It’s been a question that’s been asked by many of our readers here. Apple fanboys, maybe? But still.

How many iPhone have been sold in Japan?

Neither Apple or Softbank are releasing any official numbers on how many iPhones -and lately iPads– sold in Japan. The Cupertino company limits itself in pointing out the impressive growth in its quarterly earnings.

So I went ahead and asked as many analysts as I could think of. The smart ones only, don’t worry. And, no, I didn’t ask Steve Jobs.

The consensus is that 5 million iPhone have been sold in Japan since its debut on July 2008.

That’s 70% or more of the smartphone market in the country, if you believe surveys and expert firms.

Don’t dream, there’s no breakdown between the three models available here -3G, 3GS and the latest 4. But, to those who called the iPhone as a failure here, this is just a slap in the face.

Is the iPhone a success?

What constitutes a success is in the eye of the beholder. Every analyst, journalist, blogger I’ve asked the question to has his/her own definition of success. Some are impressed by the iPhone, some not at all. But, at least, they know what the Japanese market is like, how peculiar it is, and, more strikingly, how different it was before and after the iPhone. Next time you want to know about Japan, ask people who know about Japan, not some random copywriter just because he’s writing for an established paper in the US.

Now, 70% of the smartphone market? Smartphones do not even reach the 10% threshold in Japan. It’s still a rare beast -well, you could say that all Japan phones are smartphones, but let’s not get into this debate now, will you. And, if we believe unscientific but valuable analysis from those in the know, many users are getting an iPhone along with their existing keitai, beefing up the numbers a bit.

The iPhone has had limitations in Japan from the start. A peculiar Japanese-input system -even if that one is not as important now. No access to the web portals users are used to on their keitai and which brings all the insane services many people are drooling over abroad -like a train application that gives you the best routes & schedules, but also where to walk from one station to another if it’s raining along with the extra time it takes. A strange new mobile email address, without emojis at the start and still without all the decoration than every other dumb phone offers -don’t laugh, it is important for some segment of the market here. No digital TV tuner. No e-book store. No waterproof pink color choice.

And SoftBank. Wait, I don’t dislike the carrier, but it’s only the #3 in the race. It’s the used-to-be-foreign carrier (it was called Vodafone, you know). It has a lesser coverage, especially when compared with how good DoCoMo’s is.

But still. Not a single phone -even with three iterations- has ever held such a market share in Japan -hovering at 5%. Never. Ever. A phone from a newcomer -well, ok, Apple has historically been the only foreign electronic brand ranked at the top of consumer surveys. A candy bar smartphone in a world of clamshell keitais.

Just go to any electronic store in Tokyo and look at the sheer number of Japan-made iPhone accessories. It’s insane.

5 million is a success. Accept it.

The iPhone effect

I’m already seeing those who dislike Apple hitting me on Twitter and explaining them their view. Peeps, please. I’m known for having an everything-Apple setup. It doesn’t mean that I’m blind to realities.

Now, admit it. The Japanese mobile phone industry has changed since the iPhone arrival. Every other week, you’ve got one of the big three announcing a new smartphone, while this type of phones were just absent before -no Blackberry in the hands of CEOs, the odd Palm or WinPhone and that’s it. You just had to stroll through the aisles of the recent CEATEC in Tokyo to see that smartphones and tablets were on everybody’s booth -and lips. One could even argue that the whole SIM lock debate is partially to blame on the iPhone.

Come on, even the whole advertising campaign DoCoMo is running for the Samsung Galaxy S makes it look like an iPhone.

DoCoMo is clever: 1 in 4 of its users would get an iPhone. 25% of almost 60m subscribers.

So, yeah, thank God Android exists. After a few false starts with poor models, DoCoMo is getting serious in the smartphone game with that S beauty. KDDI is touting its Sharp IS03 flagship -plus the Skype partnership. And they’re great phones. I’ve tested both. They will be a success.

Estimates are than in less than five years, between 40 and 70% of sales (depending on which analyst you believe) will be coming from the smartphone segment in a cellphone-saturated-Japan -sales estimates range between 10 and 13% for 2010. They also estimate that most mobile revenues will come from these higher-priced devices. Factor in the fact that DoCoMo, KDDI and SoftBank already derive most of their revenue from data. That mobile advertising already brought more than USD 1bn in 2009 and you’ve got the storyline for the market in the next five years.

