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Meet Mr. I-mode

Because of bets NTT's Kei-ichi Enoki laid down years ago, the Japanese carrier is leading the way in cell phone evolution.

Kei-ichi Enoki has changed the way people use their thumbs.

Considered one of the driving forces behind the I-mode service from NTT DoCoMo, Enoki helped turn handsets into machines for writing messages, surfing the Web, watching television, playing games and paying for subway tickets.

Although the company's attempt to expand internationally through a set of high-profile investments stalled, DoCoMo is once again on the international expansion trail, this time through licensing. Now, however, the company is also struggling with flat rate pricing plans promoted by competitors.

Enoki spoke (through a translator) with CNET late last year from DoCoMo's space-age headquarters in downtown Tokyo. The DoCoMo executive VP and managing director of products and services touched on what's next for cell phones, how I-mode came about and the primitive state of U.S. cell phones.

Q: For years, people said I-mode wouldn't succeed in North America because people drive instead of taking public transportation.
A: I think that's a kind of misunderstanding people have about the service. For example, people living in Tokyo, excluding executives, ride trains. But if you go outside Tokyo about 50 kilometers, everyone drives. Fifty percent of Japanese households have two cars. In that sense, nothing is different from America.

Actually, people use I-mode more in these kinds of towns, so it's not the case that people only use I-mode during their commute. They use it in any spare time they have, waiting between meetings, etc.

Right now, we don't know who is going to be the winner in 3G. So 1G, Motorola; 2G, Nokia; 3G, we don't know yet. Everybody has a chance.
You sort of touched on something that I've heard quite a bit from Japanese companies--that the approach to product development is often different than what U.S. or European companies do.
What I thought while developing I-mode is that Japan is actually very strong in developing products for the middle-class people. In Japan, you don't see a big polarization in terms of income; you don't get very rich people, but you don't get very poor people, either.

When we initially developed this, our target was young people because they are the most sensitive to new products. There was a great debate in terms of how much the price should be. Right now, we have a large screen, but in the past, we had a smaller screen. We had a great debate about the number of letters we should put into one screen. In terms of product design, we had a number of discussions on tailoring it for young people.

I will just give you an interesting example. We started developing I-mode in January 1997. At that time, there was a similar service in the United States from AT&T Wireless. Seven years ago, I talked with people on that team. They said their target was the business market. So we were completely opposite in the sense that at AT&T, they were targeting the business market while we were targeting the consumer market. So in that sense, I think we chose the right target.

What's next for I-mode? Are you going to concentrate more on international expansion or on adding applications?
Well, we want to expand internationally to obtain royalty fees and to standardize the handset so we can reduce the price. In order to increase the number of the countries that have I-mode, we have to develop new products and services.

In Japan, we want to come up with new services as well. So what we are very focused on right now is the 3G wideband CDMA and what is called the "purse" type of handset. This handset would serve to control all the gadgets or things we really have to use.

You mean like a remote control?
Not in the sense of remote control, but this controls purchasing tickets for games, parking meters, buying things in convenience stores, entering your company.

On this phone (showing his own phone), we have three applications. We have Felica (a cell phone e-commerce application), two-dimensional bar codes and infrared. Do you see this (points to a small square on the back of his business card)? It has your phone number and other information. You put your phone on it, and it will download the information.

Already, 10 million of our handsets can read two-dimensional bar codes, and 20 million are equipped with infrared.

In Europe and Japan, the government had a final say in terms of the standardization. It was a mandatory standardization by the government, but in the United States, they don't like to do that kind of thing.
What do you think about television or videoconferencing on handsets? Will that make them too busy?
Videoconferencing--this is part of your job. There is no preference to it; you have to do it whether you like it or not. We think that there is a market there, but that market itself will be small. If it goes to the consumers, I think that means a greater expansion of the market for us. But one issue is that you don't always want to use a TV phone. It is not an issue about technology; this is maybe more of a psychological issue.

What about fixed monthly pricing? What impact is that going to have on the entire cell phone carrier industry?
Basically, I did not want to introduce the fixed-price system because all over the world, all the mobile phone operators are using very limited spectrum. Actually, one of our competitors, Au (the cellular brand of KDDI), started a service so we had to follow them. If we didn't start this service, we would lose the customers. Once we introduce it, we can't retract.

In the past, the business model for the mobile phones is that we wanted the customer to use it a lot and increase our revenue. Coming up with higher-function handsets--that's the way we increased our revenues. If you go to a flat rate, revenue is limited.

Do you think flat-rate pricing will become a problem for more operators overseas?
It depends on the competitive environment. If someone comes along with it, then it's like opening the lid of Pandora's box. If no one opens the box, then maybe you just stick to the old model, but I guess overall, we are going to enter a price competition in that area.

How will 3G affect the handset makers?
I think that in the world of the handsets, we are in a transitional phase. So right now, we don't know who is going to be the winner in 3G. So 1G, Motorola; 2G, Nokia; 3G, we don't know yet. Everybody has a chance.

So I think that in terms of the product line, we need to focus on the high-end to midrange products. For the low-end type of products, you have to produce a lot. Japanese vendors will not have the advantage in that area. The Japanese mobile-phone market is the most advanced in the world, so if they accumulate experience in selling into this very advanced market, that's because the format is standardized globally. I think they have a chance to win.

When it comes to cell phones, North Americans are sort of like cavemen. We're behind everyone else. Why is that?
Well, I think it's the way the Americans think. They think that standardization is evil. The de facto standard is the golden standard for them. In Europe and Japan, the government had a final say in terms of the standardization. It was a mandatory standardization by the government, but in the United States, they don't like to do that kind of thing.

Another point is that in the states, voice mail is very developed. Although there is a time lag, voice mail is a type of mobile communication. In Japan, we virtually have no voice mail.

We have a lot of consulting companies like McKinsey in Japan. It used to be the case that they would introduce a new business model originating from Silicon Valley into Japan. But on the other hand, for the mobile phones, the Japanese branches of McKinsey and Boston Consulting Group get inquiries from around the world. We hear that the operators and the handset makers from around the world come to Japan and go straight to Akihabara (Japan's shopping district for electronics).

How big of an impact do you think Wi-Fi will have on handsets?
Well, we have a plan to incorporate Wi-Fi in our handsets. I think the issue is whether we will be able to get money through this Wi-Fi.