How iOS & Android Disrupted Operator Led Handset eco-system of i-Mode in NTT DoCoMo

The Japanese have been at the forefront of the Mobile Internet adoption and usage. The introduction of the world’s first mobile Internet service i-mode in February 1999 by NTT DoCoMo in Japan soon became a nationwide phenomenon with an i-mode ecosystem involving handset manufacturers, content providers, and DoCoMo itself growing with i-mode’s popularity.

Much before the iPhone’s introduction, the operators owned the relationships with users by controlling the full user experience. One example of that is NTT DoCoMo’s popular imode service. All i-mode compliant devices, regardless of manufacturers, have the iconic ‘i’ button built-in for direct access to i-mode services. While i-mode devices were not considered to be smartphones per current industry definition, they were in fact an early iteration of smartphones as they possessed many capabilities that were similar to smartphones as we know them today.

In addition to the user interface, operators also owned content platforms to increase value-add and create further stickiness. Key applications on the i-mode platform covered browsing, music, mail, news and weather . It also supported third party applications such as gaming via its i-appli application platform. The other operators launched similar services later – KDDI with its EZweb and J-Phone with its J-Sky. These services were effectively proprietary platforms for mobile Internet applications. In our view, the stickiness that came with mobile content and user interface far exceeded that of device hardware and was a key ingredient for operators’ attraction to customers. With such influence over both handset manufacturers and content providers, operators were effectively positioned at the centre of the mobile Internet ecosystem.

What happened after iOS and Android Devices Flood the Market ?
With the introduction of the iPhone and Android devices, operators effectively lost ownership of the relationships between the devices and the users, effectively shifting value away from the operators. The control of mobile content began to be relegated to open platforms as they were more flexible than the closed proprietary platforms owned by Japanese operators. This also impacted handset manufacturers as the more powerful and versatile smartphone OS platforms were not integrated with the handset hardware, so the concept of an
integrated hardware and OS began to break down, with Apple’s iPhone being the exception.

Comparison of Operator Controlled Vs Android /iOS App Store Evolved eco-systems
Shift of Handset eco-system form Operators to Manufacturers

In February 2002, i-mode contributed 18% of DoCoMo’s total ARPU. For the quarter ending March 2014, value added services (VAS) contributed 9.9% of DoCoMo’s total ARPU. This is a structural change in the Japanese telecom industry, and unlikely to reverse. With the rising popularity of iOS and Android smartphones in Japan, operators are seeing their control over mobile Internet ecosystem weaken.

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