"Monthly 2980 yen battle" DoCoMo inevitably in the red and Rakuten on the premise of the surplus, the decisive difference

NTT DoCoMo announced on December 3 that it will offer a new plan "ahamo" with a data capacity of 20 giga (1 billion giga) bytes per month for 2980 yen (excluding tax) from March 2021. Of course, the price of 2980 yen was conscious of Rakuten Mobile.

On the other hand, the "au new service" announced by KDDI on December 9 was conservative with an Amazon prime for unlimited data usage and a monthly charge of 9350 yen. If you apply "Multiple line discount for 4 family members", "Set discount with fixed line", "Campaign for switching to 5G", etc., it will be 3760 yen, but there are not many users who meet this condition.

Softbank and KDDI have announced that they will be free of charge when switching to their own cheap brand (up to 15,500 yen), but for now, they are on the lookout for the essential communication charges.

■ 3M will fall into the red if 5G is reduced by 20%

There is a reason why KDDI and Softbank cannot move easily.

3M has continued to invest huge amounts in 2G, 3G, 4G and infrastructure development, and in 5G, which started service in some areas this year, DoCoMo and KDDI will each about about 5 years until 2024. It plans to invest 1 trillion yen and Softbank 500 billion yen.

Each of 3 Mega has 2200 to 2300 carrier shops nationwide, and its labor costs alone amount to hundreds of billions of yen annually. A large amount of TV commercials have been dropped, and sales promotion costs are expected to be on the same scale. The running cost is not odd. One industry insider estimates:

"With the current business model, all three companies will have a 10% price cut and a ton ton of income and expenditure. If 5G is reduced by 20%, it will fall into the red."

■ I came to crush Rakuten Mobile

In other words, if you want to recover the investment and daily fixed costs that you have made so far, KDDI's 9350 yen is reasonable, and DoCoMo's 2980 yen is a fairly unreasonable amount. DoCoMo has already been overtaken by Softbank and KDDI in terms of operating profit and is content with third place, but it has come to crush Rakuten Mobile regardless of its pretense.

A rival company executive said, "NTT DoCoMo has become a public corporation. It is not uncommon for us, as a private company, to compete with the new tariff plan."

Ahamo's monthly price of 2980 yen is also the result of strong price reduction pressure from the Kan administration, and it is a "political" price setting. If all existing DoCoMo users switch to ahamo, DoCoMo will fall into the red.

For this reason, ahamo did not accept the enrollment procedure at the actual store, but limited it to online. The upper limit of data usage is set to 20 giga, probably because heavy users who pay high fees are kept as traditional services.

■ What is Rakuten's strategy to "make it profitable" even if it is exceptional?

Then, what is the kitchen situation of Rakuten Mobile on the side that set the price destruction?

Hiroshi Mikitani, chairman and president of Rakuten, who is also the chairman of Rakuten Mobile, has acquired 7 to 8 million subscribers around 2023, and is planning to turn a profit at this point. Why is it possible to turn a profit with the exceptional price setting of "all-you-can-use data for 2980 yen per month"?

Why was Rakuten able to reduce the price of 5G to one-third of 3 mega? The key is Tarek Amin, who was appointed Vice President and CTO (Chief Technology Officer) of Rakuten Mobile in 2018. Amin explains why Rakuten Mobile's infrastructure investment is so low compared to 3 mega.

"Because we are using the world's first fully virtualized network."

"Virtualization" in the world of computers and communications refers to the processing of signals that have been processed by hardware until then by software. For example, early domestic personal computers were equipped with a ROM (read-only semiconductor = hardware) with a Japanese conversion function printed on it. On the other hand, personal computers such as Compaq, which were called "IBM compatibles," enabled language processing with the OS (basic software = software), greatly reducing costs.

Rakuten Mobile's virtualized network does the same thing with mobile networks. Of course, this is the world's first attempt.

■ Participated in development by being invited by Intel while attending school

Born in Amman to a Jordanian father and a Russian mother, Amin has a talent for computer engineering and majored in electronics and physics at Portland State University in the United States with a double degree. While still in school, he was invited by Intel to develop software for video conference systems for about a year and a half.

After that, he traveled to the US telecommunications giant Sprint, AT & T, T-Mobile and telecommunications giants as engineers before being acquired by Softbank, and settled down to the US subsidiary of Chinese telecommunications giant Huawei. There, he was invited by the Indian conglomerate Reliance Interstries. Reliance Chairman Mokash Amberni, who was looking for a talented technician to enter the telecommunications business, said.

"Amin, if you do it with us, you will one day be proud of your child,'Daddy has changed the lives of 1.3 billion people in India.'"

Amin, who thought it would be interesting, transferred to Reliance Geo, a telecommunications subsidiary of Reliance.

■ Maintain Wi-Fi with $ 35 equipment

At that time, India's communication infrastructure was far behind that of Japan, the United States, and Europe, and there was almost no 3G or 2G, let alone 4G. The amount of data used by mobile phones is 154th in the world, making it a developing country. Seeing that it would take time to build a mobile network in India, which has no infrastructure, Amin decided to install a Wi-Fi access point first.

