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Mobile Networks in the AI Age
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00:00So good morning Miki, good morning everyone, I'm Cédric Dufour, I'm the CEO and president at Rakuten TV, and executive
00:08officer at Rakuten Group, and I'm really happy today to welcome Miki Mikitani, chairman and CEO at Rakuten Group.
00:17So Miki, let's begin with the story of Rakuten. Can you tell us the story of this company? You founded
00:27Rakuten back in 1997, and it has grown a lot over the past 27 years. Can you tell us the
00:35story of the company?
00:36Yeah, so I used to be an investment banker at the bank, or Industrial Bank of Japan. You know, maybe
00:43you guys cannot believe it, at that time, we were the highest market cap company in the world, as a
00:50matter of fact.
00:50And at that time, if you remember, 14 companies out of the top 20 highest market companies in the world
00:59were Japanese companies.
01:02But I have seen that the industry is going to change because of the internet. In 1995, we had a
01:08browser coming, and everybody talked about the internet revolution, but there was nobody who wanted to take a risk in
01:16Japan.
01:16So I decided to leave the bank and started the first kind of B2B2C marketplace in the world. And nobody
01:26will believe in that time. And the internet speed was about 14.4 kilobps, not mega, not giga. So it
01:36was very slow.
01:37But we envisioned everything is going to change. And I decided to take the risk. Since then, we have been
01:46sort of not following the textbook of the business schools.
01:51We started to expand our business. Maybe you can flip the page. So this is how we started as an
02:02entrepreneur. And maybe you can go to the next page.
02:04Then, this is our growth. So we started to diversify our business model from just internet shopping to, we are
02:15now, if you go to the next page, number one, online commerce company, number one, as a matter of fact,
02:23travel agency, number one, credit card company, number one, online bank, number one, life insurance company.
02:30And then we started to globalize our business pretty much. So now we do shopping in France, our reward program
02:41in US, the Kobo is our e-book company, which is very popular in France.
02:50And Rakuten TV, which you are running, is very popular in Europe. So we are trying to become more global.
03:00And we talk about our mobile, the crazy project later on, but we started from Japan and expanded into many
03:11different fields, created very, very unique ecosystem, which I think many Asian internet startups are.
03:19So we're kind of trying to learn what we have done. And we created a very unique ecosystem, maybe you
03:26can touch a little bit about what you do for Rakuten TV, Rakuten Kobo, maybe Viber, and our main European
03:35business.
03:36So we are operating many different businesses in Europe, as you said, at Rakuten, from Rakuten Kobo, the e-reader
03:43to Rakuten Viber, Rakuten Eurobank, and two businesses are headquartered in Europe.
03:49The first one being Rakuten France, which is one of the leading online marketplace with more than 12,000 merchants
03:58and a very big partner of the main e-retailers.
04:01And the other business in Europe is Rakuten TV, based in Barcelona, Spain, where we operate our service across 43
04:12countries.
04:13We are a VOD and streaming platform, and we have many different content that we provide and we give to
04:21more than 150 million households in Europe.
04:23So Rakuten, as a whole, has increased a lot its footprint in Europe during the last 10 years, leveraging the
04:32ecosystem of Rakuten.
04:34And now we've been able to build a strong brand with the example of 85% of brand awareness in
04:42France.
04:44So, Miki, the second question is, you've explained how many businesses you've already launched and how many services you've launched
04:52in the world at Rakuten, but why you've decided to start Rakuten Mobile?
04:57Well, you know, I am one of the first generation internet entrepreneurs in the world.
05:06If you look around me, only a handful of entrepreneurs, which started in 1990s, are still running the company.
05:16So I have seen so many evolutions.
05:19And one of the biggest evolutions we have experienced was a smartphone, obviously.
05:23Right now, we'll usually talk about the AI later.
05:26But smartphone, you know, if you think about our shopping, 90% of the transaction done by smartphones now.
05:35And then we're not just talking about, you know, buying something.
05:41We are talking about paying, learning, entertainment, or even the health, you know, services, like medical services,
05:53now it's becoming AI.
05:55So your hand devices are not only hand devices, but all these mobile devices are becoming essential part of your
06:04social life.
06:06And everybody is talking about, you know, how you can, talking about the 5G or maybe 6G in the future.
06:17But I felt one of the biggest problems we have is mobile phone bills are becoming too expensive.
06:26In Japan, it was about maybe 4% of your, you know, household income.
06:34It became 5%, 6%, 7%.
06:38It was just going up and up and up.
06:41And it was becoming a huge burden for each household.
06:45So I thought about why this is happening.
06:48Because of the technology is too old.
06:51They are dependent on legacy hardware, right?
