American mobile service providers are doing their customers a disservice. In the end, it is the mobile service providers who will suffer.
A couple of weeks ago, a friend from Japan visited the US for the first time. This is a friend who speaks little English and has spent a lifetime working for the Japanese government focused on domestic issues. After he had spent a week traveling from Boston to New York City and Washington, DC, he spent a weekend at our house in New Jersey. I felt compelled to ask him, “What do you notice that’s different here in the US?” It was an open ended question. He could have commented on anything, but he replied, “Mobile internet access is really slow.”
At the time, I laughed. His comment was totally unexpected.
His observation, however, fits anecdotally into a pattern set by hard data: The internet infrastructure in Japan (and many other parts of the world) far surpasses America’s. Looking specifically at mobile access to web pages, Google found that the average web page downloads in 4 seconds in Japan but takes more than twice as long, 9.2 seconds, in the US. Nine seconds is an eternity when accessing data.
Part of the difference is the deployment of 4G and LTE data networks versus 3G networks. Theoretically, 4G networks can handle 100Mbit/s throughput for devices on trains or in cars and 1Gbit/s throughput for devices held by pedestrians. 3G, on the other hand, maxes out at 56Mbit/s. Then there are the latency issues….
Another part of the difference is the willingness of the providers to make maximum use of the available technologies. In other words, they’re holding out on their customers. When was the last time you had 56Mbit/s through put on your 3G phone? Or even your 4G phone?
Earlier this month, Japanese mobile services provider Softbank Mobile announced plans to take a 70% stake in Sprint/Nextel. Eight billion dollars of Softbank’s planned $21B acquisition will be used to improve Sprint’s infrastructure, shoring up the weaknesses in its 4G network.
How much pressure that will put on AT&T and Verizon, the American mobile heavyweights who are also rolling out 4G networks, depends in part on how aggressively Sprint pursues customer acquisition. Masayoshi Son, Softbank’s founder and Chairman/CEO, has a reputation for taking big risks and competing aggressively, so aggressive competition is a foregone conclusion.
A Japanese national of Korean ancestry who was educated at UC Berkeley, Son is accustomed to being an outsider and has frequently taken contrarian positions, placing big financial bets and coming off the winner through shrewd and determined business strategies. At various times in his career Son has unabashedly annoyed Japanese business leaders and government officials by making business decisions that did not conform to the established order.
Each time he has survived and on most occasions he has come out ahead; starting from very humble beginnings Son is now the second wealthiest man in Japan.
In 2006, Son directed Softbank to acquire Vodaphone’s failing Japanese mobile subsidiary, which was losing tens of thousands of subscribers per month to the two top mobile providers, NTT DoCoMo and KDDi. After rebranding, investing in infrastructure, and acquiring exclusive rights to the iPhone in Japan, Son’s newly named Softbank Mobile, quickly attracted subscribers and took a solid third place in the mobile market on the strength of its data services for smartphones.
Not only did Softbank leverage high speed data services to attract the bulk of the new customers coming into the mobile market, it stole customers from DoCoMo and KDDi. Surprised and feeling the pressure from this upstart, the market leaders have been forced to improve their service offerings as well. 4G and LTE are now ubiquitous in Japan and the vast majority of Japanese customers use them to access maps, graphics, and other throughput intensive applications.
Instead of whinging about how customers are using their smartphones for data intensive applications the way America’s mobile operators have, DoCoMo, KDDi, and Softbank have moved to provide their customers with what they want, for lower rates than Americans pay.
In the 1970’s, America’s auto companies were put on the defensive by better quality, less expensive Japanese auto manufacturers, who were simply doing what they should do, compete on quality and value. Is it possible Masayoshi Son is poised to repeat the trick on US mobile service providers? Furthermore, will American mobile providers prove agile enough to respond to a competitor who plays by different rules. Masayoshi Son may not be a “typical” Japanese, but like other Japanese business people he believes in competing by providing the best possible services to his customers at a reasonable price and making himself and his colleagues and investors wealthy in the process.