PHS has uncertain future in cell phone sector

by May Masangkay

Kyodo News

After Willcom Inc., the nation’s largest personal handy-phone system service provider, undergoes rehabilitation, will Japan’s PHS service still find a niche for itself amid the saturated mobile market?

While debt-ridden Willcom is quick to point out the unique benefits of PHS for hospitals, which often favor the system’s weaker electromagnetic waves over those of mobile phones, most telecom industry pundits believe PHS is unlikely to survive the fierce competition in the mobile communications service sector.

Yusuke Tsunoda, a telecommunications analyst with Tokai Tokyo Research Center, points out that NTT DoCoMo Inc. and other carriers have withdrawn from the PHS market in recent years, and says, “PHS service, in terms of business, is not that profitable.”

Despite a 4-million-strong subscriber base, Tsunoda said the number of active users is actually fewer, and voiced doubt over the viability of maintaining a service for only several million users, compared with tens of millions of mobile phone users.

Analysts say current mobile phones can serve as substitutes for PHS and the rise of smart phones such as Apple Inc.’s iPhone is making the field even more competitive.

Ichiro Michikoshi, a senior analyst for market research firm BCN Inc., said that while PHS — a stripped-down cellular service with relatively low charges — was initially popular for its flat rates and good transmission even in subways, mobile phones have already caught up with this, and the line has now blurred between PHS and mobile phones both in quality and pricing.

To stage a comeback, Willcom launched last year its next-generation high-speed data transfer PHS service, called Willcom Core XGP, with high-speed transmission of up to 20 megabits per second, but investment eventually pushed Willcom to incur heavy debts and file for bankruptcy protection Feb. 18.

In announcing the firm’s filing for bankruptcy, Willcom President Yukio Kubota stressed the value of PHS services to social infrastructure, including hospitals.

This was also the main reason the government-backed corporate turnaround body gave to justify its decision to provide a credit line of up to ¥12 billion to help maintain Willcom’s existing PHS services.

But Tsunoda indicated PHS is not indispensable, saying it is possible to create a terminal that can serve as an alternative to PHS for in-house communications at hospitals.

Willcom’s attempt to revitalize its struggling PHS business through its Willcom Core XGP has also met with skepticism from the industry in the face of powerhouse rivals in data transmission services, including Emobile Ltd. and KDDI Corp. affiliate UQ Communications Inc.

Launched last July, UQ’s WiMAX (Worldwide Interoperability for Microwave Access) wireless broadband data communications service allows downloads at speeds of up to 40 megabits per second.

Shuichi Kako, UQ’s associate senior vice president and general manager of sales, said he believes in the business viability of WiMAX for speedy and ubiquitous mobile Internet access, and is looking to expand services to consumer electronics, such as flat-panel TVs.

“It’s a question of whether computers have or do not have inbuilt WiMAX technology, and that spells a major difference,” Kako said, adding that one advantage WiMAX has over other domestic services is that it can be used abroad.

Another formidable foe Willcom Core XGP faces is Long Term Evolution, a next-generation mobile phone format that NTT DoCoMo first will introduce this year.