It's quite shocking when a senior manager at a major Japanese wireless operator points out that i-mode is basically passe'.

The words weren't as severe as that, but the executive, from one of DoCoMo's competitors asserts that DoCoMo's wireless data strategy no longer focuses on the traditional perception of i-mode as a platform for accessing the Internet with a mobile phone.

"DoCoMo's whole service focus now is actually on transactions and not on content," he said over his Heineken in the sleek surroundings of the Isola bar in Hong Kong.

Obviously, statements from a company's competitor must be taken with a pinch of salt, but the topic certainly roused my curiosity enough to look into a bit further.

No, i-mode isn't exactly dead because it continues to contribute a significant part of DoCoMo's ARPU (some 26% for the quarter ending June 30, 2005). While the actual amount of ARPU from i-mode (2G and 3G) is down about 7%, the decline is consistent with the overall drop in revenue per user.

Certainly, money from i-mode has helped DoCoMo slow the erosion of ARPU and more important, insulate its balance sheet. In 2004, the operator recorded service revenue of some $43 billion. i-mode's 26% would equal some $11 billion!

Yet, despite the huge market value of i-mode, there are signs that the platform that launched the wireless Internet is fast approaching middle age.

For starters, ARPU from i-mode is declining at a steady pace. For example, 2G i-mode users spent about 2,000 yen in the second quarter of 2004. A year later, they spent 1,550 yen, or 23% less. DoCoMo's 3G business is faring significantly better, registering much lower ARPU erosion, but erosion nevertheless.

At the same time, subscriber growth is slowing down and the penetration rate is now over 90% of DoCoMo's overall customer base.

It's safe to say that i-mode as a business has quietly slipped past its peak. Put another way, the wireless Internet has reached commoditization in a little over five years since i-mode was launched in 1999. With commoditization comes continual price decline.

All of which suggests the available revenue from the traditional i-mode platform of ringtone downloads and information services will shrink. So it should come as no surprise that DoCoMo is probably putting less emphasis on it, thus confirming the claim from my friend from Japan.
Besides, i-mode revenue for DoCoMo consists primarily of a monthly subscription fee to the service, packet charges for accessing the platform and a percentage of the subscription fees to content providers, all of which are supported in a well functioning ecosystem - albeit in a (very) slowly declining overall market.

DoCoMo is now focused on enabling transactions using its handsets.
DoCoMo's FeliCa service, which allows i-mode handsets to pay for things, is the company's fastest growing business. In less than a year since its launch in August 2004, over five million FeliCa-enabled users have signed up.

Between February and April, the number of FeliCa transactions doubled from 320,000 to 690,000 and the trend is likely to accelerate. So while traditional i-mode services offer a steady revenue stream, FeliCa is certainly looking like the new growth opportunity.

More importantly, FeliCa allows DoCoMo to explore additional business opportunities, such as becoming the clearinghouse for these transactions or adding credit to the payment system.
So as i-mode's revenues decline as it enters maturation, DoCoMo has found a way to evolve beyond i-mode by linking its services to traditional "brick and mortar" businesses via transactions. In that sense, transactions are the new mobile content - at least in terms of new revenue growth. It will be interesting to see if FeliCa generates as much overseas buzz as i-mode did.--Telecomasia.net

upay ¶ 2:54 PM

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