AT&T's $9.8 billion deal with NTT-DoCoMo for I-MODE multimedia could change
the world of wireless. The alliance is a hands-down victory for AT&T, its
partners and many wireless players. But not everybody is celebrating.
Indeed, the combo leaves AT&T's wireless carrier competitors in North
America scrambling to find their footing.
The deal, announced today, gives DoCoMo--a spin-off of the Japanese public
telephone company--a 16 percent stake in the new AT&T Wireless Unit (AWU)
set up in October.
AT&T, its affiliates, and its mobile device and networking equipment
suppliers will now be able to "leapfrog over competitors" in the U.S.
market with high-bandwidth, third-generation (3G) wireless services like
multimedia, says John Zeglis, chairman and CEO of AT&T Wireless. AWU also
gains exclusive licensing rights in the U.S. market to DoCoMo's I-MODE, a
wireless service that's enjoyed stunning success in Japan.
After AWU's planned spin-off from AT&T is a done deal, AWU and DoCoMo will
establish a jointly owned subsidiary, to focus specifically on multimedia
AT&T plans to use the cash from DoCoMo to make a quick transition from its
second generation TDMA cellular network, to the "2.5G" EDGE network, where
TDMA and GSM will converge; and finally to W-CDMA, a 3G high-bandwidth
wireless architecture already planned by other carriers for Europe and
Most North American wireless carriers are now relying on CDMA wireless
technology instead of TDMA. The CDMA carriers will be migrating to 1XRTT as
their 2.5G standard, and then to 3XRTT as their 3G network.
Deal Expected, But Still Surprising
Although the deal between AT&T and DoCoMo was expected, its exclusive
nature came as somewhat of a surprise. So, too, did some of the
partner-related details. Ericsson, Lucent, Nortel and Nokia will supply
network equipment for the emerging high-bandwidth system. Ericsson,
Motorola, Nokia and Siemens will produce the mobile devices.
The initial batch of smartphones will be dual-mode devices, supporting both
I-MODE and WAP. Eventually, in a future protocol dubbed WAP NG (Next
Generation), I-MODE is expected to converge with the less glamorous WAP.
Nokia and Ericsson were among the founders of the WAP Forum, the industry
group that originated WAP.
AT&T won't be stopping at smartphones, either. Also envisioned are handheld
PDAs, PC Cards, and other form factors. In the works, too, are plans to
scrap AT&T's existing billing system for new billing software, capable of
supporting the à la carte, content-based billing approach of I-MODE.
At Home And Abroad
Meanwhile, DoCoMo has been buying up wireless licenses in a number of
European countries. In April, NTT Communications unveiled plans to launch a
"smart-content delivery service" called Arcstar, to users in the U.S.,
Europe and Asia. Earlier this week came an announcement of a new joint
venture by DoCoMo and Hong Kong-based wireless carrier HKN to launch a
dual-mode I-MODE/WAP portal targeted at Europe.
Still, it's unclear whether I-MODE will be a hit on North American soil.
Notes Akio Tenka, co-founder of EvolutionB, a wireless ASP: "Early on, NTT
DoCoMo established a way to stimulate third-party content and an
application service market. That is really important, but it hasn't been
happening in the U.S. Consumers [in Japan] subscribe to the content, and
are billed through NTT DoCoMo. Application developers and content providers
can participate in the revenue stream."
Most I-MODE content offered in North America will be consumer-oriented,
just as in Japan. But AT&T also is eyeing "enhanced e-mail services" for
business use, involving multimedia attachments.
AT&T plans to leverage existing partnerships with IBM and Microsoft to
support the new multimedia content on the back end.
"This announcement will give the wireless market in the U.S. a much needed
shot in the arm," asserts Jerry Kaufman, self-described chief wireless guru
at the Alexander Resources analyst
firm. "Up to now, there hasn't been a wireless carrier in the U.S. with the
marketing strength to say, 'OK, we're going to make a business out of
[mobile wireless].' They've all been chickens," the analyst adds.
Still, AT&T concedes that some carriers have been unable to put together
enough wireless bandwidth in key markets to enable support for "richer"
forthcoming 3G multimedia wireless.