Japan August 6, 2009, 11:00AM EST

HP Shakes Up Japan's Wireless Market

U.S. giant Hewlett-Packard will sell portable, Web-linked computers that let users tap Japan's mobile networks without signing an operator contract

Story Tools

It was a bold statement in small packages. On Aug. 5, Hewlett-Packard (HPQ) said it was planning to sell portable, Web-connected computers that can tap Japan's cellular networks without requiring users to be locked into a contract with a wireless operator. The computers—laptops, netbooks, and touchscreen tablets—will come with 100 minutes of free airtime and a built-in, pay-as-you-go wireless system when they go on sale next month.

HP's event, at a downtown Tokyo hotel, was a small affair, attracting just a few dozen journalists and one TV camera. But among industry executives and analysts, HP's latest move is attracting a lot of attention: It could end up rewriting the rules in Japan's wireless industry.

HP, in effect, will become a mobile operator—in industry jargon, a mobile virtual network operator (MVNO). That means the Palo Alto (Calif.) company will get to decide what type of gizmos to connect to the network—and will keep for itself most of the revenues from airtime use. Having a tech manufacturer double as an operator poses a threat to Japan's three largest wireless operators, NTT DoCoMo (DCM), KDDI (9433.T), and SoftBank (9984.T).

Undercutting the Operators' Control

Operators traditionally have exerted tight control of the airwaves used to deliver telecommunication signals to consumers. They have the final say over which phones, PCs, and other gizmos can tap their network, and how much to charge subscribers for service. The iPhone, for which Apple (AAPL) is said to get up to 30% of the operators' revenues from iPhone subscribers' monthly payments, was the first to shift the balance of power away from operators. HP will take that a step further.

The Japanese government's decision last year to force operators to sell unused bandwidth to new entrants helped. HP will rent spectrum from Japan Communications (JCI), a tiny Tokyo operator. JCI doesn't own base stations or antennas; it buys bandwidth from DoCoMo. JCI officials say HP could hook up smartphones, Web-friendly digital cameras, and other gadgets in the future. Content and other online services might follow. "We have no specific plans yet," Shinya Hiramatsu, HP's marketing director for personal systems, said. "But of course, we're considering it."

Industry executives say HP could show the way for other tech outfits that want a piece of the world's most advanced wireless industry. There have been attempts to open up other markets. Last year, tech giants Google (GOOG), Microsoft (MSFT), Dell (DELL), and Philips Electronics North America (PHG) lobbied the Federal Communications Commission to set aside for free the unlicensed public wireless spectrum in the U.S. that would be available after TV stations switched to digital broadcasting. The FCC ended up auctioning the spectrum. That didn't silence critics who say operators are blocking innovative ideas that threaten the existing order. Operators say they invest billions in setting up and maintaining the network and know best how to recoup their investments.