NTT DoCoMo

Mobile Felica
Group-5 | Section-A
Aman (19/064)
Dharmanshu
(19/076)
Rishi Tarkesh
(19/313)
Shubham (19/346)
Suraj (19/350)

1.

Sources of Profit
and Barriers for
adoption of
Felica

Sources of Profit from Mobile

Felica
Licensing Fee
Platform
Management
Services
Additional
Services

Collect license fee from carriers that purchased mobile

Felica chips
Docomo was exempted from such fees which would offer
competitive advantage

Fee was charged every time the user downloaded an

application for managing the 5Kb memory area and
serving the encryption keys needed to activate
applications

Provided application providers with a range of hosted

services such as managing the servers used to download
applications or to authenticate users
Transaction fees would be collected for these services

As a major shareholder of Felica networks, Docomo, apart from the aforementioned profits,
also had the advantage of learning about new mobile apps before competitors. Thus it had
launch time advantages and a head start in negotiating for exclusive rights

Barriers for adoption of Felica

Security Concerns

To increase transaction speed, eMoney

Competing Technologies

were used mostly in Europe

did not employ PINs or communication

networks to authenticate users and

Competed with type A technologies which

Type B technology was gaining momentum

authorise payments, thus posing a threat

as Japanese government decided to use this

to security

technology for its residency registration

Smart card loaded with eMoney could not

program and was planning to apply the same

be disabled if it was lost or stolen, only

for driving licenses and passports

security was provided in the form of

had better security

remote lock up feature in the Felica

handsets

In comparison to Felica, type B technology

Sony, Visa and Infineon formed an alliance to

develop a single chip that would integrate
contactless IC with contact IC technologies

What Should Docomo Do?

Platform Sponsor: Sony, Docomo & JR East

Platform Provider: DoCoMo, KDDI & other network carriers

Platform Component Suppliers: Edy, Suica & QUICPay

Users#1: Merchants, Vendors

Users#2: Shoppers

Docomo should keep the platform open for rivals as this will help in ensuring that
the industry converges on this platform and it becomes the industry standard

In order to attract more customers, Docomo should keep the platform open for
component suppliers and all users

This would in turn contribute to Docomos revenues as well as help in building

competitive advantage

Docomos Platform Strategy

Snapshot

2.

Is Docomo wise
to offer existing
mobile phone
rivals access to
Felica?

Is Docomo wise to offer existing

mobile phone rivals access to
Felica?
Network Effects

Strong network effects; thus Felica applications and reader locations were
likely to proliferate if Docomos rivals also adopted the technology

Multi-homing Costs

Multi homing costs are high as the users would have to pay separately for
access to each of the platforms which is highly unlikely

Differentiated
features

Demand for differentiated features was medium to high as different

platforms provided varied services with different levels of security

Based on the above analysis, it can be concluded that the network market is likely to be
served by a single platform in the long term
Thus Docomo is right to offer existing mobile phone rivals access to Felica as this step will
help in promoting Felica to become the industry standard
Offering mobile phone rivals access will help in substantially improving the customer base

3.

Pricing of Felica
in short term &
long term?

Pricing of Felicia ?

The core objective of Felicia is rapid market adoption and make it the de- facto
standard.

With the launch of Felica phones by Docomo in June 2004, in a space of six months
Docomo was able to sell 1.3 million handsets (1.62% of the entire market).

Further KDDI also plans to launch Felica based phones in 2005.

Hence the network carriers are already enthused by Felica.

We advocate making the consumers as the subsidy side. We can wave all app
installation fees in the initial period subsequent purchase thereby allowing faster
adoption.

In the long term, we envisage making Felica all encompassing platform, whereby 3rd
party developers would be allowed to develop apps for Felica. A commission would be
charged based on paid app sold over Felica.

As for the licensing fees and network management fees, we advocate retaining them
both in short term & long term.

4.

What strategy
should Docomo
use in E Money
and in Credit Cards

E-Money: Anatomy of the Network

Platform Sponsor: Sony, Docomo & JR East

Platform Provider: DoCoMo, KDDI & other network carriers

Platform Component Suppliers: Edy, Suica & QUICPay

Users#1: Merchants, Vendors

Users#2: Shoppers

Issue at Hand:
Deciding upon who would be the Platform Component Supplier
Options Available:

Continue with Edy.

Promote eMoney interoperability.
Merge efforts with either JR East and/or JCB.

Docomos Strategy for E-Money:

(1/2)

Docomo has already decided not to retain exclusive rights over Felicia buy
allowing Felicia Networks to license its technology to other carriers.

The Rationale behind this strategy is to grow the contactless IC network

rapidly.

Platform Component Suppliers:

1. Does Network Mobilization require Big Investments that are subjected to
Free-rider problem ?
No. The E-payment technologies are mostly over-lapping and it requires
only a small technological effort to create a joint e-money reader.
2. Will a single platform serve the entire market ?
No. As evident from the Credit Card payment industry, we have 3-4 big
players who share the market. A similar scenario is expected to pan out here.

Docomos Strategy for E-Money:

(2/2)

Hence, we recommend to promote eMoney interoperability.

This would involve joint development of e-money reader, such that they can be rapidly
pushed to vendors who are now reluctant to invest in three different e-money readers.
When a single money reader would become the industry standard, they would have
no option but to co-opt to enjoy strong cross-side network effects.

As of now Edy, JR East & JCB are competing in different markets. Edy in mainstream
shopping, JR East in railway transport & JCB in post-paid revolving credit.

But essentially there target market is converging to the same segment, & each would
find it difficult to go on its own. Hence Docomo with its virtue of being Platform
Sponsor & a major platform provider could lead the industry in setting a common
standard.

Docomos Strategy in Credit

Cards:

Merging credit card functionality in Felicia enabled phones is at present a

complementer, which in the future as Technology evolves may become a Platform
component suppliers.

The key here for Docomo is to keep its platform open, upon which different service
providers can build their services to access the strong cross-network effects. The
range of services (different credit card companies present on Felicia) would in turn
reinforce further adoption of Felicia by different credit card service holders.

We advocate, that Felicia should allow different credit card companies to build
upon its network & access its growing user base rather than getting in a exclusive
partnership and risk being involved in a internecine battle.

This in turn would lead Felicia to become a one stop platform for all mobile related
contactless communications & payment technologies.

Thanks
!