Japan’s 3G market heats with KDDI entry

Eriko Amaha

TOKYO: Takeharu Matsuzaki said he wanted to do "a lot of stuff"

with the 10,000 yen ($75) phone he had just bought at a KDDI shop in Tokyo's

Toranomon office district.

What he didn't know was the extent of the stuff he could do. In fact, the

60-year old office worker wasn't even aware, until he was told by a reporter,

that his new phone was a third-generation (3G) model that can deliver

information twice as fast as his old phone at 144 kbps (kilobits per second).

That's fast enough to send and receive moving video and allow wireless

Internet access at broadband speeds. For KDDI Corp, which launched Japan's

second 3G phone network on Monday, 60-year-old Matsusaki is just the type of

customer it is looking for as it aims for a smooth, low-key and seamless

migration to 3G.

"I'm going to enjoy my phone," said Matsuzaki, who upgraded his

three-year-old phone to a sleek black A1012K handset manufactured by Kyocera

Corp. On its first day, the new KDDI phone is already usable nationwide in areas

that cover 70 per cent of the Japan's population.

The quiet 3G launch for Japan's number two mobile operator contrasts with the

fanfare surrounding the launch of the world's first 3G network by market leader

NTT DoCoMo Inc last October, which drew attention from around the globe.

While DoCoMo expanded its 3G network on Monday to cover 60 per cent of

Japan's population, from about 22 per cent, KDDI's new "CDMA2000 1x"

services began quietly, although it is expecting seven million users to shift to

its 3G phones by March 2003.

DoCoMo, which charges the equivalent of $300 for its standard phone, which is

about 2.6 times faster than the phone Matsuzaki bought, has so far drawn about

80,000 3G subscribers. DoCoMo has been hampered by its limited service areas and

expensive handsets, reflecting the fact that it has had to build a 3G network

from scratch.

Anyone who wants full nationwide coverage and 3G access on DoCoMo will have

to carry two phones, at least until it brings out dual-mode handsets. That's why

KDDI is not hyping it advertising for its new 3G service, said Yuji Fujimoto,

KDDI's general manager for sales planning.

"We didn't want consumers to think our service is like DoCoMo's,"

Fujimoto said.

3G battle



But KDDI's natural migration to 3G will still require effective marketing to
retain current users and also snatch subscribers away from its competitors,

analysts said. This is particularly important for KDDI, whose marketing

strategies have often been blamed for spoiling its competitive advantage with

its wireless technology.

Fujimoto said KDDI had revamped its marketing approach and started using

female celebrities, like its competitors DoCoMo and J-Phone Co Ltd., operated by

Japan Telecom Co Ltd. and British cell phone giant Vodafone Group PLc.

He said KDDI would also focus on marketing its superior e-mail services,

which allows users to send still and moving pictures and a map to show their

location.

This, Fujimoto said, is the best way to pitch KDDI's GPS (global positioning

system) technology, something DoCoMo 3G does not offer.

While analysts generally agree that KDDI has better, cost-effective

technology, many say the company only has a brief window of opportunity before

DoCoMo begins to gear up its formidable marketing machine to sell 3G services.

DoCoMo Chief Executive Keiji Tachikawa said last week that he expected

DoCoMo's brand for 3G services, FOMA -- which stands for "Freedom of Mobile

Multimedia Access" -- to become its "flagship product" in the

current fiscal year, which started on Monday.

"By the end of next March, we will have 90 per cent coverage of the

population, have dual network services (dual-mode phones) and roll out new FOMA

terminals," he told reporters last week. At present, KDDI and DoCoMo are

neck-to-neck in terms of speed and coverage. DoCoMo's 3G service delivers data

at 384 kbps, about 2.6 times faster than KDDI's service.

And close on the heels of DoCoMo, KDDI plans to widen its 3G coverage area to

90 per cent of Japan's population by March 2003. In June, another player will

enter Japan's 3G arena, when J-Phone launches its 3G service, but so far no

details of the service have been announced.

(Additional reporting by Reed Stevenson)