Tapping the Data Communications Market Tweet

From Acorn to Oak

Take a stroll through a forest of oaks on an autumn day and consciously try to avoid stepping on the acorns. Can you do it? Perhaps, but it won’t be as easy as you think. At that time of year, acorns are ubiquitous. For various reasons, however, most will never mature into oak trees.

If only one acorn succeeds, however, a forest can prosper and grow. With each successive year, the seedling grows taller and stronger, its roots seeking water, its branches multiplying and dividing in search of more energy. As long as the tree can adapt itself to the surrounding environment, it will thrive.

Now take a stroll through a modern Japanese city and consciously try to find someone who doesn’t have a mobile phone. It can be done, of course, but here again the task won’t be easy. The Japanese market for mobile communications is often described as “mature” or “saturated” and, frankly, mobile phones are as ubiquitous as acorns.

DOCOMO planted an acorn in 1992, when it launched mobile communications services in Japan. Over the years, the mobile network has matured from a seedling with basic services – voice communication, text messaging – into a trunk that now supports a complex ecosystem of creative and useful services for the mobile internet.

A mobile communication ecosystem is sustained by revenue generated from voice and data services. As far as DOCOMO is concerned, the introductions of i-mode™ and then 3G services have seen its roots tapping incrementally larger flows of data-related revenue since the early 2000s. Despite a decade of sustained growth, DOCOMO sees significant untapped potential in the data communication market.
Raising Data ARPU

If we break down ARPU – average revenue per user, a tool for measuring revenue sources and growth – into its component revenue streams, we can see that for DOCOMO voice and data services are converging. For fiscal year 2009 (April 2009-March 2010), the share of voice services was still higher than that of data services, but DOCOMO expects data to overtake voice for the first time by the end of fiscal year 2010 (March 2011):

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In FY2009, DOCOMO’s ARPU was 5,350 yen (2,900 yen from voice + 2,450 from data). For FY2010, DOCOMO expects to see ARPU of 5,110 yen (2,550 from voice + 2,560 from data) – with data ARPU rising 110 yen (4.5%) year over year. In FY2011, DOCOMO expects to see data ARPU continue to increase, with aggregate ARPU returning to growth beginning in FY2012.

So how exactly is DOCOMO going to make this growth possible? Well, let’s return to our oak tree for an explanation …
Roots

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Our seedling needs a steady supply of water and nutrients to grow, and it gets these essentials from its network of roots. Similarly, DOCOMO is tapping into the data communication stream, promoting flat-rate billing to ensure a stable supply of revenue while providing reassurance to users, who want to enjoy mobile content and services without having to worry about the size of their monthly bill.

The number of subscribers to DOCOMO’s flat-rate service continues to increase in line with growth in demand for data communication services.

At the end of FY2009, 53% of DOCOMO subscribers (25.77 million) had chosen a flat-rate option. DOCOMO expects this ratio to reach 63% (31.7 million) in FY2010 and 70% in FY2011.
Branches

Our tree cannot survive on water and minerals alone. Without sunlight, the network of roots is meaningless. So the branches continue to multiply and divide in search of the sun. Similarly, DOCOMO attracts and retains subscribers by providing the innovative services and content that users want.

When it comes to data services, DOCOMO is “following the sun” in four specific ways:

* First, DOCOMO is promoting the benefits of the mobile Internet to light and medium users of i-mode ;
* Second, DOCOMO is cultivating an environment in which ordinary Japanese – not just the technologically savvy – can appreciate and make use of smartphones;
* Third, DOCOMO is expanding its customer base for 3G data cards used with PCs; and
* Fourth, DOCOMO is offering services targeted to users of newly popular devices such as e-book readers and tablet PCs.

An example of DOCOMO’s enhanced data services is its photo mail service. Launched in July 2009, the service allows users to remotely send images to 3G-capable digital photo frames.

After taking a photo with a mobile phone, a user simply sends the image as an email message over DOCOMO’s wireless network and through DOCOMO’s server to the photo frame, which displays it automatically. Sharing photos with family living far away has never been easier.

Photo mail is an example of what DOCOMO likes to call “simplexity” – simple solutions rendered from complex technologies. Once beyond our imagination, photo mail and similar data services are gradually becoming commonplace, enhancing our daily lives and raising our expectations for the future.

DOCOMO’s mature voice communications segment is now complemented by a promising data communications proposition that has only just begun to take root. The sky’s the limit.

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