PHS MoU Group Newsletter Issue 37

The 12th PHS MoU Group General Meeting Held in Tokyo

On December 6, 2001, the 12th General Meeting of the PHS MoU Group was held at Toranomon Pastoral in Tokyo with more than seventy participants from some forty companies.
Presided over by Mr. Nobuhiro Horisaki, the Chairperson of the PHS MoU Group, the meeting was commenced with the following opening address by the Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT), the PHS MoU administrative member of the host country.

Mr. Tatsuo Kito, Director-General, Radio Department, Telecommunications Bureau, MPHPT

  At the opening of PHS MoU General Meeting, I give an opening address as the PHS MoU administrative member of the host country.

  Firstly, I would like to welcome foreign members of the PHS MoU Group including many telecommunications carriers and manufactures that have come to Japan.

  Now, PHS is diffusing internationally in a steady way. In rural areas, the supplementary-type PHS to fixed telephone networks, one of PHS applications, is widely used. It is our great satisfaction that PHS contributes to the diffusion of fixed telephone networks, a basic telephone service. As for commercial wireless telephone service, the PHS service was commenced in Thailand in 2000, and now 500,000 terminals are used.
In China, some five million people have already been using PHS. In addition, in Taiwan and the U.S., the PHS service, started in 2001, has steadily gained subscribers. The penetration of PHS as seen in these countries is attributable to the activities of the PHS MoU Group.

  Let me explain situations in Japan. In spite of the remarkable start-up, the number of subscribers to Japanese PHS services recorded a declining trend, and now it is leveled off at some 5.7 million terminals. We expect that the number of PHS subscriptions will come back from now on. What is remarkable in the recent PHS is a drastic increase in data traffic rather than voice telephony. For some carriers, more than 70% of their traffic is data traffic. As you know well, PHS's data transmission speed is faster than that of the existing cellular telephone. I think that the characteristic of the PHS, combined with drastic widespread use of the Internet, is making such a result.

  Also, the newly-started PHS flat-rate Internet access service has been enormously favored by the market. Taking into consideration the significance of mobile computing in the future of PHS, MPHPT inquired of the Telecommunications Council on the advancement of the PHS, and received a report thereon from the council in June 2001. The report proposes technical conditions for advancement of transmission speed at 1Mbps at maximum. We are planning to precede the advancement through collaboration with interested parties. We appreciate your cooperation for the PHS's progress thus far. For further technological development and diffusion thereof, we decided to make more efforts, and are willing to support PHS MoU Group members in various ways.

  Finally, I hope success of the PHS MoU General Meeting and the PHS Seminar following it.
Thank you very much.

After this address, deliberations of the General Meeting followed.
Firstly, Mr. Masaaki Hirose, the Secretary-General of the PHS MoU Group, made a general report of the Group's activities in the first half of FY2001, including a report of establishment of the PHS Operators Committee under the Steering Committee and the joining of China Telecommunications Corp. as a new observer member.

Then, activity reports from each Working Group were made. Mr. Takao Kashiwamura, Chair of the Technical WG (TWG), reported the publication of Technical Information documents (TIs) concerning PHS supplementary services. Mr. Fumio Uno, Chair of the Promotion WG (PWG), reported the progress of posting PHS MoU Technical Specifications on the Group's web site (http://www.phsmou.org) , and that the specifications will soon become downloadable freely from the web site.

Finally, the retirement of Secretary-General Hirose from the Group at the meeting and the appointment of Mr. Shoichi Sugiura as the new Secretary-General were reported.

Following the General Meeting, the PHS Seminar convened. The theme and lecturers were as follows:

"New PHS services in Taiwan"

- by Dr. Hann-Bin Chuang, Vice President of First International Telecom Corp (FITEL)

"Deployment of PHS in China, now and future"

- by Mr. Masumi Yamaguchi, General Manager of Kyocera Corporation

"New value-added PHS services in Japan"

3.1. "Deployment examples of 3G application in PHS - music download service"

3.2. "An i-mode service in PHS and its potentiality of worldwide deployment"

- by Mr. Kazutoshi Watanabe, Senior Managing Director of Index Corporation

3.3. "Japan's First MVNO for PHS"

- by Mr. Robert R. Kelley, Executive Vice President and COO of Japan Communications Inc.

Outlines of lectures will be introduced on this and next issues of the PHS MoU News. In this edition, following two themes are outlined:

"Deployment of PHS in China, now and future" (Excerpt)
by Mr. Masumi Yamaguchi, General Manager of Kyocera Corporation

1. PHS in China (the first round)
  The earliest commercial use of PHS seems to have been introduced at Yuhang City, Zhejiang Province in 1997. Since the division of China Telecom in June 1999, PHS has been penetrating.
The mobile telephone section was separated from China Telecom to become China Mobile, and the pager section was transferred to China Unicom. The China Telecom became interested in PHS for its function as supplement to fixed telephone networks.
Rural cities were especially enthusiastic on such a use of PHS. I have been insisting that PHS is a system appropriate for the second local telephone networks supplementing the first local networks for fixed telephone. This belief of mine has not been altered a bit.

