On my October business trip to Tokyo, I took time to meet with Japan Communications‘ CEO Frank Sanda. I know Frank from my work on the Eamon Ryan’s Advisory Forum on Broadband. I wanted to see Frank and his team because they just launched a new product for Hewlett-Packard. HP will now sell netbooks in Japan which come with 100 minutes of mobile wireless connectivity. Consumers can buy connectivity on a pay-as-you-go basis from Japan Communications, but branded as an HP service.
Japan Communications built a really cool billing system to handle payment and authentication. But, Japan Communications does not have a wireless network. That it gets from the leading carrier NTT DoCoMo. Japan Communications leases capacity on DoCoMo’s network nationwide, and has the ability to purchase more capacity as this business grows. HP gets to determine which devices are sold and can sell the connectivity as its own. Furthermore, Japan Communications could set up such a system to sell anyone else’s networked devices. Say, how about a Carterfone?
While Japan Communications negotiated with DoCoMo to get on its network, it was able to do so because the Japanese Ministry for Communications and Information created which rules opened the networks of three largest wireless operators DoCoMo, KDDI, and SoftBank to wholesale. There was apparently a three-year battle at the Ministry in which Japan Communications was at the center. Japan’s policy to require wholesale access to wireless networks goes further than the US FCC’s rules for its 700 MHz auction which mandated these open these networks to foreign devices and handsets.
Insight: This seems like a really cool business model with implications for carriers, devices manufacturers, and application service providers around the world. I have said in a previous Cool Stuff, it is not a question of whether wireless networks should be open or closed. Rather, there is some optimal level of openness which will maximize the carrier’s return. A privately determined level of openness will no doubt diverge from a level of openness which represents a public optimal. However, this begs the question whether opening networks to wholesale in this way is good policy and whether the Europe and the US should follow suit. The answer is far more complex than can be addressed in a humble blog entry. Nonetheless, I am curious see how this market will develop.
