One of the most significant trends in personal computer usage during the last 10 years has been networking. The Internet is perhaps the best known and most pervasive example of networking technologies, and has proven to be an easy and efficient way of delivering a wide variety of services to millions of connected users. Another important technology trend occurring during the last decade has been the growth and increasing sophistication of wireless telephony. In June 2002, the number of mobile phone users worldwide reached one billion for the first time. At the same time, 136 million people owned a mobile phone in the U.S. In parts of Scandinavia and Southeast Asia, penetration is more than 80%.
Traditionally separate, technologies of the Internet and mobile telephony have now started to converge, bringing promises of a new era of portable networking. Key to this convergence are sophisticated wireless data services providing mobile access to the Internet. The Internet “in your pocket” has many potential applications, including email, games, shopping, banking and real-time news. Worldwide, mobile (m-) commerce revenues are expected to exceed $25 billion by 2006 [5].
One country in particular has rapidly adopted the wireless Internet like no other: Japan. While the U.S. has grappled with its fragmented set of mobile network and service standards and Europe has experienced slow adoption of the wireless Internet based on the Wireless Application Protocol (WAP), the diffusion of wireless data services in Japan has been phenomenal. In May 2003, Japan had nearly 63 million mobile Internet users, approximately 60% of which were using the iMode platform [9].
The iMode platform, based on compact Hypertext Markup Language (cHTML), provides a compelling alternative to WAP. Building on its early success in Japan, iMode has begun a strategy of market entry into the U.S., Europe, and parts of Asia through a set of key partnerships. The results of these strategic partnerships are being closely monitored by the telecommunications industry.
The Nature of iMode
NTT DoCoMo, Japan’s leading cellular phone operator, launched the iMode service in February 1999. The ‘i’ of iMode stands for Internet, information, interaction and I, myself. IMode is a mobile phone service offering continuous, always-on Internet access based on packet-switching technology. Using iMode, data can be immediately sent and received via networked handsets—a radical departure from traditional circuit-switched network standards used in other parts of the world requiring the user to dial up for data transmission. The speed of the standard service varies between 9.6Kbps and 28.8Kbps. Because iMode is always on, billing for usage is based on the amount of data sent and received, not time online, costing ¥0.3 per packet (128 bytes) [4].
IMode-enabled Web sites utilize cHTML, a subset of the familiar HTML 4.0. The language is designed with the restrictions of the wireless infrastructure in mind, such as the limited bandwidth and high latencies of the networks, and small screens and limited functionality of the devices. By removing certain features of conventional HTML, such as tables and frames, the speed of content delivery can be substantially increased (albeit reducing display sophistication).
Provision of Internet content to mobile users occurs via a specially enabled iMode phone and browser application. An iMode-enabled phone typically weighs approximately 90 grams (3.6 ounces), has a comparatively large liquid crystal display (LCD), and a four-point command navigation button that allows the user to manipulate a pointer on the display. The user connects to the iMode service by pressing a single button. Recent models have strong multimedia capabilities (see Figure 1).
The client application used for delivery of information is a micro-browser, a simplified, compact version of a traditional Web browser such as Internet Explorer or Netscape. One popular browser, Compact NetFront, developed by the Japanese company Access, is used in three-quarters of all iMode-enabled devices [4]. The browser has two bars with icons at the top and bottom of the LCD screen. These can be customized to allow access to various services and menus. Typical services include email, downloading ring tones, games, entertainment, horoscopes, transportation schedules, banking, data searches, and news updates. In the middle of the screen is the main display area that provides text and graphics (see Figure 2).
DoCoMo controls the provision of content for iMode through the iMenu portal page, which links to approximately 3,000 iMenu partner sites, each approved by DoCoMo for uniqueness and usefulness. Additionally, there are more than 50,000 unofficial sites. In March 2001, DoCoMo opened up iMode site selections to unofficial sites, providing further revenue generation for the company. Some premium sites charge members a monthly subscription fee for content (up to ¥300), from which DoCoMo takes 9%—providing an estimated $60 million to DoCoMo every month [8]. Annually, iMode is worth nearly $5 billion in revenues [11].
The Growth of iMode in Japan
The growth and success of iMode has provided considerable food for thought for wireless Internet industry analysts. Some observers argue that the Japanese iMode situation is unique and perhaps unlikely to be replicated elsewhere. However, there are some key lessons that can be gleaned from the extensive acceptance of iMode in Japan. IMode is a widely recognized brand, standing for concepts such as simplicity, functionality, and meeting consumer needs [6].
Understanding iMode Adoption Using Technology Acceptance Theory. Technology acceptance theory examines the factors that influence the adoption, and diffusion throughout a social system, of new technologies such as iMode. One theorist, Everett Rogers, has spent over 30 years studying the diffusion of innovations of all kinds, from the QWERTY keyboard to agricultural innovations in developing countries [10]. Rogers developed a set of key innovation characteristics that he and others have shown serve to explain innovation diffusion outcomes very well:
- Relative Advantage: the degree to which the innovation is perceived as being better than the practice it supersedes;
- Compatibility: the extent to which adopting the innovation is compatible with what people do;
- Complexity: the degree to which an innovation is perceived as relatively difficult to understand and use;
- Trialability: the degree to which an innovation may be experimented with on a limited basis before making an adoption (or rejection) decision; and
- Observability: the degree to which the results of an innovation are visible to others.
