Japan Is Trying to Turn Its Web Phone Craze Into a Global Success

Rika Ogawa works in a body-piercing store, dyes her hair amber brown and knows quite a lot about her friends’ dates. To prove she’s really up on the latest, she owns a Web phone to view pop idols, swap e-mail and download electronic tunes--on a screen the size of two postage stamps.

About 25 million Japanese--a fifth of the nation’s population--use Net phones to chat, play games, read news, check stocks and search for restaurants, all on a 1-inch-by-1-inch screen.

Could Japan’s craze over Internet-linked phones carry over to the United States, where most Web surfers use personal computers?

Japanese providers of Net services are about to find out.

Led by NTT DoCoMo, the industry is pushing overseas--Japan’s first pass at scoring globally with an exported service, rather than a manufactured product such as cars and electronics.

The leader in Japan’s wireless Web is the “i-mode” service sold by NTT DoCoMo, the mobile phone unit of Tokyo telecommunications giant Nippon Telegraph & Telephone.

NTT DoCoMo is buying a 16% stake in AT&T; Corp.’s mobile phone unit for $9.8 billion, with hopes of expanding its i-mode business and mobile services to the United States.

NTT DoCoMo also has bought a $100-million stake in the Japan unit of America Online Inc., the largest U.S. Internet service provider, to develop AOL services linking PCs and mobile phones for the international market. But it hasn’t yet given details on pricing, timing or types of service.

Net phones have proved key to getting Japan wired because only a third of Japanese homes have computers, while half the population has cell phones.

The situation is roughly reversed in the United States, where lifestyle differences could present obstacles to exporters of the Japanese service. More than half of U.S. homes have PCs, lessening the need for people to find another way to get online.

Americans also spend far less time in crowded lines and on crowded trains. And some skeptics say Americans are less likely to get sucked into fads than the Japanese.

Will Americans pay to download an electronic version of, say, “Purple Haze” so it rings out when a call comes in, or to grab cutesy images for “wallpaper” on their cell phone screens?

Hironori Tanaka, an analyst with Morgan Stanley Dean Witter in Tokyo, believes i-mode can succeed in the United States as long as information and services are adapted to American tastes.

“I-mode succeeded in Japan because it gave what people wanted,” Tanaka said. “As long as it comes up with a business strategy to provide content that answers Americans’ needs, it has a good chance.”

I-mode has a chance to one-up the competition with the advent of a speedier technology called “3G,” for “third-generation,” which lets people watch video clips on their cell phones.

This May, NTT DoCoMo, which already controls 60% of Japan’s wireless market, expects to be the first in the world to offer 3G service, although it will be initially limited to the Tokyo area.

I-mode has drawn nearly 17 million users in Japan since February 1999, with subscriptions going strong and profits at NTT DoCoMo soaring.

Although some i-mode Web sites are free, others cost from 90 cents to $2.60 a month.

The fees are collected through the regular mobile-phone bill by NTT DoCoMo, which takes 9% of that charge plus the $2.70 a month basic i-mode service fee. NTT DoCoMo also charges for voice and data volume.

For everything, users pay an average of $88 monthly.

There is the drawback of squinting at a tiny screen, but pictures are in vivid color. And the phone’s handy candy-bar size is i-mode’s greatest asset, offering a feeling of immediacy, even though the information you get is far less than what’s on PCs--headlines, for example, instead of entire news articles.

Thousands of i-mode Web sites have sprung up. Some are “official,” listed on a preset menu in the phones and reached by a push of a button; most are “unofficial” but can be accessed by punching in the site address. Users can bookmark sites or add them to their personalized i-mode menu.

The biggest money-making sites in Japan are for downloading tinny electronic melodies and cartoonish images.

Bandai Networks, a 4-month-old spinoff of toy maker Bandai Co., is one of thousands of sites that have sprung up. Bandai Networks has attracted 3.2 million Japanese subscribers to Web pages where they can download cartoonish images such as Godzilla and Hello Kitty.

“I think Americans will accept something this convenient,” said Bandai Networks President Toshiki Hayashi, smiling in his Tokyo office as he showed off cell phones lighted up with mascots and photos of baseball stars.

Hayashi said his company hopes to offer similar services in the United States, although it has no specific plans yet.

Japanese carriers and manufacturers have plans to transform cell phones into electronic wallets, letting users pay for purchases by flashing the phone across a device. They also are planning to turn the phones into miniature navigation machines with moving maps that pop up to help people find their way.

NTT DoCoMo also is eyeing the surging Asian market, particularly China.

It’s taken a 20% share in Taiwan’s KG Telecom and agreed to take minority stakes in two European companies, KPN Mobile of the Netherlands and Hutchison 3G UK Holdings. It also owns a stake in Hong Kong’s largest cellular phone company, Hutchison Telecom.

“Personally, I’m a big believer in i-mode’s world growth,” said Adam Lavine, chief executive of FunMail, a California company that wants to sell its technology and service--letting people send animation with e-mail--on i-mode.

“As far as hand-helds, Japan is a couple of years ahead of the rest of the world.”

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Worldwide Cellular Phone Use

Japan’s NTT DoCoMo, with its popular mode hand-held data service, is on pace to become the first mobile operator in the world to offer the next generation of faster data transfer over the airwaves.

Number of cellular phone subscribers in 1998 and 1999, in millions:

Europe

1998: 105.1

1999: 178.6

*

Asia

1998: 108.2

1999: 161.2

*

The Americas

1998: 96.2

1999: 134.5

*

Australia / Pacific Islands

1998: 6.2

1999: 7.5

*

Africa

1998: 3.5

1999: 7.6