From day one, the demand for Personal Handyphone System service in Japan has astounded the world of telecommunications. After only a year in the marketplace, PHS now claims more than 3.2 million subscribers.
Most surprising is that PHS was an immediate success despite the doubt and criticism that paralleled its introduction. Government and industry questioned PHS’ viability because, in addition to its low mobility, some of the first systems demonstrated trouble handing off calls and lacked the capability to transmit data. PHS did not offer voice mail and users could not call long-distance or cellular numbers.
But many of those wrinkles have been ironed out. Data capability has been added, handoffs are softer and voice mail now is an option. Long-distance service is expected to be offered next year, previously slated to start in 1998 or 1999, said Dave Nowicki, PHS product manager for ArrayComm Inc., which supplies base station technology to Japanese equipment manufacturer Kyocera. Calling between PHS and cellular handsets recently became possible. PHS uses a combined Time Division Multiple Access/Time Division Duplex digital technology.
Low-mobility is inherent in PHS and when compared with cellular appears to be a liability. But in specific applications, where high speed travel is not as critical and reception and interference typically are a problem, PHS may be the perfect fit. In cities like Tokyo, characterized by congested traffic, high population and a forest of buildings, a mobile user’s chief concern is getting a clear signal. Operating from microcell base stations, PHS handsets can be used in basements or inside concrete structures.
Technology improvements coupled with an overwhelming consumer response are driving government and industry in Japan to reevaluate PHS-technically and as a money generator. Several other Asia-Pacific nations have adopted PHS or are testing the technology.
The mobile user
PHS’ rapid growth suggests it has upstaged Japan’s cellular market, or at least given it a run for its money. But not so, said Nowicki. Cellular’s growth rate has remained steady throughout PHS’ parade into the marketplace, he said.
PHS fills a void in the market, said Nowicki. It is more affordable than getting a new wired phone line or signing up for cellular service. Installation of a fixed line costs $800, whereas PHS has an introductory service fee of between $50 and $70, said Nowicki. For a subsidized cellular phone, a user will pay about $150. A subsidized PHS phone costs about $80. On average, three minutes on the cellular network costs $3. On a PHS system 3 minutes of airtime costs between $1.20 and $1.50, he added.
Sixty percent of Japan’s PHS users are under the age of 30 and are fixed residential users, including teenagers and college students who live at home and want a second phone line, said Nowicki. Its popularity among this crowd is evidenced by the heavy calling activity on the PHS system during the evening.
PHS compromises mobility for improved voice quality and reception, and cellular does the opposite. In Japan, cellular is most popular among business people.
George Hoffman, branch director of the Yankee Group in Japan, said PHS’ recent addition of data capability may help the technology infuse the business market. Hoffman noted cellular and PHS networks are not yet interconnected, so calls between PHS and cellular phones are routed through an intelligent terminal and connection between users is done in “a primitive sort of way.” In terms of coverage and network ubiquity, cellular surpasses PHS.
The players
DDI Pocket Telephone leads the PHS market with a 51.5 percent market share, followed by NTT (Nippon Telegraph and Telephone) Personal Communications, which holds 25.9 percent, and Astel, 22.6 percent, according to a recent report by Morgan Stanley & Co. of Singapore.
DDI’s sizable margin is particularly impressive when tracing Japan’s telecom history. NTT Corp. holds a 51 percent market share in cellular, and DDI has a 26 percent share. In the long-distance market, NTT leads with about 91 percent market share and DDI only 14 percent.
Nowicki said DDI Corp. Chairman Dr. Kazuo Inamori, also Kyocera’s chairman, has taken a unique approach to growing his company, which was founded in 1984. Historically, NTT and other Japanese service providers have used Japanese equipment, but Inamori and DDI have taken a different path.
