Rupert Goodwins' Diary

Monday 26/9/2005

O2 has launched its i-mode service. It's everything that the Japanese iMode is — colourful, wide-ranging, easy to use and attractive — except more expensive. In Japan, many services are free or low-cost: here, it's £3 a megabyte regardless. In Japan, it was first and thus kept contenders such as BlackBerry out of the market, has 42 million subscribers and makes billions in profit for NTT DoCoMo even though a lot of the revenue is passed on to content creators. Here, the first reaction of most people is "How much?" "Oh, it's very reasonable," says O2, somewhat missing the point that if Sir has to tell us, we can't afford it.

It's fun to speculate where the costs come in. Networks distributing i-mode — or any mobile data — look exactly like networks distributing broadband data over most of their extent. In a good month I can easily download five or six gigabytes of information from my broadband connection for a cost of £20 — if I were to do that over mobile data at £3 a megabyte, it would cost me £18,000. Blimey, Maud! Who knew that spewing radio waves out from a small transmitter cost so much?

It doesn't, of course. Base stations aren't that expensive, even with site rental, power and other costs. Billing systems are expensive — a surprising amount of the money you pay a telephone company goes to paying for the privilege of paying — but that's not much of an excuse either. I don't recall BT ever managing to charge more for data over the phone lines in the good old days of dial-up modems, even though I'm sure it would desperately have loved the idea. The only place the money is going is onto the bottom line: fair enough, if O2 never wants to make very much of it.

So we go around the same old cycle — telco adopts a technology in the expectation that it will make tons of cash because it has in the past while ignoring the differences in environments. i-mode here will have to contend with many more established services and access options, and a market more than used to affordable unmetered broadband. The real fun will come when the networks start to provide streamed video in earnest — there's no way that can be provided on a £3 a megabyte.

In the modern world data is cheap, it's the services that make money. Throw open the doors, O2, and take a cut.