06:55Even in Europe, Nokia, Ericsson, Samsung.
06:59These are all based on old technology.
07:01It's like a mainframe and that we can really disrupt with new software technology.
07:07And also, we created our ecosystem based on single brand strategy and also data we leverage.
07:17Because probably Rakuten has the richest data set, maybe even more than Google or our social media companies.
07:28Because we have e-commerce, we have shopping, we have a credit card, we have a banking.
07:33Now, if you can add mobile on top of it, the set of data we have is going to be
07:40extremely strong, right?
07:42So, and then we thought this can be a very, very strong subscription ecosystem.
07:47So you will become loyal to Rakuten Shopping, Rakuten Credit Card and so forth.
07:53As a matter of fact, you know, if they join Rakuten now, mobile, they buy 60% more from our
08:02online shopping.
08:05They spend two times more for our travel services, the credit card banking and so forth.
08:12So I think this is a new model.
08:14So we have two aspects, business-wise and technology-wise.
08:18Technology, we build everything from scratch.
08:21We did not really follow the path of the other telecom companies.
08:26All these things are based on software rather than hardware.
08:33Yes, you have decided to launch this business using a very different technology, which is called Open RAN.
08:39And can you tell to this non-telecom audience what Open RAN is and how significant it is for fostering
08:48innovation and competition in this industry?
08:51Yeah. So I spoke a little bit about the historical big transformation of our industry.
08:57One is smartphone. The other is cloud, right?
09:01Without cloud, you know, we couldn't have experienced this massive growth.
09:05Probably we didn't have the AI yet.
09:08But the cloud was a very big evolution for our industry.
09:13But telecom industry was different.
09:19They were still based on the old technology of a telecom network.
09:26It has not really changed since the fixed line telecom.
09:29It's all based on hardware, switches.
09:33And why is it happening?
09:35It was oligopolized by fewer players.
09:38But now we made a change.
09:41And we changed from 2G to 3G to 4G to 5G.
09:46All the numbers changed.
09:48But the hardware architecture was very, very vertically integrated.
09:53And it was locked in the vendors.
09:57There was no competition.
09:59There is no open software.
10:01There is no open OS like Linux.
10:04So everybody started to talk about how we can make it open.
10:08And the concept of what we call virtualization.
10:11Virtualization meaning we convert all these machines to software.
10:16And open RAM meaning that all these radio access networks can be interoperable with any kind of hardware.
10:27So we are unlocking this vendor lock-in.
10:32And everybody talked about it, but nobody has done it.
10:35So we took the risk of developing open radio access network software.
10:42And when we started six years ago, everybody was not only skeptical.
10:49They were basically joking, this is not going to happen.
10:53It is too complicated.
10:56Because radio access looks very simple.
10:58But you have to process millions of bits in a second.
11:03Everybody thought it can be done only by a specialized semiconductor.
11:08But we have done it.
11:11Now Rakuten Mobile has over 7 million subscribers.
11:16Connected to over 400,000 radio stations in Japan.
11:20And it is one of the best performing networks in the world.
11:25What it does is we unlock this vendor locking of mobile companies.
11:32Which will basically lead to more affordable, high speed, high quality, unlimited data access all over the world.
11:43So we started to resell our software to other companies.
11:49If you can click one more.
11:51So this is what we do.
11:54We basically try to unlock vendor lock-in from European telecom system companies or Chinese system companies.
12:05You do not need to depend on these companies.
12:08You can control your software.
12:10You can control your radios, which is going to open up.
12:14And we are not just talking about smartphones.
12:16We are talking about autonomous driving cars.
12:19We are talking about all these IOTs.
12:22We are talking about the private fire.
12:24We need to basically break the vendor lock-in system.
12:29So that's what we are doing at Rakuten Mobile.
12:33And the subsidiary called Rakuten Symphony.
12:35So Rakuten Mobile has three meanings.
12:38One is it is going to be probably very very profitable business.
12:42Because our cost of operation is fraction of our competitors.
12:47Because of our software nature.
12:48And we have a very big ecosystem in Japan.
12:51And the second is it is a kind of a test drive for our technology.
13:03Right?
13:03So we can prove this technology works.
13:07We have done it in Germany with our client called One and One.
13:12They have 14 million subscribers.
13:14They are going to move everything to our overrun system.
13:18And now also third is a contribution to our ecosystem.
13:23But this overrun thing is very very exciting.
13:26And now it is happening because of the success of Rakuten Mobile in Japan.
13:31Thank you, Miki.
13:33Let's talk now about AI.
13:35Right.
13:36As you mentioned earlier in the presentation.
13:40Let's talk a little bit about what we are going to do for our radio one more time.