Inamori retains traditional Japanese values in most his life, said Nowicki, but a Western philosophy when it comes to business. “His strategy is to shop the world.” ArrayComm, Pacific Communications Sciences Inc. of California, and DSC Communications Inc. of Texas, have supplied components of DDI’s network infrastructure.
A number of manufacturers, mostly Japanese, supply equipment to the three PHS providers. Kyocera, DDI Pocket Telephone’s main provider of base stations, owns 25 percent of DDI Corp.
More than 20 companies now produce PHS handsets, added Nowicki.
Two tone job
In Japan, PHS is a digital, public mobile service, as it will be soon in other large Asian cities. PHS also is expected to become a strong competitor in the fixed line wireless local loop market, where wireless “last mile” coverage is a more cost-effective and higher quality alternative to laying copper wire.
Underdeveloped countries, where phone service is deteriorating or not available, are target markets for this type of service.
Nowicki noted PHS systems for WLL have been sold in Guatemala, Argentina, Colombia and Uruguay.
Morgan Stanley predicts PHS will meet high success in Asian cities and anticipates PHS will extend coverage into many suburban areas as both a wireless local loop application and a value-added wireline service. The technology allows for use also in wireless private branch exchange and transceiver, or “walkie talkie,” applications, said Morgan Stanley.
Asian adopters
PHS accounts for 22 percent of current WLL trials worldwide, said Morgan Stanley. In addition to Japan, PHS adopters include Hong Kong, Singapore, Australia and soon Thailand, added the firm.
PHS is expected to be introduced in Thailand in about a year. Morgan Stanley forecasts the service will capture 26 percent of Thailand’s mobile market by 2000. Supporting its predictions are a number of market factors. In Thailand hardware costs are among the highest in the region. So PHS phones-which are smaller, offer longer battery life and on average cost 80 percent less than cellular handsets-are more desirable. Hitoshi Takanashi of NTT Wireless Systems Laboratories said the newest PHS handsets weigh only three ounces and provide seven hours of talk time and 550 hours standby time.
Installation costs, monthly fees and calling rates for PHS also are expected to cost less than cellular. Morgan Stanley noted Thailand’s urban centers, namely Bangkok, are so densely populated and traffic is so congested, users don’t require high mobility.
Two of Thailand’s four telecom providers are licensed to provide PHS as a value-added service to their fixed line services, but they await formal approvals to operate. Cellular carriers have objected to PHS, claiming their exclusive market rights are being infringed.
China’s Ministry of Posts and Telecommunications is expected to allocate frequencies for PHS soon. The country is testing both PHS and the Digital European Cordless Telephone standard.
The PHS MoU Group said the Indian government adopted a new policy to allow private entry into both the cellular and basic telephone service sectors to create competition. The group said India is interested in PHS for fixed line wireless local loop applications.
Morgan Stanley and other sources reported that Indonesia is close to adopting PHS, and trials are under way in South Korea, Taiwan, Malaysia, Vietnam, Cambodia
and India. A newspaper in Jakarta reported the country’s telecom authority will award contracts to consortia of companies for
PHS and personal communications services.
PHS MoU Group
Last fall, Dr. Hiroshi Ishikawa, chairman of Japan’s Technical Assembly of the Telecommunications Technology Committee (TTC) and vice president of Nippon Telegraph and Telephone Corp., headed up efforts to launch a PHS MoU Group. The group aims to foster growth of PHS worldwide and establish international PHS industry standards.
The Association of Radio Industries and Businesses leads the PHS MoU group. About 55 telecommunications companies, telecommunication authorities in Japan, Singapore and Australia, and several other public organizations and companies were the inaugural members of the PHS Group. The majority of members are Japanese electronics and telecommunications equipment makers.
The group determined PHS handsets must operate in public, PBX cordless, home cordless and transceiver (walkie talkie) modes. Two types of terminals are defined, public use and public with private use. PHS handsets must be small and lightweight, designed in accordance with a determined common design of parts that promote low power use and have a user-friendly interface.
