3G cellular service fails to get folks talking

A year later, telecom carriers brush off disappointing results, look ahead

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Japan got its first taste of third-generation cellular phone services a year ago with the launch of NTT DoCoMo Inc.’s FOMA service, but the technology has failed to get people talking.

In fact, as of the end of August, the high-speed data transmission technology had drawn fewer than 2.2 million subscribers, accounting for less than 3 percent of the nation’s roughly 71.6 million mobile phone users, according to industry group Telecommunications Carriers Association.

But in spite of the relatively bleak showing, the nation’s three carriers — DoCoMo, KDDI Corp. and J-Phone Co. — remain confident the service will prevail.

The sluggish penetration figures can be attributed to the slow start of DoCoMo’s 3G service, according to industrial analyst Nahoko Mitsuyama of Gartner Japan Ltd., who said FOMA is still “unsatisfactory in terms of coverage area and handset battery life.”

The FOMA network covers 60 percent of the nation, while the battery life of its first handset was just 55 hours, or one-eighth that of 2G handsets, leading to disappointing sales figures after the major success of its i-mode mobile Internet service.

There were 133,500 FOMA subscribers as of the end of August, well short of the 150,000 DoCoMo had hoped to sign up by the end of March. DoCoMo has 42 million subscribers to its 2G service, accounting for 60 percent of the domestic cell phone market.

J-Phone meanwhile began an experimental 3G service with about 1,000 users on June 30, and plans to start full-scale commercial service in December, about six months behind its original target.

The delay was due to efforts by the company, a subsidiary of British-owned Vodafone Group PLC, to make its 3G handsets usable in some European countries, J-Phone officials said.

As DoCoMo and J-Phone work to iron out their problems, KDDI, which offers mobile services under its au brand, is seeing some success with its 3G service, cdma2000 1x. As of the end of August, there were 12.9 million au subscribers, and the number of 1x subscribers has been above 2 million since its launch in April.

“(The figures) are not that surprising, as we expect to have a total of 7 million 1x users by the end of March,” said Toshio Okihashi, KDDI’s senior executive managing officer and senior general manager of the au business sector.

Analysts say the difference in 3G market penetration between DoCoMo and KDDI lies in their network technology strategies.

DoCoMo, which uses PDC technology for its 2G network that is valid only in Japan, opted to use W-CDMA for its FOMA service. To make the 3G service available nationwide, DoCoMo was forced to build a whole new network, including setting up transmission equipment in base stations and developing new handsets.

But KDDI, which already uses CDMA technology for its cdmaOne 2G service, simply upgraded its existing network and handsets, giving it the jump on DoCoMo, according to Gartner Japan’s Mitsuyama.

“(When DoCoMo launched FOMA), it emphasized the differences in services from 2G (phones),” she said. “So users might feel uneasy in shifting to the new service. In contrast, for KDDI mobile users, changing to 1x seems natural, just as if they were changing an old cell phone handset to a new one.”

But industry experts agree that these technological hurdles will soon be solved and that demand exists for faster transmission capabilities.

“Any new mobile service usually takes a while to take off, as i-mode and Sha-Mail (J-Phone’s photo mail-exchange service) did,” Mitsuyama said.

Last week, DoCoMo launched a new type of 3G mobile phone that has a battery life of about 125 hours. It also plans to expand FOMA’s coverage area to 90 percent of Japan by the end of March, rising to 97 percent by the end of March 2004, said Atsushi Shimazaki, senior manager of DoCoMo’s marketing department.

FOMA subscriptions are forecast to reach 1.38 million by the end of next March and grow to 6 million by the end of March 2004, although DoCoMo President Keiji Tachikawa indicated at a news conference last month these figures may be lowered due to the disappointing start of the service.

J-Phone, learning from DoCoMo’s mistakes, is carefully planning its commercial 3G services. To take advantage of Vodafone’s mobile network in Europe, J-Phone’s 3G service will feature an international roaming function.

KDDI meanwhile will initiate a higher-speed data transmission service — cdma2000 1x EV-DO (Evolution Data Only) — in fall 2003.

“By introducing the EV-DO service, we’ll be able to wrench market share from DoCoMo,” Okihashi said.

EV-DO’s top download speed will be 2.4 megabits per second, easily surpassing FOMA’s current maximum download speed of 384 kilobits per second.

Gartner Japan forecasts that 3G mobile phone services in Japan will begin expanding drastically sometime between the end of 2004 and the first half of 2005, with 3G users growing to around 48 million by the end of 2006.

“It is only natural that current cell phone users switch to newer technology,” Mitsuyama said.

New applications are believed to be the key to greater and more rapid 3G success.

Shinya Aihara, a researcher at Fuji Research Institute Corp., said technological advances may make this possible.

“Considering the size of (handset) screens, I think their usage is limited and should not be made out to be a small PC,” he said. “(So) key functions will remain voice communications and e-mail. What mobile operators and makers need to do is to create new and unique applications.”