THE JAPANESE HANG UP ON HANDYPHONES (from BusinessWeek int'l
edition)
The alternative to cellular can't compete
Several years ago, Tokyo hairstylist Mitsuko Shimizu decided it
wastime to get a mobile phone. Like many Japanese consumers
looking for economy and quality, she opted for the new personal
handyphone system, or PHS, the homegrown technology that offers
cheaper service and a smaller handset than normal cellular phones.
But after a free six-month trial, Shimizu, 26, grew frustrated
over the difficulty in placing calls because of PHS's limited
range. So she switched to cellular, where prices and handset sizes
were shrinking. ''I can call anywhere now,'' says Shimizu. ''I
wish I'd started with a cellular.''
It's the kind of talk that makes hearts sink among backers of PHS.
When it was launched by a government-backed consortium in 1995,
PHS--Japan's counterpart to the Personal Communications System
used in the U.S.--was billed as a major rival to cellular
technology dominated by Motorola and Ericsson. But since peaking
at 7.1 million subscribers just last September, PHS users are
dropping out at an alarming rate--even though Japan's three
providers are giving the phones away. Meanwhile, NTT DoCoMo, Tokyo
Digital Phone Co., and other providers of cellular phones based on
Japan's PDC standard, which is similar to Europe's GSM, have
boosted their subscriber base by 50% in the past year, to 30.3
million. The main reason: Average monthly bills for
cellular users have dropped from $175 to $60 since 1995, while PHS
service is still around $40. PHS providers ''have run out of
reasons to exist,'' says Salomon Brothers (Asia) telecom analyst
MakioInui.
Given Japan's global telecom aspirations, it's a demoralizing
blow. After establishing PHS at home, backers hoped to expand
across phone-starved Asia. Instead of transmitters atop tall
towers beaming signals as far as 16 kilometers away, PHS uses many
small, short-range cells mounted on buildings or telephone poles.
While the quality isn't as good as cellular, the
technology was considered ideal for developing nations because it
was much cheaper to use and install.
HYPED? But PHS providers didn't expect the prices of more powerful
digital cellular service to drop so quickly. Critics also think
PHS's early success was hyped. To enlist subscribers last year,
NTT Personal, DDI Pocket, and Astel offered $300 handsets for as
little as $40. Then they handed them out for free. As a result,
nearly 60% of PHS subscribers are in their teens or 20s, the age
groups most likely to lose interest when bills start rolling in.
''We made a
marketing mistake,'' concedes Yoshiaki Yoshida, Astel's planning
manager. ''We damaged our image and attracted the wrong kind of
subscribers.'' With giveaways, Astel has kept its subscriber base
at 1.4 million. But 10% drop out every month. The real shock came
in February, when Japanese telecom giant Nippon Telegraph &
Telephone Corp. announced a 1997 write-off of $530 million by NTT
Personal. The unit's cumulative losses are estimated at $1.9
billion. ''PHS is not attractive anymore,'' said NTT President
Junichiro Miyazu in a recent statement. Analysts predict NTT
Personal, with 2 million subscribers, will get folded into NTT's
profitable cellular subsidiary.
Japan's PHS hopes aren't dead. It's still seen as a low-cost way
to provide communications in Asian, Middle Eastern, and South
American cities. But as demand grows, it becomes cheaper to set up
a few big cellular stations than scads of PHS units. Asia's
economic crisis has also hurt. Indonesia was about to award
contracts for PHS before its currency tanked. TelecomAsia Corp. of
Thailand also has postponed its PHS launch, originally planned for
last October. But even when the region recovers, PHS will be in
for a rough time. The market is saturated, and cellular prices are
still tumbling.
''A MATTER OF SURVIVAL.'' That means PHS providers may have to
rely upon niche markets. For example, computer data transmission
accounts for only 2% of PHS use. But the share could grow when the
Internet takes off in Japan, because PHS data transmission is
three times faster than cellular and--at 15 cents a minute--is
five times cheaper. Providers also are promoting pager-type
PHS units for children, housewives, and the elderly. ''It's a
matter of survival,'' explains Junichi Takahashi of DDI Pocket,
which controls half of the PHS market.
But mere survival doesn't mean victory. To be respected as a major
world standard, PHS requires serious market share. And that dream
is fading fast.
By Irene M. Kunii in Tokyo
I choose the name El Matador (if you haven't yet got) is because
people are bullish in some stocks that will be what the Edsel was
for cars, the Newton from Apple was for PDA's and what WLL will be
for access networks.
Que venga El Toro!! Translation: Let the Bull loose! May be I
should say: Let the Ostrich loose!. Because I can lose money, but
I can't lose my good humour. |
