1. Competition of 3G Services in Japan Tatsushiro Shukunami Institute for Media and Communications Research Keio University, Japan

2. Outline of presentation Overview of Mobile Market in Japan 3G Market in Japan What do customers want? Who will win?

3. Overview of Mobile Market

4. Mobile/Internet Penetration in Japan Mobile Subscriber –> 80 million Mobile Internet Penetration –> 70 million –High growth but almost saturated Source: TCA (Million)

5. Market Share by Subscriber #1:DoCoMo #2:KDDI –au –Tu-Ka #3:Vodafone DoCoMo’s dominance is gradually eroding Source: TCA (Thousand)

6. Growth Rate of Subscribers Average growth rate came down from 50% to 8% Highest Growth: DoCoMo  Tu-Ka  Vodafone  au Source: TCA

7. Annual Subscriber Increment DoCoMo –Advantages on coverage and relianility in the early stages –i-mode added new market power since 1999 Vodafone –Advantage by photo mail in 2001 and 2002 au –3G and Aplications such as Ringsong, and Walk Navigations lifted au in 2003 and 2004 Source: TCA (Thousand)

8. 3G competition

9. What is 3G? Source: ITU

10. Technical Specifications of 3G au’s EV-DO has the highest maximum speed. CarrierTechnologyNicknameDateMax Speed DoCoMoWCDMAFOMAOctober2001384Kbps HSDPA?200514.4Mbps aucdma2000 1x April 2002144Kbps EV-DOWINNovember 2003 2.4Mbps VodafoneWCDMAVGSDecember 2002 384Kbps Source: DoCoMo, KDDI, Vodafone

11. 3G subscribers au has been dominant in 3G market. DoCoMo has been trying to catch up. Vodafone is far behind. Source: TCA

12. Penetration of 3G Penetration of 3G is more than 20% in average More than 80% in au About 10% in DoCoMo About 1% in Vodafone Source: TCA

13. Voice/Data use of KDDI subscribers Data usage increased 2.5 times during the past 3 years, while Voice usage decreased 13%. Source: KDDI

14. Comparison of 3G Strategies DoCoMoKDDIAdvantage Phone Service Coverage Not as good as 2G yetAs good as 2GKDDI Data Service Coverage Not as good as 2G yetAt least 64Kbps, Max 2.4Mbps KDDI New Handsets2G and 3GOnly 3GKDDI Key ServicesVideo Phone Video Mail Video Download Video Game Ringsong GPS Original Video Program KDDI’s self- complete functions may be accepted easily. Data ChargeDiscount Plan only for 3G Flat-rate access only for expensive monthly plan Discount Plan for both 2G and 3G Flat-rate access only for EV-DO DoCoMo’s 2G customers are not happy on data charge.

15. What do customers want?

16. 3G service menu Network –Video Phone –Video Mail –Video Clip –Walk Navigation/ GPS –Ringsong –Network Video Game Standalone –Photo Camera –Video Camera –Radio Receiver –Analogue TV Receiver –File Viewer –IC Card –Digital TV Receiver(2005)

17. Penetration of high end functions FunctionWeb/ e-mail Photo Mail Video Mail JavaGPSRingsong DoCoMo 41.725.6?24.8?? au 14.513.111.44.6911.2 Vodafone 1312.13.28?? (million) Source: ITmedia

18. Mobile Content Market Market size reached nealy $300 milion. Music and video are about 50%. Source: DCAJ

19. Most Popular Aplications Camera and photo mail has become as popular as web access. Regular e-mail is as popular as phone call. Source: MRI

20. Who will win?

21. Lessons in the past few years Customers want convenience and value. High speed is not the first priority. Service coverage problem still bars DoCoMo’s migration strategy. Creative, easy-to-understand, and self- complete services are accepted first. Full music download has great potential, as Ringsong and iPod has proved.

22. DoCoMo –Technology –Reliability –Handsets au –Creative Service –Low Price –Good sense Vodafone –International

23. Customers expectation Flat rate pricing may change business model and handset requirements. More download of music and game needs more storage in handsets. Source: MRI

24. Issues on 3G Business Identification of killer applications for 3G Sustainability of WiFi and new entries New business model for content provider –Rich content suitable for flat-rate Flat-rate for “full” internet access –Handsets, PDA, and PC Handsets Improvement –Weight, size, battery, and price –Standalone functions such as Digital TV reception Service Coverage –Domestic and Global

25. Thank you for your attention. shuku@mediacom.keio.ac.jp