In 1992, Nippon Telegraph and Telephone Corporation (NTT), Japan's phone monopoly, spun off its DoCoMo wireless division. DoCoMo - which stands for Do (Japanese for "everywhere") Communications over the Mobile Network - has brought Japan to the forefront of the wireless revolution. DoCoMo's success has been due largely to i-mode, its popular mobile Internet service.

What Do Consumers Get with I-mode?

I-mode is an always-on mobile Internet service with more than 62,000 content sites. I-mode is sold as a subscription and is turned on when the customer signs up. Nearly 85 percent of all new NTT mobile phone subscribers in Japan want i-mode as part of their voice subscription package.

I-mode is a "walled garden," which is essentially a closed portal where the company does not allow its customers to '"surf" outside its portal. The advantage of a walled garden is the considerable control gained from the company's intimate knowledge of their customers' profiles. This knowledge can be used to offer relevant services and content through the operator's portal. The success of this model is evident in the market-penetration statistics. Since i-mode's beginning in February 1999, the company has signed up an astonishing 36.8 million subscribers - slightly more than 30 percent of Japan's population of 120 million.

How does it work? Customers access i-mode by pressing the "i" button that comes on every DoCoMo cell phone. Pressing the "i" button connects the phone directly to the Internet through an i-mode gateway. A menu is displayed, with an English-Japanese choice button plus additional choices, including a bookmark list. The user can also type in a URL to visit various web sites. The i-mode screen's display is colorful. Rich audio tones ring from the phone when it is called and sounds from sites customers visit are equally resonant.

I-mode web sites are frequently used to check information or to interact with a site for short periods, often only one to two minutes. A customer can quickly check an e-mail, stock quote, or travel schedule, or play a short game. Entertainment is easily i-mode's most popular web-based attraction. Entertainment represents 41 percent of the service's usage and includes activities such as downloading music, playing games, reading cartoons, telling fortunes, and betting.

Another primary i-mode use is for database inquiries to access content such as a dictionary, restaurant guide, or travel guide and general information such as business news, sports scores, and stock quotes. I-mode also supports transactions such as personal banking, online shopping, and ticket reservations. It also supports localization, through i-area, which delivers users a broad range of location specific i-mode content. Recognizing 500 different regions, the system pinpoints the location of the subscriber according to their nearest base station and provides them with a content menu specific to that area.

The subscriber can then view information about nearby restaurants, accommodations, download relevant maps and even access localized weather reports. The portal's success is due to its ease of use and the ease with which content can be created for it.

According to DoCoMo's third quarter 2002 data, game/horoscope content was accessed 20% during the quarter and entertainment info content was accessed 21% during the quarter.

Technically, i-mode is an always-on packet data service running at 9.6 Kbps out of a possible maximum speed of 28.8 Kbps. Subscribers are charged according to data packets transmitted and received. Rather than use a proprietary language that would require web designers to recode their sites for i-mode, the programmers at DoCoMo developed a markup language - cHTML, which is a subset of HTML. The development of cHTML allowed users with HTML-capable phones to access a myriad of content sites via the i-mode portal. cHTML uses minimalist functionality, allows neither JPEG files nor frames. Web pages larger than a certain size are truncated. By using cHTML, i-mode has overcome usability problems that plague other mobile portals written with different protocols such as WAP.

Prior to the advent of i-mode, most analysts believed consumers would reject a mobile device incapable of providing the same level of graphic intensity as that found on the traditional web. Furthermore, most believed it would be impossible to encode a web page with true functionality and keep it small enough to be readily accessible via a wireless device. I-mode has proven both of these assumptions wrong. Its home page is 2 Kb and i-mode mail is limited to 500 bytes, which helps with rapid transmission and retrieval. Although the handsets used to access i-mode have color screens, they are tiny. Few users want to write lengthy e-mail messages using a small keypad. I-mode e-mail is basically text messaging; most messages are only several words long and are often selected from predefined responses.

The handset is a critical part of the experience. To find the right form factor, DoCoMo spent time analyzing what consumers wanted in an ideal handset. They found the following: The weight cannot be more than 100 grams, the screen must have at least 256-color resolution, and the battery life must be more than 300 hours standby and have at least 4 to 5 hours talk time. NTT's handset business is flourishing in the Japanese market, where the average handset retention period is less than three months, versus about seventeen months in the United States. The only handset manufacturer anywhere near a competitive position against NTT in the Japanese market is Nokia. By all accounts, Nokia is a distant second and having a difficult time.

To appeal to the mainstream consumer market, i-mode is touted as simple, usable, and fun. Customers sign up for i-mode as an ancillary service to their mobile phone subscription. They are billed separately for the service based on usage or, more accurately, on the number of information "packets" transmitted. Users can easily relate the cost of service to actual usage - for example, the number of e-mails sent.

The Future of DoCoMo

DoCoMo has found an untapped market in Japan and reaped the rewards of its discovery with loyal users and fabulous revenues. Yet DoCoMo is not resting on its laurels. DoCoMo has begun offering i-mode service in Germany, the Netherlands, Taiwan, Belgium, France, Greece and the United States (where it is known as mMode).

Furthermore, NTT is rolling out an upgrade to i-mode in WCDMA, or Wideband CDMA, an early version of 3G that will run at 128-384 Kbps. The company has partnered with AT&T Wireless to release the product in four U.S. markets before the close of December 2004. It will spend 1 trillion yen (US $8.19 billion) over the next three years on infrastructure for its 3G service, and it expects to turn a profit within four years of launch. This upgrade should enable the next-generation phones to display streaming video and run Java applications. This should allow a more complete desktop experience for users. DoCoMo needs to be careful as they move from low-cost, simple-to-use services to new services for which there is no proven demand, as with streaming video.

DoCoMo may face an uphill battle in the United States because the market characteristics are different. Japan’s mobile population, over 49 million mobile phone users, was the highest in the world. The i-mode service offered e-mail, proprietary information and access to over 440 official web-sites, and 9,200 plus private pages. Since the home PC and Internet market had not taken off in Japan, i-Mode offered an attractive alternative. In fact, most users consider the Internet/Web synonymous to i-mode because of low PC penetration.

The big question is if Americans (and users in other markets) will be as taken by this technology after being jaded with years of the PC-based Internet/Web. Nobody in the US has tried to price based on the packet. Many have said that Americans are used to simple pricing schemes and this may not work. The usual issue of cultural differences is also brought up. Will American teenagers be excited by the same things as Japanese teenagers?

With its customer base of nearly 37 million subscribers, DoCoMo is by far the leading success story of the mobile Internet market. Its i-mode technology has overshadowed the much-anticipated WAP, which has experienced drastically lower-than-expected adoption rates. Whether other cellular companies can realistically emulate the i-mode experience and whether DoCoMo's strategy can be directly applied to other global markets remains to be seen. For most cellular companies, mobile Internet and m-commerce strategies are still in their infancy. Few can predict, with any real conviction, which services and applications their subscribers will use and, more importantly, are willing to pay for.