By ignoring the copyright (like everybody here) I post
an interview with a prominent member of this list I just
got over several other newsletters and mailing lists:
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Interview with Renfield Kuroda
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This month, Renfield Kuroda, who lives in Tokyo and covers the
wireless Internet industry for a major Wall Street financial
firm (which must remain nameless due to restrictions placed on
him by the firm's legal department) was gracious enough to agree
to an interview with the Japan E-C newsLINE. In our discussion,
Ren shared a lot of insights into the current state of Internet
business and where it's going in the near future.
Q. What is your background, and how did it lead you to your
present job in Japan?
A.I came to Japan immediately after graduating UC Berkeley, via
the JET Programme. After JET, I joined a small Japanese design
firm to help start Digital Media Group, spending 1 year there
doing various internet/digital media things. I joined my present
firm in June 1998, initially in the Japanese Language Engin-
eering Group, doing I18N work, mostly for web technologies.
I moved to E-Business Technologies where I am presently in
engineering and strategy, focused on wireless Internet, split-
ting my time between building things, finding new things to
build, and finding promising companies and technologies.
Q. What kind of people and in which industries are you in
regular contact with in the course of a work week?
A. Other engineers and developers, various people via several
mailing lists, research analysts, traders, designers, firm man-
agement, and lots of inter-firm interaction, locally and
internationally with our offices in NY, London, Hong Kong. Also,
I' m constantly meeting with vendors and other firms in
wireless, knowledge management, financial data, and internet
tech.
Q. How many people are on the Internet in Japan?
A. Twenty million by traditional count. However, over 14 million
are also accessing data and sending email, etc. via cell phones
So you'd have to include another 12 million or so.
Q. What are the major stories in Internet business in Japan
these days?
A. Only one: the future of the Net is wireless. It's already
here. NTT DoCoMo has over NINE MILLION subscribers to its I-Mode
service. And it's growing at nearly a million a month. That's 9
million people surfing the web and doing e-mails via a cell
phone. That makes it the world's largest cell phone operator,
with almost almost 30 million customers, and also Japan's
largest ISP. The next largest traditional(home dialup)ISP is
Fujitsu's @Nifty, with 3.5 million users.
Q. Are the major systemic barriers that have held Internet
growth back in Japan now disappearing?
A. Fixed line costs are astronomical. Because of the government
sponsored NTT monopoly on fixed lines, it costs about US$700 to
get a phone line in your apartment. The irony is, NTT spun off
its pitiful cell phone division and punished an uppity career
employee by putting him in charge. He turned NTT DoCoMo into a
powerhouse, now valued MORE than NTT and making the fixed line
cost issue irrelevant. You can already get 64k speeds via PHS
cellular phones. With wCDMA next year, speeds will rapidly
approach hundreds of k and soon megs, so the necessity of fixed
line drops. In fact, as of a few months ago the number of cell-
ular phones overtook the number of fixed line (57 vs 55
million).
Q. How long have you been tracking developments in wireless
Internet access in Japan? What have been the major changes and
surprises in that time?
A. Over a year, from just before i-mode started. The major
surprise has been the speed of uptake. DoCoMo predicted 10
million i-mode users by 2001. We'll hit 10 million by August.
Before February 1999 there wasn't much besides SMS messaging.
Now, only a year and a half later, there are 14 million people
using cell phones.
Q. Why is wireless Interent access via cell phones such a
phenomenon in Japan as opposed to, say, the US? Is it mainly
due to the fact that Japanese enjoy "always on" cell phone
access throughout the country?
A. Let me mention several reasons. Land lines and PC hardware
are relatively expensive, as are local landline charges. Homes
are small and desktop room is scant. Office PC penetration is
also relatively low. Also, Japanese mostly commute via public
transportation, allowing for lots of time to kill -- perfect for
web-enabled phones. Then there is the fact that many Japanese
consider themselves tech-illiterate. They can't type, and have
never used a PC, but anyone can use a phone. In fact, a major
marketing strategy of DoCoMo'sis to NEVER mention things like
email, Internet, or technical terms, instead focusing on
"communication, buying a ticket, or playing a game"
Q. Sounds like AOL's strategy. Why has NTT DoCoMo's i-mode
been such a hit, even though its users are looking at tiny
screens and typing on tiny key pads?
A. Such an American opinion! First, the technical truth: the
screen on Nokia's I-Mode phone is less than half the size of
Nokia's European WAP phone, and yet the WAP phone can only dis-
play 4 blocky lines of text, whereas the I-Mode phone can dis-
play 6 lines of text, 16 characters per line, plus GIFs 111 x 71
pixels. Many phones in Japan can support more text, colors, and
larger graphics. So, the small displays are MORE than adequate
for displaying text and image data. Besides, a typical Japanese
phone weighs less than 100 grams, fits in your shirt pocket,
and has a lithium-ion battery that lasts a week.
As for the keypad, high-school kids who crank out 50 e-mails a
day on their phones can do so at 40 words a minute. A recent
contest in the cool Shibuya area of Tokyo produced a winner who
could do over 70 words a minute! You think learning to type is
any easier than using a phone keypad?