Now PHS is expanding rapidly. Despite the lack of formal statistics, PHS users are said to be over five million people.

2. The second round of PHS in China
  As seen in the first round, China's PHS has developed smoothly. Sooner or later, China will be the largest market for PHS, too. Recent hottest topic is the break-up/integration of Chinese communications carriers. The Standardization Committee was established in the State Council on October 11, 2000, and communications reforms and reorganization of carriers were discussed at the council on October 12.
  What influence will the reorganization bring about on PHS? Concerned parties of PHS are hoping that local telephone networks in large cities will be constructed with PHS, and users will be able to benefit from lowered communications charges.

3. Conditions for PHS's development
  Lastly, I would like to tell you what important factors for PHS to grow further are.

1) Lowering terminal costs and increasing attractive terminal equipment
  In order to develop wider markets, further lowering of costs is necessary. Also, users should enjoy various models of terminals.

2) Commencing services that cellular telephones lack
  One of the features of PHS is its faster data transmission speed. By studying multimedia service used in Japan for making it fit for China, PHS terminals will win other terminals, and, PHS, as a system, will win other systems.

3) Starting service in large cities
  For fully utilizing PHS's characteristics, PHS should start services in large cities. In order to provide services which only PHS with a low-power consumption feature can give, large cities are appropriate for PHS.

4) Raising public awareness on PHS for correct understanding
  Features of PHS are not sufficiently and correctly understood by the public. To this end, we must make further and continuous efforts to carry out awareness campaigns in order to contribute to the development of PHS.

"Japan's First MVNO for PHS" (Excerpt)

by Mr. Robert R. Kelley, Executive Vice President and COO of Japan Communications Inc.

After DDI POCKET began lending PHS networks to Mobile Virtual Network Operators (MVNOs), our company, Japan Communications Inc. (JCI), as the first partner, has been providing services to users since October 2001. (Ref. PHS MoU News No. 36)

  Firstly, I would like to explain what MVNO is. A Mobile Network Operator (MNO) refers to a carrier having an actual network.
On the other hand, MVNO refers to a "V," or, "virtual" carrier. From a users' perspective, MVNOs provide services in the same way as actual carriers, but seen from the behind, they have no networks. This is why MVNOs are virtual operators.
Currently, MVNOs are classified into the following three categories. The first is a "value-added orientation." This is a type of MVNOs, different from other carriers, providing services with added value. The second is a "brand orientation." This is a brand-centered type that a company with brand value acquires users by providing carrier services. The third one is a "device orientation." A firm with devices, such as SONY, becomes an MVNO, and installs PHS in a Walkman so that we can download music with it. This type is called a device-orientation MVNO.

  There is a discussion whether MVNOs are necessary or not. We of course think they are necessary. If MVNOs can have different perspectives and different values in comparison with other carriers, MVNOs will expand markets, making larger markets for carriers as a whole. It is crucial that a "win-win" relationship in which both carriers and MVNOs make profits is possible in this way.
On the contrary, what MVNOs should never do is just to lower market prices by scrambling for the zero-sum market. This is very dangerous for both of the carriers, MNOs and MVNOs. Needless to say, MVNOs have to be happy for users. For users, the advent of MVNOs means wider choices in services, fees and so on.

  Secondly, we introduce a PHS MVNO business that JCI commenced in October. Contracting with DDI POCKET in the form of MVNO, we now provide data communications services with speed at 32kbps, but our target is 128-kbps data service, which, if realized, will explode in the corporate-user market.
We consider two kinds of services for MVNOs.
The one is wholesale business. The other is service for corporate users, the core of our business. The wholesale business is to resell a capacity to companies willing to do the MVNO business. In this case, the company will be able to make MVNO contracts directly with carriers. In this way, we help increase our fellow MVNOs.

  The service for corporate users, our core business, is not a telephone service but a data communications service. We let users insert a PHS data card into their PC or PDA for using it. The data card has our brand but no DDI POCKET's logo.
As the figure shows, data from users goes through an operator's network and comes to our data center, shown in the center of the figure. By using our data card, every data comes here. The data center contains an authentication server and a mail server. We connect between our data center and corporate user's intranets with leased circuits or Virtual Private Networks (VPNs), providing secure end-to-end connection. Users can access from outside safely to applications on their corporate intranets.

  For corporate users, what is the difference between contracting with PHS carriers and with JCI? In contract with us, everything from wireless to VPN is dealt with as a package. In the case of a direct contract with a PHS carrier, for instance, they say "regarding the part of leased circuits, we introduce a wired carrier, so please make a separate contract for that part." It is very troublesome for end users to make contracts with multiple carriers. These systems cannot do without troubles. Upon troubles, users have to separate the troubles into pieces by themselves. If contracting with JCI, users can let JCI handle every maintenance services through "one-stop shopping."

Currently we are negotiating with about 250 corporate users. In comparison with cellular telephones, the number of PHS contract lines per corporation is much bigger, averaging some one thousand lines. Our data cards we sell now are already 128-kbps compatible.
As I said before, when the PHS network side becomes 128kbps in the spring of 2002, this service will surely explode. We are expecting it.