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6 October 2020

Japan’s mobile industry is transforming, with global impact

In the mobile market, Japan has traditionally been technologically advanced, but very conservative on the commercial front. In the 3G era, NTT Docomo may have been the first operator to launch the new technology – with a pre-standard version called FOMA – but it was able to afford to do so partly because of the high margins it could command in a three-operator market that behaved in a closed, uncompetitive way.

Those days are gone. First, Softbank bought Vodafone Japan in 2006 and injected a new dose of competition with some disruptive propositions for users. Softbank turned away from proprietary handsets and user interfaces, co-developed with local partners, and introduced iPhones and global applications, tapping into its activities in the Internet world to become a more modern, web-centric MNO than Japan had seen before.

Then, of course, another Internet player, Rakuten, has moved into the cellular market and is attempting to lead the way into a next generation mobile web business that offers cloud and ecommerce services over many platforms and connections. Rakuten launched its 5G service last week, though judging by these first steps, the jury is out on whether it will be the same disruptive force in pricing and consumer 5G as it has been in its network architecture.

In technology, it has shaken up the ecosystem, lending important endorsement to open RAN and cloud-native cellular movements and seeking to demonstrate that future networks could be fully software-centric, built from common components on commoditized cloud infrastructure, and based on open, multivendor platforms. In its own deployment, Rakuten has actually behaved like a traditional Japanese MNO, working closely with a clique of vendors which have delivered a heavily customized solution, tailored for the operator’s specific needs.

And with NEC prominent in the radio and core, there is an element of trying to create a new-generation Japanese mobile industry, reasserting the technological leadership of the past and even taking advantage of Huawei’s troubles to set a ‘Japan-first’ vision of 5G against those of China or even the USA.

However, the difference between this project, and the huge collaborations of the past by Docomo and KDDI and their vendors, is that Rakuten wants to share its developments with the global operator community, in order to achieve momentum and adoption for open network specifications. It advocates for a 5G deployment approach, in which multivendor network functions and hardware modules could be selected from an app store and integrated in a framework such as the MNO’s own Rakuten Communications Platform (RCP).

To succeed in this ambitious attempt, it needs to build significant supplier and operator support around RCP, because other telcos will also certainly be trying to define their own platforms and shape the next generation network in their own image. It remains to be seen how successful it is, either as a 5G operator in Japan, or a driver of open standards on the global stage.

It may not have the same latitude to seize market share at home, as other disruptors like Reliance Jio in India or Free Mobile in France, because of the levels of saturation, because Japan’s mobile economy is changing anyway. The government is trying to do some of the disruptor’s work for it, by enforcing more price competition, and the telcos’ balance of power is changing. NTT is taking Docomo back under full control in a bid to boost profitability and take decisions more quickly in response to market changes.

Softbank’s company has been through significant financial turmoil, which will affect its mobile strategies. It has sold 5% of the Japanese MNO, but it has been forced to sell many other properties, including ARM, and so may refocus on the 5G business rather than pursuing its goal of building a massively diverse hi-tech empire.

And the big two MNOs, Docomo and KDDI, are not the lumbering giants they once were. Always technologically advanced, they are now looking to inject greater agility into their business processes and their architectures in order to revive profits, reduce costs, and fend off Rakuten. Both have recently announced their latest breakthroughs in open networks, ensuring that the new MNO is not the only open RAN game in town in Japan.

All this innovation and change will no doubt result in greater choice of services and tariffs for consumers, greater convergence between mobile and broader Internet or content services, and new developments for the industrial sector. In the context of current geopolitical change and supply chain shake-ups, we can expect Japan to achieve the kind of influence it has not had in the mobile platform for a couple of decades.