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Porn Downloads Strain Japan Phone Network, Prompt DoCoMo Curbs

July 6 (Bloomberg) -- Takeshi says he pays 6,300 yen ($66) a month to NTT DoCoMo Inc. for unlimited Internet access, allowing him to download adult movies on his mobile phone.

“A mobile is far handier than a computer for Internet access -- I seldom use a PC outside the office,” said Tokyo travel agent Takeshi, 32, who declined to give his surname.

Takeshi and other pornography fans are feeding a surge in demand for movie downloads in Japan, home to the world’s first third-generation wireless network. While profiting from the traffic, Tokyo-based mobile carriers DoCoMo and KDDI Corp. say they’ve been forced to impose limits on the heaviest users as the $74 billion network feels the strain.

“When you have unlimited data, you’re going to have an issue with capacity -- it’s an issue that’s been waiting to happen,” said Windsor Holden, principal analyst at Juniper Research Ltd. “It wouldn’t surprise me that it happens in Japan first because they’ve had 3G for so much longer.”

Softbank Corp., the third-largest network and the Japanese operator of Apple Inc.’s iPhone service, said it is also considering restrictions on users with unlimited data plans.

While telecommunications companies say privacy laws prevent them from seeing what customers download, Japan’s top two pornography providers, Hokuto and Soft on Demand Co., said sales to mobile phone users are driving revenue growth.

Growing Traffic

“Pornography will eventually open a debate about how carriers should modify their business model as data traffic swells,” said Yusuke Tsunoda, a telecommunications analyst at Tokai Tokyo Securities Co. “It may prompt even tighter access restrictions.”

Japan rolled out so-called third-generation, high-speed mobile services in 2001, two years before the U.S. Now, more than 91 million Japanese surf the Internet by mobile phone, downloading movies, games and music, according to the Tokyo- based Telecommunications Carriers Association. Juniper estimates Internet usage over phones in Japan is three times the level in the U.S.

The problems Japanese carriers face may spread as consumers demand more movies, music and other data-intensive downloads, including growing access to sites with adult content, said U.K.- based Juniper.

Pornography Boom

Global revenue from pornography on mobile devices will more than double to $4.9 billion in the five years to 2013, while music sales will grow by about a third, said Juniper, which provides global research on the telecommunication industry and includes Finland’s Nokia Oyj, the world’s largest maker of mobile phones, Apple and Microsoft Corp. among its clients.

“We can’t see customers’ data but can surmise the biggest portion of it is probably movies,” said KDDI spokesman Keiichi Sakurai. “We can’t deny the possibility those movies include adult content.”

Customers have complained about stoppages or slow Web access, mainly around midnight when traffic from “heavy users” spikes, Sakurai said. Japanese carriers spent $74 billion building their networks since 2000, based on data provided by Wireless Intelligence, a London-based researcher.

Japan has more than 1,000 companies producing adult-content movies, generating about 17,000 titles last year, said Tim Smith, who’s worked in Japan’s telecommunications industry since 1999 and is chief executive officer of 3G service company Sairis Group KK.

‘Big Earner’

Smith says the largest Japanese adult content Internet sites have as many as 1,000 new customers a day, each paying as much as 10,000 yen as a sign-up fee.

While music downloads are the “official big earner” in Japanese mobile commerce, more money is made through porn, dating sites and even fortune-telling services, said Smith, whose company has helped run promotions in Japan for Viacom Inc.’s Paramount Studios, Toshiba Corp. and MasterCard Inc.

Revenue at Soft On Demand’s mobile site, which offers free movie samples and DVD sales, surged 40 percent in the year to March 2009 and now totals about 15 million yen a month, said Hirotaka Ishimori, head of the company’s online division.

“We see the mobile phone as potentially a huge market,” Ishimori said. “Fixed-rate data plans, faster Internet access and sophisticated handsets are contributing to that growth.” Ishimori estimates total annual sales in Japan’s pornography market are about 100 billion yen.

‘Relatively Untouched’

The unlisted, Tokyo-based porn producer had 14.7 billion yen in sales for the year ended March 2008, according to company researcher Teikoku Data Bank Ltd. Revenue at market leader Hokuto is more than twice as much, Teikoku Data estimated.

“Our mobile business is growing steadily,” said Hiroshi Tojo, head of mobile sales at Tokyo-based Digital Media Mart, which operates the online outlet for Hokuto. The mobile porn market is “still relatively untouched.”

Hokuto’s Web site offers 2-minute video clips for phone users for as little as 100 yen and sells full-length movies for DoCoMo subscribers.

“Whenever there is a new distribution method for adult content, adult content will go that medium,” said Holden at Juniper Research. “It’s gone that way since cavemen drew adult pictures in the cave.”