Asia's U.S. Wireless Foray

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Today, Americans spend about as much on data services—ringtones, text messages, video, and music—as their counterparts in Asia and Europe. But U.S. spending could surge ahead if the carriers make good on plans to give device and software makers more freedom to develop products for their networks, spurring a wave of innovation best epitomized by Apple's (AAPL) unique iPhone.

Mobile Data Services Experience

In November, Verizon Wireless announced plans to open its network to outside devices and applications (BusinessWeek.com, 12/3/07). And Google, if it wins spectrum in the auction, is expected to build an open network to complement its new Open Handset Alliance, which aims to create a cheaper and more flexible software platform for cell phones.

So while most North American wireless users currently pay less than $10 a month for data services, that spending may rise to nearly $38 a month by 2012, according to Insight Research. Over that same period, the consultancy says, wireless data spending by Europeans, Asians, and Latin Americans is only expected to roughly double, to about $20 a month. Overall, North American data revenues are projected to grow 36.4% a year—faster than in any other region of the world—to reach $132 billion by 2012, up from $28 billion this year, according to Insight Research.

Asian carriers do have a wealth of experience in mobile data services, and therefore less revenue growth opportunity in their home markets. Up to 90% of consumers in some Asian countries subscribe to wireless data plans, vs. 54% in the U.S., according to consultancy IDC (IDC). And while Americans mostly use basic data features such as mobile text messaging, Asians already have access to a robust array of services on their phones, from watching movies and buying food at a vending machine to using them as train passes.

Hooking Up with Michael Powell

DoCoMo, in fact, pioneered many of the most advanced services and appears anxious to bring them to other markets. In March the company set up a pavilion for the first time at the biggest U.S. wireless industry show, and formed a U.S. advisory board (BusinessWeek.com, 3/28/07) headed by Michael Powell, the former FCC chairman and a senior adviser at Providence Equity Partners. In July, DoCoMo agreed to provide up to $24 million in funding for a superfast wireless network AT&T is building in Hawaii.

More recently, DoCoMo joined the Google-led handset software group, though Yoshikawa cautions that nothing has been decided about new partnerships with the Internet search company or other U.S. businesses. But if it is vying for Google's attention, DoCoMo may face stiff competition from KDDI, the fastest-growing Japanese carrier. "KDDI works very closely with Google in Japan," notes Macquarie Securities analyst Nathan Ramler.

While KDDI remains mum on any potential Google-related plans, the company is preparing to launch an ambitious U.S. wireless service. The venture, X/S PCS Mobile, hopes to draw customers with free calling to 25 countries at a flat monthly rate and first-rate LG and Sanyo phones only available in Asia. The company also is pinning its hopes on a high-speed data service to be launched shortly. "We want to bring Japanese applications here," says Toshiro Akiyama, director of marketing and business development for KDDI America.

Then there's SK Telecom, a dark horse galloping through the West. After one-and-a-half years in operation, its Helio joint venture with EarthLink (ELNK) had only signed up 145,000 subscribers by the end of September. So although it is investing more in the money-losing business, SK may be looking to make a bigger play at the same time. "We already have a telecom joint venture in the U.S. for a niche market, but we hope to take part in the mainstream telecom business as well," says SK spokesman Ko Chang Kook.

Kharif is a writer for BusinessWeek.com in Portland, Ore.
With Moon Ihlwan in Korea and Kenji Hall in Japan.