Other researchers have extended Rogers’s work, suggesting additional factors to be considered along with Rogers’s basic five, specifically image (the degree to which adoption and use of the innovation is perceived to enhance one’s image or status), and trust (the extent to which the innovation adopter perceives the innovation provider to be trustworthy).
Beginning about the same time as Rogers, psychologists Martin Fishbein and Icek Ajzen conducted many years of research from which they eventually developed the Theory of Reasoned Action (TRA) [1]. This theory attempts to explain why people behave as they do in situations of “reasoned action.” In the context of technology adoption, TRA posits that actual use is determined by the individual’s behavioral intention to use the technology. Intention is in turn determined (in cases where use is voluntary) by the individual’s attitude toward using the technology, and the subjective norms toward using the technology present in the individual’s social milieu.
In recent years, Rogers’s findings and those of TRA have been combined into a general theory of technology acceptance [7], illustrated in Figure 3. This model can be applied to the case of iMode to help understand its adoption dynamics and success. First, the theory argues that an individual’s attitude toward adopting iMode is determined by the key characteristics related to the technology: relative advantage, compatibility, complexity, trialability, and observability, as well as trust and image; each of these characteristics is examined in greater detail here.
IMode’s principal source of relative advantage stems from the fact that it provides an Internet access channel to many individuals for whom the Internet was effectively inaccessible previously. Before iMode, Internet penetration over traditional wired channels was constrained by the high online data charges set by DoCoMo’s parent NTT, resulting in a high level of price-constrained, unmet Internet demand. Consumer enthusiasm for the iMode channel is evidenced in click-through rates for banner and email advertisements, 3.6% and 24% respectively, compared to less than 0.5% for PC-based online banner ads [3].
In terms of complexity, the iMode service has performed well due to its simple and intuitive interface of menus and the command navigation button. The iMode micro-browser is also a scaled-back version of traditional browsers, further simplifying the user’s experience. In providing the iMode service, DoCoMo has emphasized simple content. DoCoMo’s control of the portal page and approval control of third-party service providers’ access also contributes to the management of iMode’s complexity. In managing iMode’s complexity, DoCoMo has tended to trade off richness for reach [12], and this surfaces clearly in iMode usage patterns: simple entertainment (games, ring tones, Bandai characters) represents more than 75% of the traffic, followed by email and news [11].
Based on the familiar mobile telephone handset, iMode maintains a high degree of compatibility with the consumer’s previous experience. IMode is also highly compatible with Japanese cultural values. Modern Japanese culture is well known for its enthusiasm for electronic devices, especially among its youth. Indeed, Japan has been at the core of innovation and development for many electronic entertainment devices—mobile or otherwise—such as Sony’s Playstation or Nintendo’s Game Boy. Therefore, it is perhaps not surprising that entertainment applications have played an important part in the success of iMode.
The low initial cost of the service, based largely on a pay-as-you-use mechanism, allows for a high level of trialability before confirmation of adoption. Trialability is also enhanced through social networks. The low per-message cost of an iMode telephone means subscribers can easily share their devices for trial operation.
The immediacy of iMode also creates a relatively high level of observability. IMode usage is highly interactive; iMode transactions are responded to nearly instantly. Observability is also enhanced through individuals witnessing others using iMode phones, which often occurs in public locations. Observability is lessened somewhat due to the fact that aspects of the innovation, such as the network, are less visible, and that many of the applications on iMode are rather abstract—such as news retrieval. On the other hand, iMode usage often forms the basis for observable behavior, such as restaurant information and booking, or person-to-person email communication.
The iMode service clearly engenders a high level of trust (and thus low perceived risk) due to its large, established brand and owner, NTT DoCoMo. As well as DoCoMo being an established and respected voice provider, iMode has become a recognized brand for mobile data services. Consumer trust in iMode is further reinforced through the consistent use of the “nttdocomo.ne.jp” email address.
Related to visibility, and similarly to other mobile phone markets, the image of iMode devices is very important. Indeed, as in the European and U.S. markets, users often select handsets on the basis of a perceived enhancing of the individual’s social status or image [6].
The success of this relatively low-speed network has challenged the myth that new mobile Internet services cannot grow and succeed without high-bandwidth network standards.
Additionally, an individual’s adoption of iMode will be affected by subjective norms toward using the technology. These norms are determined by normative beliefs attributed to significant others (friends, colleagues, or family members) with respect to adopting or continuing to use the technology. The Japanese cultural tendency toward group conformity [2] provides a strong basis for these norms. Once a new technology reaches a critical mass of usage, these cultural norms tend to accelerate adoption and continued usage. In that regard, iMode adoption is strongly centered in the youth and young-adult age segment; approximately two-thirds of iMode subscribers are under 35 [4], with the under-25 market segment generating the highest monthly bills. Also, loyalty to the DoCoMo brand, discussed earlier, comprises a subjective norm that strengthens iMode adoption and use.
