The three major Japanese mobile-phone service providers in the home of ‘walled-gardens’ are making their smartphone content offerings available to rival companiesâ€™ customers as they focus more on content services, the Nikkei reported this week.
That may not seem such a bad idea but in such a fiercely competitive market, content has been a highly prized, lucrative and crucial differentiator – up until now, that is. Back in the days of iMode, for those that can remember, content providers were being wooed with up to 90 per cent plus revenue share models by operators, unheard of in other countries.
The form factor of the very popular â€˜clam-shellâ€™ phones, the early high-definition screens and the use of space saving Kanji characters all contributed to a comfortable content delivery and consumption model that really did not catch on elsewhere until the era of smartphones and high speed networks. Japan was truly the country where content was â€˜kingâ€™ and walled-gardens never questioned.
So, why the sudden change of heart? It seems that NTT DoCoMo, KDDI and Softbank have always been battling to increase the number of their subscribers in a market that is tantamount to saturated. At the same time, revenue growth from communication charges have stagnated and the days of price wars are well behind them. As a result, they are all turning to content services to bolster sales, but not just with their own customers, as has been the tradition.
Now that smartphones have taken hold, 30 million units shipped in the last twelve months, and customers are free to purchase online content and apps for any number of OTT players it makes sense for the mobile operators to open up, hoping to sell their wares to their competitors customers as well. It doesnâ€™t seem to be a collusive effort, more an opening up of those old closed shops. There is also no sign that they will join forces to form another ill-fated WAC-type platform. Each continues to maintain its own shop fronts but with the doors wide open for all to visit.
For example, DoCoMo has been offering its â€œdgameâ€ mobile gaming service to smartphone and tablet users irrespective of their providers. The company is considering expanding its content services for smartphones and tablet devices to include video streaming and online shopping, with an eye toward generating one trillion yen ($10.77 billion) in sales through new business. KDDI and Softbank are doing the same with their music and video streaming services to both iOS and Android customers of any provider.
Is it possible we may some day see operator billing opened up so that customers could be charged by their own provider when they buy goods and services from another? It sounds bizarre but not so far-fetched when we see efforts being made to provide the same service to OTT content providers.
Ultimately, a telco ecosystem of sorts might evolve where the dominant provider in a particular area, e.g. games or apps, might become the specialist and the others point their business in that direction with some sort of margin or revenue share arrangement in place, yet keeping the all important billing component in-house, of course. And would a model like this catch on outside of Japan? I, for one, would like to see it tried. Any takers?
First published at TM Forum asÂ The Insider