J-Phone Tiptoes Towards 3G

J-Phone Co. Ltd. crept into 3G territory on Sunday with more of a whimper than a bang. Just 160 people are involved in the trial of its W-CDMA service in and around Tokyo, and there is just one handset model available, NEC Corp.’s (Nasdaq: NIPNY) J-N001.

So low-key was the trial launch that the company did not feel it was worth announcing, says J-Phone’s public relations manager Kazuyuki Hagiwara. Other reasons could be that the company is already having teething problems with the handsets, that its capital expenditure budget has been cut by parent company Vodafone Group PLC (NYSE: VOD) to help keep global costs down, and that the indifferent start by NTT DoCoMo Inc.'s (NYSE: DCM) FOMA service has shown that the market may not yet be ready for 3G (see Japan's 3G Needs a Kick Start).

The trial service, which offers data throughput of just 28.8 kbit/s to the handset, is not quite what J-Phone had planned. The original intention was to have 1,000 people sampling services using two handsets. The J-N001 was to have handled services with speeds up to 64 kbit/s, while the J-SA001 model from Sanyo Electric Co. would have offered up to 384 kbit/s.

But it now looks as if the Sanyo model will not be available until August, and even then only offer up to 64 kbit/s, says Hagiwara, adding that J-Phone will increase the number of trialists during the year, hoping to have 1,000 by December.

The initial trial network of mini W-CDMA base stations extends to within the area bounded by National Route 16, a rough circle with about a 30 kilometer radius from the center of Tokyo. J-Phone is planning 60 percent national coverage for the full service launch, which was originally due for June but is now slated for December.

According to J-Phone president Darryl E. Green, the commercial launch was postponed so that the carrier could deploy network software that is compliant with the latest specifications from standards body 3rd Generation Partnership Project (3GPP). This would allow the 3G service to be fully compatible with Vodafone's GSM networks, and also allow J-Phone "to commence 3G services simultaneously in major cities throughout Japan, not just Tokyo," Green said in April.

But Kirk Boodry, director of equities research for telecommunications at Dresdner Kleinwort Wasserstein in Tokyo, believes the delay has more to do with handset issues. “My feeling is that it’s more to do with the phones. J-Phone doesn’t have [many of] the handsets, and they don’t have a very long battery life. So they are asking themselves ‘Why do we have to launch a new service now?’ ”

However, he believes J-Phone's cautious approach is justified, considering DoCoMo's initial problems following its commercial launch.

Many observers believe Japan's 3G market will not take off until a number of major issues -- namely, area coverage, handset price, handset performance, and available content -- are addressed. Until then, 3G packages will not compare favorably with the current popular 2G offerings, such as DoCoMo's i-mode. J-Phone's main rivals are already in the process of tempting customers into the 3G world -- DoCoMo with its struggling FOMA service and KDDI Corp. with its recently upgraded CDMA service (see KDDI Makes Waves With 1x ).

J-Phone’s Hagiwara believes the operator's planned 60 percent coverage at launch will help it achieve its goal of 2 million subscribers by March 2004. It currently has more than 12 million subscribers to its 2G service. But the company is keeping quiet on how J-Phone's handsets and content offers will differ from DoCoMo's. “These are still secret,” says Hagiwara.

— Paul Kallender, special to Unstrung

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