Tuesday, April 16, 2002 - 10:44 a.m. Pacific
http://seattletimes.nwsource.com/html/businesstechnology/134437097_mmode16.html

AT&T Wireless bets Japan's hit technology will score here

By Sharon Pian Chan
Seattle Times technology reporter

Could we be turning Japanese? That's what AT&T Wireless is plotting. Today, the Redmond carrier is expected to launch mMode, its version of NTT DoCoMo's wildly successful Japanese i-mode Internet service.

The hope is that Americans will evolve into phone-thumbing Japanese teenage girls — exchanging text messages, downloading pictures, pulling up Internet content, buying personalized ring tones — and paying for a whole new set of services on our wireless phones.
But the last time wireless carriers tried to market a wireless Internet service to consumers, users shunned it like a Mariah Carey film. For mMode to succeed — along with competing wireless-data services from VoiceStream in Bellevue and Verizon Wireless — wireless carriers are going to have to tread carefully as they market this second generation of wireless-data services to consumers.

With today's launch in more than a dozen markets, including Seattle, AT&T Wireless is dipping a big toe in the wireless-data waters as it spends $5 billion this year to upgrade its network infrastructure.
mMode is the fruit of the $10 billion investment NTT DoCoMo has made in the Redmond-based spinoff of AT&T. The Japanese company has made investments worldwide to try to reproduce the success of i-mode in other countries.

"It's the first step in a critical strategy of where the company is headed," says Andy Willett, vice president of data services in AT&T Wireless' mobile multimedia-services division. "The company is spending billions to deploy the network. This gives us the ability to develop consumer services to leverage the network."

In some ways, AT&T Wireless' mMode product is PocketNet version 2.0. The company launched PocketNet, a wireless-data service, in 1996; it was widely viewed as a failure because the service attracted fewer than a million subscribers.

Verizon Wireless and Sprint PCS launched similar wireless Web services, but none has attained the 30 million subscribers that i-mode has attracted since launching three years ago.

Slow and limited

Those earlier services delivered a few lines of text on a black-and-white 1-inch screen at speeds of 9.6 kilobits per second (compared with the 56-kilobit-per-second speed of most personal computer modems).

Accessing content was awkward: Doing something as simple as checking the weather forecast could take several minutes. It was faster to pick up a newspaper and flip to the weather section.
Subscribers can personalize their mMode phone by downloading graphics.PocketNet also suffered from incomplete coverage. Only about half of AT&T Wireless' subscribers lived in areas where the services were available. To top it off, it was only available on a few second-tier phones.

To fix the speed and coverage issue, AT&T Wireless and most of the other big wireless carriers are upgrading their networks to transfer data at higher speeds, commonly referred to as 2.5G for 2.5 generation. The technology also allows always-on data access, and users can receive voice calls while downloading data. AT&T Wireless expects to have networkwide 2.5G coverage by the end of the year.
What mMode does have over PocketNet is a new business model and better devices.

Content providers who developed PocketNet applications simply shared a branding relationship with AT&T Wireless. With mMode, content providers can charge for their applications, with about 10 percent going to AT&T Wireless and the other 90 percent or so going to content provider.

For now, customers will be billed through their credit cards; later this year, customers are expected to have the option of paying for content on their AT&T Wireless monthly bill.

A momentous change?

Theoretically, this change could be as seminal as what happened to the PC when software evolved from free code to a product companies could sell. The number of software developers and applications proliferated, and the PC went from an aficionado's device to a high-end business-productivity tool and household appliance.
That's what happened in Japan. Subscribers now think of DoCoMo's i-mode just as Americans think about the Internet on the PC: access to thousands of sites.

"There's a dramatic inability of the user (in the U.S.) to reach exciting and engaging content. There's no content outside of news, weather, sports," says Reuven Carlyle, a wireless consultant.

"What i-mode is about is messaging and communications and community and chat application and services that are brand driven. When you go to build a Web site in Japan, you say, 'Cool, now what are we doing for wireless?' "

DoCoMo's i-mode service also offered pioneering devices that have taken years to reach the U.S. The new devices AT&T Wireless plans to start selling this week offer a glimpse of that. One of the devices, the Sony Ericsson T68, has a color screen, and wireless headsets, digital cameras and MP3 player attachments are expected soon.
"From a content provider's perspective, it is a biblical difference that people get to make money from it," says George Lightbody, chief executive of Mforma, a wireless-content provider in Seattle. "It's the creation of a value chain."

Still, mMode has a long way to go. The higher speeds aren't immediately apparent on the mMode service unless you're downloading color graphics, and the service has only about 150 content sites right now (DoCoMo has 52,000). U.S. subscribers also lead completely different lifestyles than Japanese users. In Japan, users commute by train, which gives users time to kill, so they play with their devices. The U.S. culture, on the other hand, revolves more around driving, which does not lend itself to typing and reading a tiny phone screen.

"Consumer mobile Internet offerings have to compete with the large installed base of PCs that offer a rich, all-you-can eat Internet experience," says Nick Sears, vice president of marketing for new products at VoiceStream Wireless. "This makes the mobile Internet an extension for most people instead of the primary source. So adoption rates won't change dramatically unless we make the mobile 'extension' something that customers really want when they are mobile."
The last time around the block, the overhyping of the "mobile Internet" burned many consumers.

"The other companies that have gone out — we've even been guilty — say you're getting the mobile Internet, a slimmed-down version of the desktop," says AT&T Wireless' Willett. "That's not what it is. It's a phone plus. It's really about a new media."

The company emphasizes that what comes out today is only the first building block. "It's still not the whole enchilada yet," says Jeff Kagan, a telecom-industry analyst, of the new services. "It's one step. But for a change, it's a big step."

Sharon Pian Chan can be reached at 206-464-2958 or schan@seattletimes.com.