NTT takes home phones online with L-mode

By CNN's Kristie Lu Stout

TOKYO, Japan (CNN) -- NTT will launch its L-mode service Friday in a bid to replicate I-mode's success and lift its falling fixed-line revenues.

Japan's dominant carrier is hoping to capture more Internet users by bringing cyberspace direct to the home -- transforming the traditional home phone into a Web platform.

Analysts however question whether NTT can rely on the L-mode to boost its sagging bottom line and ease its reliance on its mobile unit, NTT DoCoMo.

I-mode for the living room

L-mode is a fixed-line version of the popular I-mode wireless service, which allows email and Net access from a home telephone.

NTT is hoping to replicate the consumer sensation of the wildly successful I-mode Internet data service offered by DoCoMo. The I-mode has attracted over 23 million subscribers since its launch in 1999.

The L-mode, like the I-mode, will give subscribers access to weather, health and banking information from over 200 content providers. Each L-mode user will receive an email address.

The basic monthly charge will be $2.50, not including special charges for Internet access. Devices to access the fixed-line data service will retail for around $150.

NTT will also install L-mode compatible pay phones for remote access of the service.

The service is targeting a demographic not known for participating in Japan's mobile craze -- primary and middle school students, and senior citizens.

"This product is very applicable for Japanese seniors," said Kiyohisa Ota of Merrill Lynch Telecom Research Japan.

"Older Japanese are not accustomed to using a keyboard. The L-mode service will have a simple 10-key access to the Internet."

A fixed-line miracle for NTT?

Analysts say that with L-mode, NTT is hoping to replicate the success of the popular I-mode service as it faces a decline in pay phone use and fixed-line subscriptions.

Buoyed by DoCoMo, NTT reported a consolidated net profit for the year to March of $3.67 billion.

While revenue from NTT's fixed line business and DoCoMo are largely the same, the more profitable wireless unit generates 87 percent of the group's operating profit.

"Results from the fixed line business are not very good," NTT President Junichiro Miyazu told reporters after the earnings announcement.

Though NTT East and NTT West currently enjoy a dominance of 95 percent of the fixed line market in Japan, both units face growing competition in the world's second-largest telecommunications market.

NTT shares have been hammered over the past week over fears of an imminent breakup. Spooked by an NTT torn away from its cash cow DoCoMo, investors have sent the telco's stock down to an eight-year low this week.

Analysts doubt whether NTT can deliver a fixed-line miracle with the L-mode, a hybrid product that looks like a fax machine with a small LCD screen, and 10-key keyboard.

"L-mode is the I-mode without the advantages (of mobility)," said Ion Global's Tokyo-based analyst Tim Clark.

"But at the same time, there are housewives interested in the L-mode service who are not quite as mobile as their working women counterparts," he added.

"So we may see a solid pickup, just not on the order of what we've seen with I-mode."

NTT traded at 644,000 yen in morning trade Thursday, down 1,000 yen from its previous close of 645,000.