13:48And then because of our success, all these hardware vendors started to talk about Oran.
13:56Ericsson Oran, Nokia Oran, Samsung Oran, Fujitsu Oran, NEC Oran, Mavenia Oran.
14:03For me, but one more question.
14:07It doesn't make sense.
14:09So we have decided to basically open source this.
14:15So I started to talk with all these my competitors and our clients.
14:21We will give you our Oran software.
14:25You don't need to develop by yourself.
14:26Right.
14:27If you think about why Linux became so popular, it is partially because of the company called Red Hat.
14:35Red Hat certified and guaranteed interoperability with all these hardware and software.
14:43We sell those kind of, you know, company.
14:48Linux will not be here.
14:51And cloud not be here.
14:53And then internet will not be here.
14:56So I thought about, you know, analogy.
15:01Well, what we should do.
15:02Okay.
15:02Now we will give our source code to even to our competitors at a very reasonable price.
15:10You don't need to develop the open run software, which we already have developed.
15:15And Rakuten Symphony is the only company which has proven 4G and 5G Oran software.
15:25And we have interoperable for most of hardware and software already.
15:30But other companies, big companies are trying to catch up.
15:34So what I think is, okay, now all these software, we're going to give it to you.
15:39We're going to give it to our competitor.
15:40We can give it to all the telecom companies which they want.
15:45And this is going to be a huge revolution, I think.
15:48Because we are going to change nature of wireless network.
15:54And why this is important?
15:58Because AI cannot manage hardware so easily, right?
16:03If you think about autonomous cars, multiple autonomous cars are electronic.
16:08Why?
16:09Because it is easier to manage software than manage hardware.
16:14So this is the same.
16:15If these hardware or, you know, a network is driven based on hardware,
16:22it is going to be very difficult to manage it.
16:25But if it's based on software, we will be able to, you know, manage your radio, core, all with AI,
16:35right?
16:36So, for example, Rakuten Mobile engineering cost is a fraction of our competitors
16:44because it's all autonomous.
16:46We can commission thousands of radio stations in one day.
16:52And we did it.
16:53But this is impossible for other companies because it's all done by hardware and by human.
17:02So AI is going to be a major part of our network.
17:08And AI can bring down the cost.
17:11AI can prevent the more outage.
17:15So what it's doing is very, very different from what our, you know, competitors are doing and have been doing.
17:25Yes, because talking about AI, Rakuten Group, with its 70 plus companies, processes a large amount of data, talent, coupled
17:37with strong AI capabilities.
17:39So how you've leveraged data and AI to make a difference across your business?
17:44Yeah. So talking about AI, we have on the product side, we have two strategies.
17:50One is partnership with OpenAI and Google and other AI companies.
17:56At the same time, we are developing our own large language model.
18:01And we just published our 7B Rakuten AI outperform almost all our competition for the small AI.
18:13And big AI is very, very smart.
18:15But it consumes a lot of calculation and a lot of money.
18:20And we are talking about more vertically integrated, smaller AI for commerce, smaller AI for finance, smaller AI for travel,
18:31which does make sense for us.
18:35So we are developing our own AI and hiring all these talented people because the food they like is not
18:44money.
18:44The food they like is what we call data.
18:47And we have the richest data set even compared with big hyperscalers.
18:52The second thing is on the service side.
18:55We create a strategy called triple 20.
18:57What it is, is we're going to basically improve our operational efficiency by 20%.
19:05And each business has a very specific target, how to do it.
19:09And we are going to improve our marketing efficiency by 20%.
19:14And we would like to also empower our clients, merchants, you know, the partners by 20%.
19:24Because all these smaller companies do not have a capability to how to implement and use AI.
19:33And we have over 500,000 clients all over the world.
19:38So that's our vision for AI.
19:41But I think AI will probably redefine the future of not only internet businesses, but also the nature of the
19:52society.
19:53And one of the reasons why we can do it is the fact that Rocketing globalized its organization in the
20:04past.
20:05And we changed our internal communication language from Japanese to English.
20:12Even though you have a very good dataset, if it's all Japanese, in combination of all Japanese,
20:18we could not hire talented people like yourself, right?
20:22Because now all these meetings are done in English.
20:26Even if we only have Japanese participants in our meetings, we do meetings in English.
20:36So that is part of the reason why we can attract and hire many, many talented AI engineers and data
20:48scientists.
20:49Yeah.
20:51Great.
20:51I think we are coming to the end of our discussion, Miki.
20:54So thank you very much again for sharing your invaluable insights and vision for Rakuten.
21:00Thank you very much.
21:00Thank you.
21:01That's good.
21:02Thank you very much.
21:03.
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