The explosive popularity of a picture messaging service, which sends image or video messages over existing second-generation networks, has made a built-in camera standard equipment for mobile phones in Japan. Users can take images or video footage at any time, anywhere.

After a sluggish first half, the mobile-phone market now "will be activated mainly because of built-in camera mobile phones stimulating the market," said Masanori Fujita, assistant director of Techno Systems Research Co. Ltd. (Tokyo).

Mobile-phone penetration in Japan has reached 60 percent, with 76 million subscriptions at the end of June. Month-to-month growth has averaged less than 1 percent. "The growth has reached a plateau," said Nahoko Mitsuyama, mobile analyst of Gartner Dataquest. The shipment in Japan this year will be 43 million units, about 6 percent higher than the year before, Dataquest projects.

As the mobile-phone market becomes saturated, its players have to urge subscribers to buy other, higher-performance models for content-rich services, thus boosting companies' average revenue per user (ARPU), rather than numbers of subscribers.

Typical services that can boost ARPU are images and video. Only a year ago, it appeared third-generation (3G) phones would handle those content-rich services-this was the scenario when NTT Docomo Inc. began 3G trial service. Other carriers planned early 3G shifts to compete.

But the picture-messaging called Sha-mail (sha means "to shoot" in Japanese) from J-Phone Co. Ltd. has captured more than 5 million subscribers with a service based on the existing second-generation network.

Sha-mail is simple. A built-in mobile CCD camera sends captured images to other mobile phones or PCs. Since users create their own contents, carriers or providers do not have to prepare images and video.

J-Phone, a unit of Vodafone Corp., started the service in November 2000 with only one camera-equipped model. J-Phone had wanted some differentiating services from the two largest carriers and Sharp Corp., a latecomer in mobile-phone terminals, wanted some unique features for its mobile phones. Color liquid-crystal displays and image sensors were both Sharp's strong products. Thus, the first wireless phone with a camera was introduced.

Young people embraced the service. It took seven months to sell the first million units of Sha-mail ready-phones. The next-million milestone came in three months and the sales have accelerated to add another million in every three months, then, recently in two months. J-Phone reported that the number of handsets ready for the service exceeded 5.1 million units in May.

In March, J-Phone introduced a 28.8-kbit/second packet communication service on its Personal Digital Cellular (PDC) format service. Phones in the service can shoot footage and send a 5-second video as a message. To make the data light enough to transmit over 2G networks, J-Phone adopted Nancy video compression from software venture company Office Noa (Tokyo). J-Phone now supports only video messaging and has not launched video distribution services. More than 420,000 people use movie-ready phones, a J-Phone spokesperson said.

In Japan's mobile phone market, NTT Docomo has nearly a 60 percent share, followed by KDDI and J-Phone. But Sha-mail's success made a crack in this hierarchy. In March, J-Phone was second in total subscribers for the first time. But KDDI, which runs its cellular phone network under the brand name of "au," regained the second position in April, but J-Phone is putting pressure on KDDI. J-Phone even beat Docomo in May in terms of monthly increases in subscribers.

Video distribution and video messaging were planned to be attractive options for the 3G phones. But pressured by J-Phone's Sha-mail service, NTT Docomo was forced to introduce one model with camera in June that can send messages with pictures throughout the i-mode network. As the supplier of the first model for the service named i-shot, Docomo appointed Sharp, which has been working with J-Phone on Sha-mail terminals. A few more models will follow with cameras in this summer.

NTT Docomo's Foma, the first 3G service in the world, began regular service last October. Docomo initially expected 150,000 subscribers in the first six months but achieved only 60 percent of that. "It's quite behind from the initial plan," said Techno Systems' Fujita.

Fujita and Dataquest analyst Mitsuyama estimate that it will be 18 to 24 months before 3G matches 2G for infrastructure and ease of use. "3G users are mostly heavy users who want to do high-speed data communications," she said.

Before the shift to 3G fully takes place, mobile phones will be equipped with camera and color displays to be ready for anticipated image/video related services. "The second half of this year will be brisk," said Fujita, "because camera-based services will spread from J-Phone only, to au and Docomo. All terminal venders will line up built-in camera models," he said.

Stimulated by Sha-mail service in Japan, Vodafone, parent company of J-Phone, plans to begin a similar service in Europe in the fall. NTT Docomo is actively promoting i-mode services to overseas 2.5G networks through licensing and alliances. At present, seven overseas carriers started or will start i-mode-like service. These will help pave the way for Japanese vendors, who already have designed and produced terminals for these services.

"They can make better use of their experience for the overseas market," said Techno Systems' Fujita.

Japanese vendors trail in the world mobile-phone market.

Sony, which formed a joint venture with Ericsson, ranks highest, at fifth, in the Dataquest survey taken in the first quarter of 2002. Other top Japanese vendors in the Dataquest survey include Matsushita, in sixth place, Kyocera Corp. in ninth place and NEC in 10th.