DoCoMo might have started the application market more than 10 years ago with the i-mode, there has never been the same rush of developers creating for them than its the case with the iTunes App Store -just log on there and witness the incredible number of local apps. DoCoMo had the standard. It had the control. Apple displaced that control. SoftBank has no say over what is coming to the iPhone. The revenue stream is shifting.

While the story will be slightly different with Android, KDDI installing its own Android app market and DoCoMo creating a portal -not a store per se-, the end game is that data will be revenue. Data + ads + mobile commerce will be revenue.

Users are loving it. Developers are loving it. Carriers are loving it. Big party with balloons and hugs. Well, not exactly, we don’t live in a perfect world, but you see the idea -and the opportunities for everyone.

Don’t read the 5m iPhones sold into an ode to Apple. Don’t even believe the 5m number if you wish, I don’t care.

Read this as the sign that the mobile market ecosystem in Japan is evolving.

Darwinism is hitting the Galapagos.

The smartphone battle is heating up -again- in Japan.

Realizing that it was clearly lagging in that fast-growing segment -hey, we’re talking 4m units this year in a cell phone saturated market-, au KDDI, Japan’s second biggest mobile carrier, has decided to take a bold move. It entered an alliance with Skype, the peer-to-peer VoIP company.

Because calls between Skype users are free, mobile-phone companies have feared their revenue would decline should they make the service available. For that reason, the Skype app was viewed as verboten until now

Bold enough? At least in the eyes of Tanaka, KDDI’s Senior VP.

No details have been released yet, though. No package pricing in particular.

Skype on WiFi?

It’s only the second time that Skype partners with a cellco. Their first deal was made with US Verizon Wireless.

If you didn’t know, Skype calls are actually not made using the data service there. They’re being done on the voice line. Skype’s press release says KDDI will also do that.

That’s a big no-no for Wifi, sorry folks.

It has to be noted that calls will need to use a bit of data before being re-routed to the voice line. Hope KDDI won’t charge users for that.

Skype to Japan numbers?

The Verizon deal only allows Skype calls to be made while on US soil. And while Skype-to-Skype are free, the Skype-to-cell/landine minutes are charged against the plan. That should be similar with KDDI in Japan. Or will it?

If you read the press release I just mentioned between the lines, you see that

users will be able to make unlimited Skype-to-Skype calls to any Skype user in Japan and around the globe

Yeah, ok, basically what Skype is for, but let’s read on.

KDDI customers with data plans will also be able to […] call international phone numbers at competitive Skype Out calling rates.

Nice. But, if you didn’t get it, no mention to Skype Out calling rates for phone numbers in Japan. None. Zip.

So, unlike the Verizon deal where the application lets you call mobile and landline numbers, KDDI’s Skype might well force you to exit it for these types of call. Not very practical, isn’t it?

Skype on Android

So, starting this November, Japan’s second biggest carrier should pre-install the Skype application on all its smartphones (pre-register if interested)

The flagship phone will be Sharp’s IS03. Mobile in Japan’s good friend Steve and I had the chance to play with it at the recent CEATEC in Tokyo.

We both found it to be a very solid smartphone. Of notice is the integration of an e-wallet function, a feature existing on many keitais but not on the iPhone, and the faculty to keep an existing KDDI mobile email address, again something SoftBank was not able to provide with the iPhone (oh yeah, it also has a pimp-your-email decorating function -so important for the teenager market here).

We weren’t able to fully test it, but our limited look at au One Market, a carrier-branded Android app store, left a good impression.

The app will also be rolled-out on the less noticeable IS01, but, strangely enough, no news about Sharp’s IS05 that was announced today, nor Toshiba’s IS04.

Skype on keitais?

While KDDI promises to use Android for all its upcoming smartphones, the future roadmap for Skype and KDDI promises to go beyond Google mobile operating system.

Other phones might get an app too, not unlike what Verizon is offering in the US with LG and Samsung. I’d say not before Q2 2011 though.

But, in a time when DoCoMo is rolling out its Android smartphone with full fanfare, IS03 + Skype might very well be a sweet deal for KDDI.

Skype on DoCoMo?

Yeah, what about DoCoMo? Does it have to reply with an VoIP offering?

Right now, the king of carriers is kinda blunt. Skype is simply banned from its Android-powered devices. It’s as simple as that. And, anyway, none of its Android-powered phones is running 2.1 yet, a pre-requisiste for the application.

But rumors are floating that it is negotiating a similar deal than KDDI’s. Skype with DoCoMo might become true by the end of the year, if you’re of the optimist kind.

