NTT Docomo Inc:

Mobile Felica

Group 9
Karu Vysali (451)
Rahul Garg (464)
Kartik Narayana (467)
Uttama Hande (487)
Yamini Garg (489)
Major Sources of revenue from FeliCa
One important source of value for DoCoMo from FeliCa would be the revenue stream from FeliCa Networks, a Joint Venture
of Sony and DoCoMo.There are three major sources of revenue from FeliCa Networks to DoCoMo

1. Licensing Fee : FeliCa Networks would charge licensing fee from the carriers which would purchase FeliCa chips.
Docomo has been exempted from paying this fee, creating a competitive advantage over future use of the same by
competitors.

2. Platform Management Services : Felicia network received a fee every time a user
downloaded an application in exchange of maintaining the 5kb memory area which had room for 5 to 10 applications to be
downloaded. They also provided the encryption key through which users can activate the application.

3. Additional services : FeliCa Networks also provided a range of services such as managing the servers used to
download applications, authenticate users etc in exchange of a transaction fees which generated revenue for DoCoMo.
However, these services could be generated by content providers in-house as well. Hence, the stream was not steady.

Furthermore, FeliCa will provide value addition to DoCoMo in terms of improved mobile phone churn rates, improved
sunscriber acquisition rates and by directly providing FeliCa services (ex: as a financial services like eMoney)

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Is FeliCa a “Winner-takes-all” scenario?
Industries which enjoy increasing returns to scale, maybe subject to “winner-takes-all” competitor dynamics. For the industry
to be WTA, the following must be present:

➔ High Switching cost: Present

◆ FeliCa readers and writers have to be installed and they cost between $300-$1000
◆ FeliCa’s speed is nearly twice that of other contactless ICs and security was provided by a sophisticated
encryption system
◆ FeliCa supported multiple applications, multiple IDs, eMoney, subway fares etc can be accessed through
one platform
◆ Loyalty programs adopted by businesses will be lost on switching. Ex - Asano Supermarket provides 5%
discount on payments done through FeliCa
➔ Strong positive network effects: Potential
◆ FeliCa applications and reader locations are likely to proliferate if DoCoMo’s rivals also adopt the technology
◆ KDDI has planned to launch mobile FeliCa in 2005 which might lead to moderate positive network effects in
the future
➔ Room for differentiation by specific features : Present
◆ FeliCa can be adopted for versatile functions and can cater to various segments

Conclusion: FeliCa has the potential to become a winner-take-all industry. However, if enough carriers dont adopt to it, it
might not be able to garner the strong network effect required.
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How DoCoMo should adopt FeliCa
➔ DoCoMo should focus on increasing the network effects by providing applications which require high user
engagement. For this DoCoMo should focus on getting more content-providers on board and host quality content

➔ The potential eMoney suppliers such as Edy, Suica and QUICPay should be provided with open platform to attract
more customers onto Docomo

➔ DoCoMo should address the safety concern associated with theft and misplacement of FeliCa mobile. The time lag
between theft and remote disabling should be reduced to promote FeliCa as a safe alternative to traditional payment
routes. Technology such as Type A and Type B contactless IC technologies were direct competitors to FeliCa.
Japanese government had decided to use Type B for its residency registration program as well as passports and
driving licenses owing to better security. Further adoption of competing tech by DoCoMo’s competitors will decrease
potential network effects.

➔ Docomo should highlight the convenience factor and versatility of FeliCa. DoCoMo can subsidize loyalty programs of
retailers to promote use of FeliCa along with subsidizing the installation of readers so that FeliCa’s value proposition to
users increases.

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How should it price if it is a shared platform?
➔ The core objective of Felicia is rapid market adoption and make it the de- facto standard.

User
• Users must be treated as subsidy side.
• Users would be charged by carriers, as carriers would pass on additional cost of inserting chip to user
• In order to propel network expansion usage fee must be subsidized.
Telecom Carrier
• Telecom Carriers would be charged flat rates monthly

Application Providers
• Application providers would be charged flat rates

Credit Card Companies

• Credit Card companies would as act as Monetary partner by providing access to platform

Merchants
• The pricing for merchants must be done in such a way that as transaction number increases, the cost per transaction
decreases
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Is Docomo wise to offer existing mobile phone rivals
access to Felica?
Network Effects
• Strong network effects; thus
Felica applications and
reader locations were likely
to proliferate if Docomo’s
rivals also adopted the
technology
Multi-homing Costs
• Multi homing costs are high
as the users had to pay
separately for access to
each of the platforms. High
homing costs also will act as
entry barrier
Differentiated
features
• Demand for differentiated
features was medium to
high as different platforms
provided various services
with different levels of
security

Conclusion- In the long-term network market can be served single platform. Hence Docomo is right in offering
existing mobile phone rivals access to Felica. And also Offering mobile phone rivals access will help in substantially
improving the customer base. If Docomo does not offer rivals access to Felica then the merchant base adopting the
product will be low as they have to install multiple readers, but it will defeat the ultimate objective of Docomo to
increase the user base.