Slow Down of Wireless LAN Services

By Hajime Yamada (GLOCOM)

On December 5, 2002, Mobile Internet Services, Inc. (MIS) announced that it would suspend its wireless local area network (LAN) service as of the end of December 2002. This announcement may become a turning point for all wireless LAN services.

MIS is a start-up company based in Tokyo. It was the first public telecommunications carrier that provided services utilizing wireless LAN. In the summer of 2001 the company started an experimental wireless LAN service within Tokyo that could be utilized while users were moving around outdoors, with a maximum speed of 11 megabits per second. About seven thousand subscribers were attracted to this service at that time. However, most of them cancelled subscriptions when MIS started to charge two thousand yen per month for its services in April of 2002, and now only 1300 subscribers remain.

MIS has been trying hard to expand its service areas in Tokyo, but in late July, 2002 the Telecommunications Business Dispute Settlement Commission turned down the company's application for installing antennas in premises of major railway stations of East Japan Railway (East JR) Company. That was part of the reason that MIS could not achieve the aim of expanding its service areas.

This business had a typical chicken-and-egg problem: less subscribers resulted in less income for investing in expansion of service areas, and smaller service areas caused slow growth of the number of subscribers. This vicious circle prevented MIS from growing its business.

The MIS services attached importance to security. It utilized more complicated protocols than normal wireless LANs for making precise authentication of each subscriber. Therefore, MIS subscribers had trouble logging out from this special MIS protocol before accessing a normal wireless LAN while they were outside MIS service areas. This inconvenience may be another reason for the slow increase in the number of subscribers.

Nippon Telegraph and Telephone Communications Corporation (NTT Com.), NTT West Corporation, NTT DoCoMo, Inc. and Softbank Corporation, among others, are following MIS to provide wireless LAN services. Also, East JR and private railroad companies as well as restaurants such as McDonald's Japan have started experimental services.

NTT Com. aims to acquire 20 to 30 thousand subscribers by increasing the number of base stations in Tokyo to one thousand before the end of March, 2003. The goal of NTT West is said to be to gain ten thousand subscribers during the same period. Although neither carrier publicizes how many subscribers it has actually acquired so far, the number is most likely no more than a few thousand each. The business of wireless LAN access service as a whole seems to be making little progress.

In order to make the wireless LAN business successful, each carrier must create a business model with new concepts and ideas.

In spite of the situation, NTT East Corporation made a noteworthy announcement. According to its press release dated December 5, 2002, subscribers of asymmetrical digital subscriber lines (ADSL) or optical fiber network of NTT East will be able to access the company's wireless LAN from outside the home or office by paying an additional fee of 200 yen per month. The service intends to provide a broadband environment even when subscribers are away from their home or office. It is not to be an independent service but rather an additional service for wireline service subscribers. Because of the cheap price this plan may attract various users in a short time.

The full-scale service is planned to start in May 2003. We should closely watch how it progresses.