Japan in a Cell Phone League of its Own
New York – Even the smartest smartphones in the United States can seem pretty dumb compared with their Japanese counterparts, which can act as keycards, personal I.D., transit passes, airline boarding tickets, credit cards and more.
But the blame for lagging behind the mobile future does not rest with the smartphones themselves.
Japan's leap ahead came about in part because of NTT DoCoMo, the leading mobile operator by market share in Japan. DoCoMo teamed up with Sony in 2003 to transform Japanese cell phones into all-in-one devices that go beyond voice, text or browsing functions. [Read "10 Cool Asian Cell Phone Features You Can't Have â Yet ."]
"You can walk out of the house without your wallet, because everything is in your phone," said Adrian Van Meerbeeck, vice president of research and strategy at DoCoMo USA. "It's your everything."
Van Meerbeeck spoke with TechNewsDaily on the 41st floor of a building that overlooks Grand Central Terminal in New York City. The DoCoMo USA headquarters perches like a lonely outpost in a strange, quaint land where subway riders still use plastic transit cards to swipe through the gates.
Rather than fumble in wallets or purses, subway riders in Japan can simply wave their phones over a scanner, courtesy of the Osaifu-Keitai ("Wallet Phone") system. Such phones take advantage of the FeliCa smart card technology developed by Sony and later adapted for mobile use in partnership with DoCoMo.
Yet the wallet phone feature emerged in Japan not because of better technology , but because everyone agreed to get on board and install the payment readers and other equipment needed for the FeliCa system to work.
"You get at least a few big parties that adopt it, and then little by little it becomes more of a standard," Van Meerbeeck explained. "But what I think is important is that there was no blocking from other parties."
In contrast, telecoms in the United States still show reluctance to cooperate in a similar manner on technology standards. But Van Meerbeeck noted that U.S. carriers face the challenge of covering a country almost as large as Europe, and added that Japan had benefited from unique historical trends.
"[The U.S.] is a big country, so things cannot happen as easily," Van Meerbeeck said. "Japan is a tiny country compared to the U.S. on the surface."
Tracing cell phone evolution
Japan relied heavily on cell phones well before the Osaifu-Keitai system. They became popular during a time when PCs still represented clunky devices in the eyes of the average consumer or businessman.
DoCoMo launched a mobile phone Internet service known as i-mode in 1999, and e-mail service on phones became standard around 2000. Soon text-messaging didn't stand a chance – there was no need for it.
Japanese kids and grandparents alike were tapping out e-mails on trains and buses without limits on the number of characters. That took place at least seven years before the launch of Apple's first iPhone.
"In some ways, all Japanese cell phones have been smartphones for a very long time," said Jeffrey Funk, a mechanical engineer and technology analyst at the National University of Singapore. "They had e-mail, cameras, and all these capabilities that we ordinarily associate with smartphones."
But the phone transformation went far beyond e-mail . DoCoMo's i-mode and similar services from its competitors became the default online portals for a large number of Japanese phone users, especially the younger generation. Such services allowed the Japanese cell phone carriers to offer controlled mobile content to their subscribers.
"You've got a consumer base which is used to really having the phone as almost their primary source of information, even more so than the PC," Van Meerbeeck said.
An entire keitai, or phone culture, emerged with its own shorthand lingo and text-created images. It even spawned "cell phone novels" compiled from short, text-message-size chunks that read better on small cell phone screens but later became bestsellers when published as books.
The everything phone
The popularity of cell phones as voice, text and online service devices perhaps made it easier for the next step. Sony's FeliCa smart card promised to turn the phone into the all-in-one device. DoCoMo joined Sony in developing a version for mobile phones.
DoCoMo and Sony are corporate behemoths in Japan, yet they realized that they could not go it alone. They needed the cooperation of other companies, including that of the Japan Railways and Japan Airlines to install the card readers that would allow FeliCa-enabled phones to speed travelers on their way.
Similarly, they wanted to encourage both large and small retailers and shops to adopt the technology as a universal standard.
Rather than hold onto the card technology to retain a competitive edge, Sony and DoCoMo allowed mobile-operator competitors such as Softbank to license it. That decision reduced the possibility of a scenario in which rivals such as Softbank or KDDI developed their own technologies, complicating matters for everyone involved, and perhaps even crippling the spread of the technology.
The move helped ensure widespread adoption of FeliCa among the phone carriers – which in turn encouraged everyone else to install card readers.
"It makes it easier that Japan Railways installs only one type of reader that only reads one card," Van Meerbeeck explained. "And then the mom-and-pop shops – most of them in Japan have a reader like this – they don't want three kinds of readers."
Similarly, Japanese phone manufacturers had a much easier time producing phones for DoCoMo and other mobile operators because of the standardized FeliCa cards.
Keeping some things exclusive
Of course, DoCoMo and its rivals don't openly share everything. They compete based on the services they offer, such as DoCoMo's iConcierge, which keeps tabs on restaurant openings or local concerts by a favorite band. Another Auto-GPS service keeps track of where a phone user is at a given time, sending a late-night reminder that the train system in Tokyo shuts down at midnight.
The combination of exclusive online content and FeliCa-enabled functions makes Japanese phone users exceedingly loyal customers. Switching between mobile operators isn't simply a matter of moving the SIM card with all the contact numbers – it means having to abandon all the personal information and user history embedded within a mobile network such as i-mode.
That means DoCoMo can look with satisfaction upon a churn rate (the percentage of customers leaving) of about 0.45 percent. By contrast, U.S. telecoms such as AT&T and Verizon have reported 2010 churn rates of above 1 percent.
Customer service holds strong even beyond Japan's shores. Japanese expats or travelers who need to replace lost or stolen cell phones can find a DoCoMo phone and access customer help lines in the basement of the Kinokuniya Bookstore, just across the street from the New York Public Library in Manhattan's Bryant Park.
Forging a smartphone future
For all their seemingly futuristic qualities, Japanese cell phones have not caught on beyond Japan. Van Meerbeeck encountered the difficulties firsthand when he aided DoCoMo's effort in trying to gain a foothold in Europe.
But perhaps that's not too surprising, because Japan's cell phones don't hold inherent advantages over most other phones nowadays. Instead, they draw their all-in-one power and mystique from the mobile network services and smart card infrastructure in Japan.
Exporting that future to the U.S. and the rest of the world represents a far tougher challenge than marketing the latest phone.
"The problem is that all the parties that would have to cooperate in the U.S. to make this happen don’t want to use someone else’s system. So nothing happens," said Ken Dulaney, a vice president and analyst at Gartner Research.
The U.S. could get its all-in-one phones someday, but only if a major trendsetter such as Apple can force cooperation upon the major cell phone carriers and other companies, Dulaney said. He added that Japan and South Korea had the collective willpower to build the necessary infrastructure because they have tightly linked systems and powerful cell phone carriers such as DoCoMo.
"Remember, the wireless internet [for U.S. phones] could have happened 10 years ago," Dulaney told TechNewsDaily. "The carriers kept it to themselves and screwed it up until Apple," which had the clout and "busted open their hegemony."