i-mode: 3G services at 2G ease?

Some industry pundits are quick to point out that i-mode, due to roll out in Hong Kong through Hutchison’s mobile unit late next month, is not exactly short of challenges that it needs to overcome in order to quickly gain critical mass, and in fact, it’s not really taking Asia by storm. Although similar to the earlier, more familiar WAP (wireless access protocol) technology, proponents of the Japan-developed system argue it provides much more, and may revolutionise the space in much the same way as iPod did with MP3.

1 Developed by Japan-based NTT DoCoMo and launched in 1999, i-mode is essentially a 2G wireless internet service for mobile which presents an alternative to WAP and 3G. It offers everything from email on-the-run, voice data, payment services and everything else that you can find online — video is just around the corner. It’s presented in a user-friendly format and at much higher speeds, through a network of official and unofficial partner i-mode sites, numbering more than 5,000 and 100,000 respectively.

2 While i-mode has become the flavour of the day in Japan with more than 50 million customers, it serves a comparatively paltry five million people globally, raising questions about its forecast success outside of Japan. Taiwan and Singapore, which in 2005 launched i-mode services through Far Eastone and StarHub respectively, are leading the way for Asia-Pacific. Nonetheless, they have not experienced the same rapid take-up of the service, and other global markets, particularly Europe, have likewise struggled.

3 Some say it has the telcos running scared. Operators have spent hundreds of millions of dollars acquiring 3G licences, developing infrastructure, rolling out the platform and marketing what continually threatens to be a white elephant. By comparison, i-mode’s 2G platform offers 3G-similar services, it’s far cheaper, easy to use and already boasts a far greater potential consumer base.

4 i-mode’s competitive pricing structure is one factor which has telcos in fear of cannibalising their revenue of their own similar pre-existing offerings, according to experts. With most offering their own proprietary or partner-developed browsing platforms for mobile, often at a higher price, it makes little sense for them to offer something cheaper, like i-mode.

5 Another key challenge for i-mode is that the internet-through-your-mobile technology already exists with WAP and 3G. Thus, its introduction is widely viewed as an incremental improvement, rather than a revolutionary one, and consumers will find it difficult to shift for anything less than a revolution. Telcos need to lead the way, fundamentally shifting their emphasis with a concerted effort to migrate their offer to the new system — which needs to be clearly differentiated from WAP and particularly 3G — something they’re not yet doing.

6 While the quality and availability of content is improving, 5,000 official sites is a tremendously low number by internet standards. Experts believe NTT DoCoMo is hindering the take-up of i-mode with a ‘walled garden’ policy, which seeks to keep consumers within the confines of its partner sites, guaranteeing traffic and offering potential returns to those sites.

7 But perhaps the largest hurdle for i-mode is a viable long-term revenue stream for brands, an issue which rears its head in all forms of new media. Limited advertising opportunities are a costly problem, with even specific digital ads needing to be reformatted specifically so they work on mobile. Couple this with a lack of understanding in how to use mobile as a media channel, and it will be time before interest peaks.

8 Despite the challenges i-mode faces, brands will eventually turn their hand. While 3G remains popular among leading technology markets and an upscale demographic, it’s worth remembering that much of Asia is still focusing on 2G.

WHAT IT MEANS FOR BRANDS...

It is likely be at least another two years before effective advertising revenue models are developed, both in Japan and other i-mode markets globally. Currently, the lion’s share of the revenue comes through subscriptions and content downloads.

i-mode is presenting itself as a relatively ‘brand neutral’ platform, with brands like NorthWest Airlines using the platform for a wide range of consumer promotions. But the platform does not exactly encourage breakthrough creative.

WHAT IT MEANS FOR TELCOS...

Telecommunications companies must move quickly to differentiate i-mode from 3G, in order to ensure the incumbent platform remains viable.

Pricing and promotion of i-mode needs to be reviewed in order to ensure consumers actually use the platform.