The deal announced yesterday between America Online and Japan's NTT DoCoMo to create a range of wireless Internet services is the most ambitious of AOL's various forays into the wireless world. It also serves to give NTT a strong ally in the United States, a market it has long had its eyes on.
NTT DoCoMo is the wireless communications arm of Japanese giant NTT. With more than 32 million subscribers, it is far and away the largest single national mobile service in the world. AOL, with more than 23 million subscribers, is the largest ISP in the world.
Analysts say the match is at this point a marriage of convenience, without indications of any deeper loyalty between the two companies. But it's a marriage that could ultimately unsettle the alliances developing in the U.S. wireless world and push the look and feel of wireless Net technology in a new direction.
The two companies each have succeeded far beyond competitors by making their services easy to use for mainstream consumers. That's a goal that has largely escaped wireless companies in the United States. If the pair is able to bring a version of DoCoMo's iMode service to the United States, it has the potential to gain considerable traction that other wireless companies lack.
For this to happen, the pair would need to partner with one of the U.S. phone companies, most of which are committed to a non-iMode technology. Analysts say that kind of partnership is possible, however. "If that combination happens, it will be very powerful," said Bob Egan, an analyst with the Gartner Group. "Another chess piece needs to be played here before that comes to bear. But I wouldn't rule it out."
The link between AOL and DoCoMo is a natural fit, placing two companies with similar global ambitions and approaches to customers on the same page. In fact, DoCoMo's iMode service has in many ways served as the closest analogy the wireless world offers for AOL's early days.
Web access over cellular phones in the United States has remained something of a novelty, hampered by difficult-to-use interfaces and lack of content. But iMode, which analysts say has a more consumer-friendly focus, has already skyrocketed to 12 million subscribers.
DoCoMo's service has taken a different approach than most of the world's mobile phone Web connections. Where U.S. companies are using a technology called Wireless Access Protocol, or WAP, iMode takes advantage of technology that is closer to that of the ordinary Web.
Developers say that means it's easier to create sites for the service, and the level of content available through each system has borne this out.
To date, iMode is available only in Japan, as a proprietary service of DoCoMo. That doesn't mean the company limits what sites a customer can visit, but NTT does serve as a portal to many of the most popular sites.
With its dominance in Japan settled, the company is looking elsewhere in the world. It already has partners in Hong Kong and Europe and has its eyes on the United States. Analysts have said that the joint venture between SBC Communications and BellSouth could be one potential partner.
Executives yesterday said their goal was to push their influence over the wireless Web across international boundaries.
"Through this alliance, we will work together to create brand new services...with our joint venture, AOL Japan, as the first testing ground--and to extend them around the world," DoCoMo CEO Keiji Tachikawa said in a statement yesterday.
The deal will play itself out in Japan first. NTT will become an investor in AOL's Japanese service and offer AOL software such as email and Instant Messenger on the iMode service. The online giant already has deals with carriers and equipment makers to move those services into the U.S. wireless market.
The two companies also are establishing a "senior-level working group" aimed at developing next-generation wireless technologies, which will provide much faster connections than today's molasses-slow mobile Web services. With the reach of both companies, that group could be enormously influential in determining the future shape and feel of wireless interfaces--and which companies run the services.
Analysts note that AOL has no exclusive loyalty to NTT. The company is dead-set on seeing its content and communications services available on any platform possible. Already it has cut distribution deals with Sprint and AT&T in the United States, among others, and today announced the availability of an AOL mobile service in Brazil.
If AOL can work to create the face of new services with the most successful wireless Internet company in the world, the two could extend their influence even beyond the services they own themselves. Analysts say further partnerships are likely as the alliance brings other companies into the fold.
"AOL wants to dominate, and they've made that clear," said Jane Zweig, senior vice president of research firm Herschel Shosteck Associates. "I think it's too early to say what the final outcome is going to be. But it's clear that any successful strategy has to be a partnership and that nothing is going to be exclusive."