Other Factors Affecting iMode Adoption and Use. Technology acceptance theory operates principally at the level of the individual. However, in the case of iMode, there are some key factors in the economic and technological environments that also play important roles.
Market Situation. NTT DoCoMo was—and still is—the market leader, with 60% market share in the mobile phone market. The majority of DoCoMo’s shares are owned by NTT, and the Japanese government owns the majority of NTT’s shares. This provides a monopolistic situation where the Japanese government has a controlling stake, although successive waves of deregulation by the Ministry of Posts and Telecommunications promise to promote socio-economic structural reform.
Vertical Integration. DoCoMo has a strong position in the mobile value chain, being vertically integrated into chip, handset, and infrastructure research and development. This power has been leveraged substantially. For example, DoCoMo received preferential access to the lightest-weight phones from four suppliers in exchange for preferential information about new phone standards. Subsequently, these phone suppliers used this information to obtain strong cooperation from parts suppliers to make better design decisions and trade-offs [6]. Similarly, the release of Fujitsu’s 256-color screen phones in December 1999 allowed DoCoMo to support its own version of the Internet with attractive phones at affordable prices.
Network Investment. DoCoMo has been proactive in its investment in network infrastructure. Its implementation of a packet data overlay allowed for spectrum-efficient, cost-effective, key-push services, approximately one year ahead of Japanese rivals. The success of this relatively low-speed network between 1999 and 2001 has challenged the myth that new mobile Internet services cannot grow and succeed without high-bandwidth network standards—a position taken by many European and U.S. analysts.
Self-reinforcing Services. Recently, it has become evident there is a “virtuous circle” connecting DoCoMo’s voice and data services. While the average revenue per subscriber is lower for iMode than voice (¥2,150/month compared with ¥7,800/month), iMode users tend to make more voice calls, driven by the information they access though the service, such as the names of certain restaurants.
In summary, the theory of technology acceptance helps us see how features of iMode technology, factors underlying the surrounding behavioral norms, and market and industry features have driven the rapid rise of iMode in Japan. How effectively have these forces combined together? Approximately 15,000 new users subscribe to iMode every day, indicating high behavioral intentions to use the technology; market research also indicates a continuing steady stream of subscriptions that have so far outstripped all predictions [9].
Future Developments
NTT DoCoMo plans to export its iMode model to the U.S., Europe, and other Asian markets. Through a strategy of partnering, DoCoMo hopes to emulate its earlier achievements in Japan. In June 2002, iMode was launched in Taiwan, and by May 2003, subscriptions were more than 900,000. European versions of iMode became available to German and Dutch markets in early 2002 and France in November 2002, but have struggled to convince customers to subscribe.
DoCoMo is also expected to launch iMode in the U.S. market at the end of 2004, purchasing a 16% share of AT&T in order to gain market access. During 20032004, AT&T is rolling out third-generation (3G) networks to support future services.
In terms of technological developments, DoCoMo continues to innovate in providing its iMode service. Japan was the first country to offer consumers access to 3G wireless networks based on the Wideband Code Division Multiple Access standard in October 2001, considerably earlier than other developed markets. These 3G networks allow transmission speeds of up to 384Kbps, opening the way to advanced audiovisual capabilities. By 2006, DoCoMo plans to roll out fourth-generation (4G) networks, which will be 10 times faster.
Alongside network infrastructure, DoCoMo introduced the Java-based iAppli (or iApplications) service in January 2001, providing more sophistication in applications. These can be downloaded and stored, eliminating the need to continually connect to a Web site. Further, constantly changing information can be automatically updated at set times, creating opportunities for applications such as elaborate games and automatically updated stock prices.
Other recent service developments include: DoCommerce, a major m-commerce service; c-mode, for purchasing beverages and other items from vending machines; the IYBank mobile cash card; and the Loppi system for buying and collecting groceries from Lawson corner stores.
Conclusion
Based on the discussion of technology acceptance theory, it is perhaps unlikely that iMode’s success will be emulated to the same extent or as easily in other markets. The conditions that have combined to create the fertile environment for growth of iMode in Japan do not necessarily exist elsewhere. For example, the level of PC-based Internet access is already very high in the U.S. and Europe. Moreover, competition is more intense and technology fragmentation has been much higher and vertical integration lower. The DoCoMo brand is less well known elsewhere, and cultural norms regarding conformity are also different. Nevertheless, given the high penetration of mobile phone use and slow adoption of WAP, iMode could provide a compelling alternative for consumers in countries other than Japan. Key lessons to be learned from the success of iMode in Japan include the importance of a trusted, branded, useful, easy-to-use, holistic package of services, and the value of investment and leveraging of technological infrastructure such as networks and handsets.
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