Wi-Fi networks are cheaper to build than mobile networks, but they still cost a lot of money to cover the whole of India. So he thought of "virtualization". In traditional Wi-Fi networks, dedicated equipment placed on access points played an important role, but Amine adopted "virtualization" that processes most of the data with software, which was $ 1000 for access points. I made the equipment in time with my own $ 35 equipment.

The $ 35 access point was quickly installed in 1 million locations, making it possible to use Wi-Fi even in places where mobile phone signals are out of reach. Reliance Jio has gained 100 million users in the first few years.

■ Judgment that "mobile virtualization can be realized"

Gaining confidence in "Wi-Fi virtualization," Amin envisioned "mobile phone virtualization" as the next step. The principle is the same. Since general-purpose servers used in data centers can be used without using expensive dedicated exchanges, the cost of infrastructure construction can be significantly reduced. But it's still a much larger investment than Wi-Fi, so Reliance leaders were reluctant to make a decision.

In February 2018, Amin meets Mikitani at the Mobile World Congress (MWC Barcelona) held in Barcelona. Mikitani was keenly interested in the success of Reliance's Wi-Fi virtualization in India.

When Amin explained "mobile phone virtualization," Mikitani leaned forward.

"Interesting. Why don't you do it at home?"

At this moment, Amin recalls, "My idea has become an Auer idea." Although Mikitani is not a communication expert, he intuitively judged that "mobile phone virtualization can be realized."

Six months later, Amin transferred to Rakuten Mobile and started developing "mobile virtualization." Under Amin, who challenges the "world's first" attempt, engineers who are proud of their skills gathered from 53 countries around the world, including India.

"The development department is like the United Nations," says Amin.

Here, the "Englishization of the official language of the company" that Mikitani has been working on for many years lives on. The United Nations started to move smoothly because the environment for discussions in English was already in place.

■ "Let me set up the antenna" Ask the president himself

However, there is a difference between developing and prototyping at a research institute and actually building an infrastructure. The work of steadily setting up the antenna should not proceed as planned, and due to problems such as delays in base station construction and sales of terminals that do not conform to technical certification, Rakuten will receive from the Ministry of Internal Affairs and Communications by the start of service in April 2020. Received 6 administrative guidance.

The biggest reason for the delay in the construction of the base station was the "geophysics" to find a place to set up the antenna. Even if I ask a trader, I can't find a place easily.

Here, Rakuten demonstrates the foolish power of a fireplace that seems to be a venture. 600 elite people from Rakuten Ichiba, which is the core business of the Rakuten Group, were transferred to Rakuten Mobile, and a "search team" was formed to start carpet bombing.

First, a technical team led by Amin finds suitable building candidates to cover the area. There are several candidate sites on the map with a radius of 2 kilometers, and the geophysical team looks for the owner of the building and asks, "Let me set up the antenna."

The hardest part was around Tokyo Station, where mobile phone users are crowded. The place where the antenna can be set up is already occupied by 3 mega, and it is difficult to find a candidate site. The candidate site finally found was the courtyard of the headquarters building of a large company. Mikitani himself went to meet the top of the company and got permission to set up an antenna. I don't think the presidents of DoCoMo and KDDI will be this far.

■ "Nationwide expansion in 2026" 5 years ahead of schedule

Construction began after the land was secured, but there were further problems here as well. The pace of work at the construction company, which undertook the installation of the 3 mega antenna, was much slower than Rakuten had envisioned. One day in December 2019, four months before the service started, Mikitani enthusiastically gathered the presidents of the construction companies who were angry, "Why do you hurry so much?"

"You are not setting up an antenna. You are creating the future of Japan."

The construction company that felt enthusiastic started to move. In March 2020, 4,600 antennas lined up in the service area, exceeding the planned 3,700 antennas submitted to the Ministry of Internal Affairs and Communications.

If we continue to set up antennas at the current pace, 44,000 antennas will stand up nationwide next summer. Rakuten Mobile has advanced the timing of nationwide expansion (population coverage rate 96%), which was set as "2026", to 2021.

Now, when I go out of Rakuten Mobile's network, I switch to the KDDI line that has a roaming contract, and since this is not all-you-can-use data, I will soon hit the upper limit. This won't be a match, but from next year, when you can cover the whole country with your own line, Rakuten Mobile's virtualized network will show its true value. Which one will the user choose at that time? By this time next year, the power map of the Japanese mobile phone market may have changed significantly.

---------- Yasuyuki Onishi (Yasuyuki Onishi) Journalist Born in 1965. Born in Aichi prefecture. He graduated from Waseda University Faculty of Law in 1988 and joined Nihon Keizai Shimbun. He became independent in 2016 after working as a director of the European Directorate General, an editorial board member, and a Nikkei business editorial board member in 1998. His books include "Toshiba Nuclear Defeat" and others. ----------

(Journalist Yasuyuki Onishi)