subscribers visit google, yahoo,msn in US A separate device – PDA is popular

Impact of the Strategies From the MNO: 

Impact of the Strategies From the MNO Lack of Contents in US Rich and diverse contents are crucial to create the critical mass of users during the start up period. Different ways to deal with the content providers have largely influenced the variety of contents. Operators in Japan, Semi-walled garden contents Operators in US, Walled garden Conduit Builds an open architecture Get involved Create contents Only a handful of sites available More than 70,000 unofficial sites 91% content fee Keep 9% - the billing fee 50% content fee Poor contents, Bankrupt content providers Failed to attract customers Due to profit, brand Fixed network operator How about cooperating with youtube, flickr, myspace?

Impact of the Strategies From the MNO: 

Impact of the Strategies From the MNO Relationship with other parties Operators in Japan (conduit) Content provider Handset manufactures Platform supplier follow Lead, dictate follow Operators in US Content provider Platform supplier fight Handset manufacture1 Handset manufacture2 Standardization war US Japan

Impact of the Strategies From the MNO: 

Impact of the Strategies From the MNO Innovation spirit – Market Driver US: revolutionary killer driver comes from the hardware and the technical side. Camera phone, Music Phone, GPS Phone. Japan: innovation is constant and everywhere. Kids phone (KDDI, NTT DoCoMo) Co-branded phone Softbank <=>Swarovski NTT DoCoMo <=> Samantha Thavasa Scented phone NTT DoCoMo “So703i” –aroma sheet In addition to functionality, technique, usability

Impact of the Strategies From the MNO: 

Impact of the Strategies From the MNO Aggressive billing plan and short term profit-driven Mental Model In US, carriers experienced unexpected exponential revenue increase from SMS these years. The cash flow from SMS ironically, has become the inhibitor for more advanced and fancier data services. In Japan, instead of achieving short term economic profitability, they are more driven by the need for market power and market share. Keep offering innovative services, generating more traffic is always the goal. Source: NTT DoCoMo website, referred from (44 Lindmark, S 2003) Yearly overview of i-mode revenue

Impact of the Strategies From the MNO: 

Impact of the Strategies From the MNO Other charging plan comparisons: Japan Mobile email: $0.026 from Softbank or 0.013/Kb from NTT DoCoMo GPS: counted as normal traffic Monthly charge: Flat rate ￥4,095 from NTT-Docomo, Retailer: More than $250 subsidy US SMS: $0.15 for both sender and receiver GPS: $9.9/month from Verizon, $25/month from Sprint Nextel, $0.002/Kb from Helio, $2.29/month from Boost Monthly charge: Metered charge from Verizon, flat rate, $19.99 from Cingular AT&T (current) Flat rate starts from $85 (Sprint, 2002) Retailer: about $100 subsidy

MVNO (Mobile Virtual Network Operator): 

MVNO (Mobile Virtual Network Operator) Don’t own network facilities and spectrums. Lease from major operators Focus on the segments that have not been touched by the big operators. (Youths and New featured Data Service) In US, Helio, Virgin Mobile, Disney Mobile, Mobile ESPN, Boost, etc. Fills in the content blank left by the big operators, with more compelling prices; provides more choices for consumers; brings competition and pressure for MNO..

Conclusion & Discussion: 

Conclusion & Discussion The report studies the inhibitors of US’s mobile internet market, especially from the policies from the public sector and the strategies or mental models from the operators. Position of the business target Perception of the mobile internet service Variety of the contents Relations with Manufactures and Content providers Aggressive billing plans Mental Model - short term profit The weakness of the Telecom Act The spectrum licensing policy Macroeconomic backgrounds

Conclusion & Discussion: 

Conclusion & Discussion A little confused about the price factor. Is the pricing plan more attractive in Japan? Further work needed Figures left unfilled Modify the report

Acknowledgement: 

Acknowledgement Thank Prof Okada who helped me all the way from the visa application, to the guidance of the study, to the suggestions of the fantastic life in Tokyo… Thank everybody for the excellent presentations given every Tuesday. Wish you all had a nice golden week and a gorgeous future! Thank you!

Slide28: 

Other funs in Japan