Another disruptive innovation by Softbank ?

Softbank Japan audaciously proclaims, in its advertising I spotted at the station: in Japanese, the body copy, ”ケータイが凄いことになりそうです。” that more or less in English meaning (ok, its my take) :”mobile” is going to be disruptive on Oct 1.

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Given the number portability between au, docomo, and softbank is to be ope rationalized effective on 10/24 according to CNET Japan, the announcement of Oct 1 might serve as a preliminary statement, and if it is really “凄いこと” (“disruptive” or “chaotic” as I read it), well it is going to be “凄いこと”. Obviously if the new number portability program is so promising, you might be tempted to annouce it earlier than the rest will do and early enough so that it will have the time for WOM to spread well before the launch.

Softbank is known for its penetration pricing; they penetrated ADSL services throughout Japan circa 2001, with the lowest price ever below JPY 3,000 at fixed cost for always on connection, when all the equivalent services were offered around JPY 5,000 -7,000 back in the days many people (myself included) were still using the dial up, cost on a pay-as-you-go basis beyond a certain level of usage for a given month. The following Internet statistics shows how low the broadband penetration was back in 2001 (the diagram I’ve stolen from Impress, now they got the now report out for 2006 in PDF in Japanese)

internetstats

However, the situation this time is different. It was OK with Broadband, by lowering the price, to increase the penetration virtually zero in 2001 to somewhere around 40% in 2006.

Now the mobile is already penetrated quite well across the nation; everybody has it. Even my daughter at grade 3 has it with docomo kids discount at 1500 yen a month. It might be wise for softbank not to ignite the pricing war; once it started, the industry wise revenue will dilute. Therefore, this time it is not about simply the pricing war but instead it should involve servicing (“disruptive”) war with moderate pricing. That is how I expect this category to evolve.

Number Portability on October 24

According to CNET Japan, Japan’s three major mobile carriers, notably, Docomo, AU KDD, and YAHOO have agreed that Number Portability to be effective on October 24, while the details especially the fee asoociated with changing the carrier for the same number are yet to be known (CNET article in Japanese). I think given the competitive pressure and the nature of number portability, the fee would also be competitive.

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docomo i-mode user interface

By far the most terrible user interface I’ve experienced in my entire life.
Cost me about 20 steps only to change the mobile package plan online (what they call “i-mode”).

This terrible UI has been around for years; still docomo has kept its dominant position in Japan (>50%).

I know they inherite the DNA of NTT, Japan’s ATT. A dinaour, which is another story. But, now that Yahoo Japan / Softbank enters the JP mobile market taking over vodafone, docomo has no choice but to focus on their UI. Or, die.

wansegu – ワンセグ

About a week ago I was pondering to switch my keitai (cell phone) to either softbank (new Vodafone Japan, the new brand name yet to be known) or au, sometime this year when the number portability will be around. But, yesterday I happened to spot the “wansegu” keitai (ワンセグ in katakana) being on promotion in downtown, Tokyo. Well, after all, I couldn’t resist buying the one from au (model: W41H).


The deal was 0 yen for the equipment and the basic monthly phone bill would be about $26 ($20)for the next 24 months, which is quite cheap (the withdrawal within 24 months would cost about $90 of cancellation charge) . So I signed up for it and now my family owns four keitai units for three of us. Well, you know I still feel the deal was that good.

Here is why:

WANSEGU: Quite simply, “wansegu” or “one seg” is the digital TV broadcast brought to your cell phone ; for now, the content is basically the same with those on analog network broadcast TV but in a much better quality. It claims its picture is stable even “on the go” situation. Yes, that is true: I enjoyed FM J-Wave (81.3FM, Tokyo) on my way to the station and digital TV in the train (but not in the subway) to the office this morning. Both FM and digital TV come at free of charge. In addition to the conventional TV content, it also features text-based weather news and news topics you can browse into the ez-web, which is the au original sort of mobile internet service at some cost of packets to navigate (as shown in the picture below.)

Or, you might also want to watch the TV in a bigger landscape display (2.7-inche wide) at home, at office, at sports game, or even inside the car (below). It says the battery lasts as long as 3.5 hours.

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Overall, I felt it very good. Think of it as a game where internet and TV broadcast media compete for our time or attention. Some of us, my wife for one, spend more time with TV; others, me for one, tend to spend more at internet. It’s the occasion-based segmentation. And I think “on the go” is quite an under-developed ocassion.

Plus, it comes with 2(2.1) mega pixels, auto focus camera.

And also with LISMO, an iPOD alike music player (which I will report later).

[Full disclosure] (for fun) : Last night, I had the hanami party with friends including au guy, who does not know about this blog and that I am blogging. He came late and liked that I had this au keitai. I work for ad agency and consult for network broadcast TV, but I don’t think this post is biased in any way.

Update: More on wansegu, PC card and Nintendo DS.

Cell phone pricing in Japan

When it comes to buying the new cell phone model here in Japan, I always got frustrated at their pricing scheme something like:

  • 24,000yen($200) if you are changing from the existing model with the same number within the same carrier (e.g., docomo).
  • 12,000yen($100), or sometimes even 0yen, if you are applying for the new number.
     

The price differential exists: the loyal customers like me who have been with the same mobile carrier with the same number get the price more and those applying for the new number get less. This is ridiculous, since the cost of manufacturing and delivery of the equipment should be the same. Yet my guess is a large portion of loyal customers now tend to compromise on the premium only to keep the phone number same. This is how this price differential works now and that’s why I, for one among many, am waiting for the mobile number portability soon to be operationally effective in Japan.  

 

If/when the mobile number portability is introduced sometime this year as reported elsewhere (in Japanese or in English), it can possibly ignite the price war. Those who would have otherwise paid the premium might now have the option to switch to other carriers at promotional price without changing the phone number. I can imagine carriers would try to acquire the customers away from the competitor each other; at the same time, they will try to retain the existing customers at competitive offer.

As the result, the current price differential will disappear. The two different prices will converge to somewhere between zero and $240. While where it will converge is up to industry wise coordination, there is already a downward pressure now being further intensified by Softbank’s acquisition of Vodafone Japan.

Reference: International price comparison statistics (Japan=100) for cell phone rate and ADSL, the Japanese government published in November 17, 2005  (in Japanese):    

                              JP=100        US       UK     FR      DE
Cell Phone, 224 min         100         67     102     94        91

ADSL,always-on,3m,        100       116     168    162     116

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