NTT DoCoMo Phenomenon: Leading the Broadband Revolution

Citation

Steinbock, D. (2003), "NTT DoCoMo Phenomenon: Leading the Broadband Revolution", info, Vol. 5 No. 3, pp. 72-73. https://doi.org/10.1108/info.2003.5.3.72.4

Nippon Telegraph and Telephone (NTT) was launched in 1952 by Japan’s Ministry of Communications to rebuild Japan’s war‐ravaged phone system. Created in the image of the old American “Ma Bell,” NTT struggled to rebuild Japan’s telephone infrastructure. It enjoyed a monopoly on phone services for more than four decades. While NTT’s pioneering mobile communications experiences originate from a maritime phone service in 1959, Japan’s first primitive marine mobile system was introduced in 1923. These earliest land mobile radio communications evolved out of systems that were originally developed for the country’s extensive fishing fleet and harbor traffic.

Today NTT DoCoMo is synonymous with service innovation. Formerly NTT Mobile Communications Network, NTT’s wireless spinoff has more than 41 million subscribers to its digital network. As the second largest mobile phone operator worldwide, DoCoMo has some 32 million customers, who subscribe to the i‐mode service, which provides Internet access from mobile phones. The company also offers paging, maritime and in‐flight phone services, and sells handsets and pagers. True to its name, DoCoMo is “everywhere” in Japan, dominating nearly 60 percent of the Japanese market for mobile phones.

Japan’s cellular phone market grew explosively in the early 1990s thanks to the new strategy of Koichi Obuchi, NTT DoCoMo’s first CEO and current chairman.

By May 2001 Japan had 62 million subscribers, almost half its entire population. Following the shift from analog to digital, NTT DoCoMo pioneered the development of non‐voice mobile communications with DoPa, Japan’s first “packet” communications service.

At first, i‐Mode had been a pet project of Koichi Obuchi, NTT DoCoMo’s first CEO and current chairman. When DoCoMo launched the mobile Internet service in February 1999, not only did i‐Mode become highly popular in Japan; it also attracted wide international attention. Unlike the European WAP, the Japanese “got 3G right.” Meanwhile, Keiji Tachikawa, the official strategist behind DoCoMo’s success, engaged the operator in the international expansion and Yoshinori Uda was in charge of the company’s global business operations.

In 2000 and 2001, NTT DoCoMo began to actively build alliances with mobile phone carriers and other telecom companies around the world, “to ensure i‐mode’s future as the de facto global standard.” To push these new data services, the Japanese operator initiated a slate of strategic partnerships in Japan and, more importantly, in foreign markets. The operator and the service co‐evolved: i‐Mode’s hypergrowth boosted NTT DoCoMo’s international ambitions, while the efforts to build presence in the lead markets of western Europe and the USA attracted international attention to DoCoMo and i‐Mode. The Japanese operator envisioned a future in which people around the world would benefit from borderless global communications, live‐action video on mobile terminals, and even mobile control of home and office appliances. Despite its global ambitions, DoCoMo’s “global strategy” has not materialized in a worldwide empire. In the 3G era, the operator continues to thrive primarily in the Japanese market, despite a slate of footholds in foreign markets.

The success of NTT DoCoMo in the peak years of the 2G era and the 3G transition that attracted the attention of industry rivals and observers, analysts and investors, investment bankers and M&A boutiques worldwide, at the end of the 1990s.

In DoCoMo: Japan’s Wireless Tsunami, John C. Beck (The Attention Economy) and Mitchell Wade, an Accenture senior consultant, tell the story of Japan’s dominant operator, particularly how it pioneered mobile services and acquired global ambitions. They argue that DoCoMo achieved outstanding success with i‐mode, “a system that turns the pedestrian cellphone into a personal network connection” and allows users to send messages as well as “download and pay for information.” The authors propose an explanation as to how the highly successful DoCoMo went from $16 billion to almost $400 billion in market capitalization in less than a year. The inflated rhetoric does not validate the grandiose claims, but the book is one of the first comprehensive studies of the Japanese mobile operator and profiles many of the major players in the DoCoMo story. The authors also profile consumers who have adopted the i‐mode system and offer readers lessons in innovation strategies.