As for Softbank, it already allows Skype on the iPhone, but no news on any other front from them. At least, they can be satisfied that Ustream, a company they’ve partnered with and invested in, was used by KDDI for its press conference.

My guess is that things are only getting started on the smartphone front. Oh boy, I love that.

We would like to show that we are (competing in the segment) in earnest and with dedication

Tanaka seems to be up for the battle. Let’s rumble.

Last February, Willcom, Japan’s #4 mobile operator filed for bankruptcy, not being able to repay its massive amount of debts.

And massive they were. JPY 206bn. The largest bankruptcy in Japanese telecommunication industry, as I pointed out back then.

From that date on, SoftBank was named as one of the companies that would strategically help the failing operator to get out of its slump, by helping it repay JPY 41bn, or, according to current -volatile- exchange rates, more than USD 500m.

Well, it now wants to gob the whole company. 100%. Let’s ask ourselves why.

4m More Subscribers

4 million users is not something SoftBank was willing to let completely go, as it battles KDDI to reach the number 2 spot in Japan -the latter having 32 million subscribers, while the former clocks at 27m.

Willcom famously uses an older wireless technology, PHS, which impaired its growth after an initial advantage due to lower costs.

Coincidentally, SoftBank started investing in PHS after being embroiled with Willcom this year. Nikkei reported last April that it would start rolling out a “next-generation” PHS networked, based on Chinese technology and as early as Q3 2010.

It’s called XGP. A technology not without interest.

XGP Technology Explained

XGP is theoretically capable of data speeds up to 100Mbps, with the burden of installing lots of micro cells on the network (a requirement PHS also had). Apparently, quality of the signal in a dense network would allow you to travel as fast as 300 km/h while maintaining both up- and down-link. Sweet, I wonder when the Yamanote line will travel that fast.

Field tests by Willcom gave XPG reason to be hopeful. Unlike KDDI’s WiMax, it fared better indoors and offered better speeds -and latency- than the competition.

Still, we’re talking about field tests that date a bit from a now-bankrupt company. A technology China Telecom, one of its bigger backers seems to have abandoned. A technology which could have battled with WiMax, but one that only a handful of handset makers -Kyocera comes to mind- and cell manufacturers are still developing for.

Really?

I’ve got this gut feeling that PHS/XGP was never exactly what SoftBank was interested in. Read on.

The Battle for Data Spectrum

The battle is all about Willcom’s 2.5GHz license. A big fat 30Mhz chunk of the 2.5Ghz spectrum.

You see, SoftBank is in dire need of extra broadband spectrum in the war it’s figthing against heavyweight DoCoMo, KDDI -who holds the other 2.5GHz license under the UQ Communication joint-venture- and that little company which disrupts the data market, namely emobile. All that in the days leading to the LTE -call it 4G if you wish- roll-outs.

Let’s call what I’m going to write science-fiction, but read on.

You’ve got a mobile carrier which invests in saving a competitor via a separate company, a competitor that happens to own some mobile broadband spectrum, the carrier then decides to deploy a cell network it never cared for but one that was used by that specific competitor, then announces it wants to buy the failing competitor 100%.

Isn’t that called a plan?

The Opponents

SoftBank has a series of hurdles to cope with before it can acquire the license. Tokyo’s District Court has to weigh in first. Then, the Ministry of Internal Affairs and Communication. And the competition who will shout foul.

The licenses were auctioned by the government with the specific requirement that telcos shouldn’t hold them outright and that they couldn’t have any commanding equity rights in any company that would get them -hence that UQ Communications company I mentioned above.

SoftBank had 33.3% in the business entity set up to save Willcom, a perfect conduit to gain access to the license. But, you know what, the license is tied to XGP. Not satisfactory enough. The other parties might not have agreed with SoftBank on that one.

The carrier might now be betting -or was betting all along, again as part of the plan- that it will get anti-trust approval, especially now that it has invested in PHS technology, then navigate the Japanese political representatives and bureaucracies to render the 2.5GHz license protocol-neutral, forget XPG and finally set up its own network, WiMax or else.

Sweetening the judges by investing in a competitor tech? That sounds like a plan.

All that while it’s trying to get Willcom lenders to waive part of the massive debt.

Lots of simultaneous fights for SoftBank. But it knows what it feels like. Its long history of legal battles in trying to get into the 800Mhz spectrum is proof enough. This time though, the outcome is the mobile data holy grail.

The hero wants to save the Willcom castle, rescue its inhabitants with their old technology and marry the princess. A princess called 2.5GHz.

Truly epic.