Japan is known as one of the most advanced nations in adoption of advanced mobile and broadband services, and is one of the most pressurized competitive environments for operators. Its Ministry of Information and Communications (MIC) has made various attempts to boost the number of competitors in the market, most recently by excluding incumbents from the forthcoming auctions of WiMAX spectrum. But in a market of this maturity, it is doubtful whether a start-up can make a viable business against the big three – DoCoMo, KDDI and Softbank, which are themselves under intense profit pressure. So we see these giants working their way into the WiMAX market despite the best intentions of the regulator, and quite possibly this is the only way that 802.16 will succeed at all in Japan against HSPA and LTE. And the latest indication that Japan is tough for smaller companies is the abrupt exit of NextWave, the US company that aims to buy spectrum round the world in order to leverage sales of its WiMAX-like equipment and offer an end-to-end service to service providers, including spectrum as well as networks and managed services.

NextWave Wireless, which owns significant 2.5GHz and AWS frequencies in the US and stakes in operators in countries such as Austria, bought a 69.23% share in Japanese operator IPMobile in July from Mori Trust. Now it is already selling this holding back to Mori (which plans to sell it on to IPMobile executives), apparently deciding it will not be possible to create a profitable business model in Japan. This is despite the fact that NextWave owns the technology that IPMobile is planning to deploy – TD-CDMA from IPWireless, now part of NextWave – and the Tokyo carrier has the only license in Japan for that system.

NextWave’s decision creates a high degree of uncertainty for the much-acquired IPMobile and the TD-CDMA system. The telco aimed to take on the giants by adopting TD-CDMA, having acquired spectrum whose conditions fit neatly with the network’s characteristics. The investment had come at a crucial time for IPMobile – having purchased its license in 2005, at the same time as fellow new entrants Softbank Mobile and eMobile received theirs, it now has to start offering services by November or lose its franchise. Now it seems NextWave has lost faith in a strategy that involved using IPMobile as a showcase for its technology and its business model, and as a springboard to work with the Japanese consumer electronics industry to create new classes of device for the network and so potentially attract some CE powerhouses into its ecosystem.

If a company with these advantages gives up so easily, the idea that start-up WiMAX operators could succeed seems highly unlikely.

This is probably why the MIC seems to be relaxed about the planned entry of DoCoMo and KDDI into WiMAX, despite its efforts to exclude them from the auction. DoCoMo recently formed a joint venture with ACCA Networks, the frontunner to win a 2.5GHz license, which will provide it with an entry point to the market for a technology it has been trialling with parent company NTT.

Now second ranked cellco KDDI, which has talked up advanced WiMAX plans for several years now, is teaming with Intel in a joint venture to bid for a 2.5GHz license, in order to put its plans into action. KDDI envisages a separate WiMAX network to augment the mobile broadband services it can offer with its CDMA system, taking an approach somewhat similar to fellow CDMA operator Sprint Nextel, though it will not be able to get its hands on as much spectrum. The operator is working with Intel Capital, the East Japan Railway Company (which has 7,500 kilometers of infrastructure), Kyocera, Daiwa Securities and the Bank of Tokyo-Mitsubishi to create the venture, called Wireless Broadband Planning.

This group is looking beyond Japan. While both DoCoMo and KDDI believe that one technology and one swathe of spectrum will not be enough to support true mobile broadband in their country, and so are targeting a parallel WiMAX system, they also badly need to move beyond their saturated home territory. DoCoMo was burned in the early years of the decade by its program of investments in western operators, and is now focused more on working with cellcos in emerging south east Asian markets like Vietnam, and in offering services and enterprise offerings round the world. KDDI, via its new venture, is hoping to create a network of WiMAX operators from different regions, implementing roaming agreements and MVNO partnerships, in order to expand its international influence without massive investment in operators or networks.

To comply with government rules, DoCoMo and KDDI will only be able to take a stake of about one-third in their respective WiMAX ventures. KDDI carried out Japan’s first WiMAX field trial in Osaka last year. In November 2006, DoCoMo partner ACCA began trials of WiMAX in the suburban area of Yokosuka Research Park, and is now expanding that test to include the urban area of Yokohama City, using Alcatel-Lucent’s 9100 Evolium WiMAX system.

The other confirmed bidder for a 2.5GHz license is Willcom, currently the operator of Japan’s PHS network.

With the Japanese auction looming, vendors are also positioning themselves to take advantage of the country’s particular rulemaking and spectrum set-up. Last month Alvarion teamed with Hitachi Communication Technologies to develop a Mobile WiMAX system, which though it will be applicable in future to other 2.5GHz allocations, will initially be optimized for the specifics of the Japanese spectrum and rules.