In The NTT Phenomenon, Koichi Obuchi, former CEO and current chairman of DoCoMo, explains how the operator developed its i‐Mode service, how it planned to export its success around the world, and its vision for the 3G era. Obuchi describes the experience as “leading the broadband revolution.” With a look at DoCoMo’s unique corporate culture, the book also includes insights from its senior management on how the operator became the world’s largest mobile carrier, and its efforts to secure foothold in world markets through strategic alliances.

In The Mobile Internet: How Japan Dialed up and the West Disconnected, Jeffrey L. Funk, an associate professor of business at Kobe University’s Research Institute for Economics and business, seeks to demonstrate how the mobile Internet became phenomenally successful in Japan, and a dismal failure in the United States and Europe. Comparing the US and Japanese approaches to the mobile Internet, Funk explains how the different approaches have led to very different market responses. The reason for the mobile Internet’s success in Japan, he argues, was the early focus of the service providers on appropriate content, phones, business models, portal/search engines, services, and users (the critical factors). These early drivers evolved quickly and suggested that the mobile Internet was different from and an important complement to the fixed‐line Internet. At first, the users of the mobile Internet in Japan were young, and the services, phones, content, portals, and content provider business models were simple. Over time, each item evolved from simple to complex, while users diversified. The author urges US and European firms to rethink their strategic postures regarding the mobile Internet, focusing first on the appropriate early drivers.

The Mobile Internet is a sequel to Funk’s Global Competition Between and Within Standards: The Case of Mobile Phones. In that volume he challenged both traditional regulatory and classic free‐market policies to setting standards. Relying on a hybrid model that used both market and committee mechanisms, he explored standard setting and firm competition in the mobile communications industry. This model, he argued, explained why certain mobile communication standards like GSM have become global standards, and how the Finnish Nokia became the leading handset producer and the Swedish Ericsson the leading producer of mobile infrastructure.

“In Japan, DoCoMo’s wireless Web phones are all the rage,” reported Fortune in September 2000. The story focused on the efforts of the mobile operator to take its cutting‐edge technology global:

It is hardly an exaggeration to say that DoCoMo’s i‐mode phones have the potential to become the biggest consumer phenomenon to emerge from Japan since Sony’s Walkman in the early 1980s. The world will soon find out whether that prediction is true: DoCoMo is set to bring its cutting‐edge mobile Web technology to the US and Europe. And the phone company’s huge success in Japan should give it a technological and marketing edge over global competitors like AT&T and Vodafone. Small wonder that the industry considers DoCoMo the most important company to watch in the coming huge battle for the mobile Internet market (Rohwer, 2000).

Despite the provocative title, NTT DoCoMo has not yet succeeded globally. In effect, the bust of the telecom boom phase has revealed cracks in the operator’s armor that were concealed during the intense growth years in the late 1990s (see Dan Steinbock Wireless Horizon, New York: Amacom Books, 2002, Chapter 6). Except for a few insightful journalistic pieces, many of these cracks have been downplayed in the excitement over NTT DoCoMo’s service innovation.

Increasing tension between DoCoMo and its corporate parent, NTT, which owns 64 percent of the mobile operator, has complicated the execution of effective business strategies. In contrast to the United States, where subscribers first adopted the fixed‐line Internet, mobile penetration grew first in Japan, which was bound to exaggerate the strength of NTT DoCoMo penetration strategies in the early 3G transition. In contrast to the most advanced mobile markets in the United States and western Europe, the Japanese market was dominated by NTT DoCoMo. With its almost 60 per cent market share, this mobile operator enjoyed extraordinary bargaining power in the industry value chain, from services to equipment manufacturing. Although this de facto market lock ensured virtual monopoly power in Japan, it translated to a troublesome barrier against internationalization, not to speak of global strategies. NTT DoCoMo excelled in service innovation in Japan, but has not been as successful in exporting its popular i‐mode to foreign markets.

The peculiar history of Japanese public policies, innovation, and market insularity may explain much of NTT DoCoMo’s recent success and the difficulties in translating this triumph to successful penetration strategies internationally. Moreover, it is debatable whether NTT DoCoMo’s service innovation is sustainable because much of it may well be competed and imitated away.