Today my presentation covers the following five subjects.

Mr. Fang Hui

1. The history of Value-Added Service (VAS) in China
2. Opening & standardization
-- the only way to the healthy development of PHS
3. Packet Data Service has good future
4. Handset Internet Access Service
5. SMS is expected to develop further

1. The history of Value-Added Service (VAS) in China

     Five PHS Value-Added Services (VAS) -- Intelligent Network Service, Data Service, Handset Internet Access, Short Messaging Service (SMS), and Location Service (LCS) are being developed in China. At present, the PHS has a system capacity of 45 million lines and 30 million subscribers in total and two PHS operators -- China Telecom (CTC) and China Netcom (CNC) are expanding the service area into the countryside. There still remains, for the next two to three years, great opportunity PHS development. Up until now, the PHS operator revenues come mainly from voice service; PHS data service is at present very limited. We can, however, foresee a brilliant future for data service in China. Packet data communications would be a powerful impetus and CTC, CNC and PHS equipment suppliers have a strong interest and high expectations from this new technology. gC-modeh service has been introduced into China for Internet access using PHS handsets and CTC and CNC are considering the adoption of open protocols such as HTTP, HTML, xHTML, SMTP, and POP3. In China, SMS has been the most successful mobile value added service. CTC and CNC have unified the specification of SMS, which has become a necessary service for new PHS handsets.

2. Opening & Standardization

     Open specification such as RCR STD-28 etc. has powerfully boosted the development of the PHS in Japan and the other areas/countries. On the other hand, the disunity and imperfection of the SMS specification severely affected and postponed the development of the SMS in China. The lack of interoperability criterion affected the development of the roaming service in China. We ZTE sincerely believe and suggest that 1) itfs our responsibility including the PHS MoU Group, operators, manufacturers to promote the development of the PHS, 2) open and standardization is the only way to make the PHS develop healthily and continuously, 3) the healthy development of the PHS will benefit all participants, 4) technology innovation is the foundation of the PHS.

3. Packet Data Service has good future

     At present, the PHS network layout is built for voice service and the occupation of the channel by the circuit-switched data communications ties up radio resources. As data communications and VAS develop, the voice business will be affected and users will be lost. China Mobile, the other mobile service operator, has started GPRS service in most areas of China and offering a data rate of approximately 30-40 Kbps. China Unicomfs CDMA network has been updated to CDMA 1X and its average data rate is 70 Kbps. PHS is required to compete with these services. Packet data communications has the great advantage of higher availability of radio resources, billing by actual use, channel-sharing by multiple users, ealways onf operation, and 128 Kbps data rate. Almost all Cell Stations (CSs) can be software-upgraded to support these services at low cost. Packet data communications can provide not only better service to the users and income to operators but also commercial opportunities to Japanese manufacturers. The obstacles to packet data communications are the lack of a disclosed protocol, high network equipment and handset price, and the fact that some CSs canft support it. ZTE proposes that the packet data communications protocol be made open in order to attract companies to take part in this new market and to reduce the network equipment and handsets cost to meet the requirements of the Chinese market.

4. Handset Internet Access Service

     The promotion of the internet access terminal business by China Mobile and China Unicom has impelled the development of PHS handset Internet access service in China. Service analogous with the forthcoming 3G services is strongly attractive. We must consider the features that this mobile phone Internet access should offer. For basic functions and protocol, type of the mobile phone, and the operation methods, we should make specific suggestions and create specific criteria. In order to overcome compatibility problems, we think that it is necessary to present feasible proposals, including PPMP protocol, in an open forum.

5. SMS is expected to develop further

     In the beginning of PHS, SMS service wasnft considered, and so, in China, we have experienced a very hard process to unify SMS service specifications. In contrast, in GSM, SMS was considered from very early stages and complete standards, from handsets to the network, were formed. Now, in addition to text SMS, GSM can also support voice and picture downloading, and is rapidly moving to Multi Media Service (MMS). In China, PHS has just unified text-type SMS standards with a maximum 116 byte size. ZTE proposes 1) to study and create specifications for long SMS, 2) to discuss the possibility of receiving & sending the short message while speaking, 3) to study the possibility of simple media downloads such as voice and pictures using long SMS and to make specifications for this and 4) to study the possibility of PHS MMS modeled from GSM.