HP Shakes Up Japan's Wireless Market

(page 2 of 2)

For now, HP's arrangement is the exception. But it could spur imitators offering pay-as-you-go wireless services for all kinds of gadgets that use the Web in new ways. One example: car navigation systems. Most in-car systems give directions and allow map searches, but hardly act like Web-connected PCs. Auto industry executives say it's because they haven't found a low-cost solution to connect cars to the Net. "If we had [always-on Net] connection to the car, we'd be able to do more things than we can today," says Graham Smethurst, who heads BMW's Munich-based division that works on navigation and entertainment systems.

Low-Cost Come-On

HP could be the test case. To lure consumers, HP plans to sell its computers for $50 to $100 more than the company's laptop models without the wireless broadband feature, which range in cost from around $500 to $900. Every machine will come with a removable SIM card that lets users buy more minutes. A radio antenna for Wi-Fi will give the computers access to Wi-Fi spots in restaurants, malls, and train stations nationwide. HP's starting small, to be sure: Hiramatsu hopes to sell tens of thousands of units—a rounding error in a market of more than 108 million mobile-phone subscribers but not bad for a brand with a small presence in Japan.

With the economy still in the doldrums, HP's netbook has the best shot at attracting buyers. Market researcher Gartner (IT) predicts that global shipments of netbooks will more than double this year to 28 million units, up from 11.8 million in 2008. By 2010, the tally could top 42 million. Already nearly 1 in 5 laptops sold worldwide is a netbook, says Gartner analyst Mikako Kitagawa, adding: "It could go higher." And yet, because netbooks sell for far less than standard laptops, the trend has slimmed margins for PC makers.

That's why adding services would be an important new business for hardware makers. Still, it's not clear whether Japanese consumers will embrace HP's 3G wireless service. One fact that could help HP: Wi-Fi hotspots are hard to find in Japan. If nothing else, HP could apply the lessons it learns in Japan to other countries that follow. "Our executives in the U.S. were very interested in this model," says Hiramatsu. "At this point, though, you won't find a similar arrangement in other countries."

Why would an operator like JCI want to empower tech companies? The answer lies in JCI CEO Frank Seiji Sanda's background. Sanda is a former engineer who worked for Motorola (MOT) and Apple. In recent years, he has prodded the government to intervene and remake Japan's wireless market so the three biggest cellular operators are less dominant. Last year, the government ordered DoCoMo to open up its wireless network, and JCI was the first to score a deal. Sanda says he wants to create "the platform for the next-generation Internet." "If we can start the next generation of the Internet from Japan, the economy will have a second act," he says.

But his position hasn't won him many friends among rival operators. Several electronics firms JCI initially spoke with worried that doing business with Sanda would damage their ties with the larger carriers. "This is a big risk [HP] took," he says. "They do have relationships with many carriers."

Hall is BusinessWeek's technology correspondent in Tokyo.

Business Exchange

Track and share business topics across the Web.