Q. Will NTT DoCoMo continue its domination of this market or
will its competitors, DDI and IDO, make inroads into market
share? Why haven't they been able to compete with i-mode so far?
A. NTT DoCoMo isn't going anywhere for a while. They've got well
over 80% market share for smart phones, and all the momentum
that a government-sponsored, industry-dominating monopoly can
muster. All major players, be they hardware, contents, what have
you, go to DoCoMo first because they have the customer base.
Q. When will DoCoMo launch its 3G digital cellular system? How
fast will it be? What will that speed allow users to do that
they can't do now?
A. Wideband CDMA is scheduled to launch spring 2001. Initial
estimates are for 100k/sec, over 300k/sec in optimal conditions.
Q. Is the Internet boom in Japan attracting lots of attention
from foreign firms?
A. Not nearly enough in my opinion.
Q. Are American firms still being too "US-centric" about the
Internet and missing opportunities in Japan?
A. Absolutely. There are opportunities in Japan that simply do
NOT exist anywhere in the world: 14 million customers, fast
takeup of new technologies, profitable business models.
Q. What separates those that succeed in Japan from those that
fail?
A. In order to succeed in Japan you have to understand Japan.
You need local presence and local connections. Opening an office
in Tokyo and bringing in $50 million in VC will get you nowhere.
You need people who speak the language and are connected in the
industry. The cutting edge wireless world is no different than
any other industry in Japan. It's dominated by an old boy's
network, and all the major players are top names like Sony, NTT,
and Fujitsu. There are many young and hungry companies, some
doing very well (Softbank,Tokyo Mettalic Tsushin) but still they
have extensive connections and know how to get
themselves in good with the right politicians and bureaucrats
to get the chance they need.
Q. For which kinds are foreign firms is Japan's present boom in
e-commerce producing opportunities? How are they entering the
market? Joint ventures, greenfields, aquisitions, licensing
agreements?
A. A lot of infrastructure is still foreign -- nobody makes
better routers than Cisco. Also, big opportunities to fund
start-ups and supply everything from backend systems and
customer/relationship management tools to "e-commerce" software.
Of course both your company and your product needs to work in
Japanese, in Japan, on Japan time. Again, strategic partnerships
are the way to go, even if you're bilingual. Connection, via
bits as well as handshakes, makes business success in Japan.
Q. More specifically, how is the boom in wireless Internet
access opening doors for foreign firms in Japan? What kinds
of foreign firms do you see becoming players in Internet bus-
iness in Japan these days?
A. Domestic finance in Japan is still very shaky and
traditional, so there's tons of opportunities for funding
and investing. There's also lots of smart local players with
a cool technology, or a copy of a successful website from
the States, but with room for improvement in supply chain,
knowledge, and content management. The real players in Japan,
like in the States, will be the VCs.
Q. Is Japan's inablity to get its economy in gear acting as
a major impediment for firms who would like to take advantage
of the opportunities the Internet?
A. Nope. Just the opposite: less local competition! And,
increasingly, more local players are willing to partner with
a foreign company because that's the only option that can
save them.
Q. How will the present wireless access boom affect B2B
E-commerce in Japan?
A. So far, B2B hasn't come yet because so much money is being
made in B2C. But the inefficiencies of Japan's famously huge,
basically valueless middle management and unbelievable supply
chains mean big opportunities for cost-cutting.
Q. Now it's time to get our your crystal ball. Any predictions
as to how the landscape of e-commerce in Japan will look like
in a year? In two years?
A. I think B2C will continue to dominate. Fashion and trends
have always been and always will be big in Japan. I don't know
which famous singer or cartoon character it'll be, but it
doesn't matter because it changes every 3 months anyway.
I feel confident that the future WON'T be what everyone's
hyping and demoing now for 3G: video phones. Wireless video
telephony is not the holy grail of 3G. That being said, some-
one will figure out some use for 3G that no one now can en-
vision, and it will be HUGE.
Audio will be a big deal: J-Pop CD singles sell well, so it's
not hard to imagine downloading the latest MP3 on your wire-
less cellphone/walkman, but that's not future tech because we
already have PHS phones that can do that.
I think the really cool stuff will be breaking up the phone into
component pieces. I hate all the hype around Bluetooth, because
it's just cable replacement. But, if you can use Bluetooth to
break up the phone itself, make my belt buckle a phone, stitch
buttons into my shirt sleeve, put a folding screen in my pocket,
and a hard disk in my shoe.........
Ericcson's and everyone else's visions of the future are so
lame. Some company will specialize in making screens. In-
credibly rich, color, foldable screens that do nothing but
display. Some other company will make really small mics and
speakers. So, with Bluetooth tying them all together and to
a 3G network, why do I need a phone with a keypad, screen,
mike, and speaker that all suck?
My final prediction: the future is fashion. Think of the
leather band, of the gold face, or the slick design. The same
thing is happening with wireless phones in Japan, and a bit
in Europe, and with Bluetooth to break up the components,
your earring is your speaker and mic, your necklace is the
antenna, and your false fingernails act as a keyboard
by just tapping your fingers.
A. Sounds like I'd have to do some accessorizing to
make that work for me, but thanks for opening that window
into the future!
Received on Thu Aug 24 13:01:26 2000