China has attained the largest number of PHS subscribers in the world and is adding additional subscribers at a brisk pace. No doubt this enormous and fast-growing market has attracted attention from PHS vendors worldwide. To provide the PHS community a close-up look at the PHS service in China, the PHS MoU Group visited the Xiamen Branch of Fujian Telecom Corporation, China Telecom Group. Our sincere thanks go to Mr. Yunai Pan, Vice Director of Planning and Construction Department, for hosting our visit in Xiamen, China in January 2002. Xiamen is a medium sized city located in the Fujian province directly across the strait from Taiwan. The city has approximately 1.25 million inhabitants and is located on an island connected by bridges to the mainland. It has been a special economic zone since the early 80's and thus a relatively prosperous city in China.

CS Antenna on Street Light

According to Mr. Pan, China Telecom currently has approximately 140,000 PHS subscribers. This compared to about 500,000 China Mobile GSM subscribers and 200,000 China Unicom subscribers. In 2002, China Telecom plans to add 240,000 new subscribers in Xiamen. PHS commercial service in Xiamen began in December 2000.

China Telecom Xiamen uses Lucent as the PHS system integrator. They purchase switches from Lucent and cell stations (CSs) from Kyocera and Hitachi. Currently they have over 1700 500mW outdoor CSs, over 1400 300mW outdoor CSs, and over 100 20mW indoor CSs deployed. Additional CS deployments are planned.

The 500mW CSs have smart antenna capabilities built-in. Mr. Pan said there are coverage and mobility benefits from the smart antennas. China Telecom has verified that PHS voice calls work well while driving on the highway at over 100km/h through deploying CSs with smart antenna capabilities.Data service was not commercially available in Xiamen yet. The Xiamen office did conduct tests on the network to verify 32kbps data capability. Mr. Pan thought there are two key impediments to rolling out data services: First, there are not enough channels to support both voice and data services. For example, the 128kbps data service ties up 4 channels. Second, the PHS phone to PC connector cables are too expensive. The cables are imported from Japan cost US$ 50 each. This compared to PHS handsets that retail for US$ 100 - 140.

At this point a quick explanation of the organization structure of China Telecom is in order. China Telecom Group consists of fairly independent companies at each province. For example, Mr. Pan works at the Fujian Province Telecom Corporation. The national group has limited control over the provincial companies. The provincial companies have branches in each city and have strong control over the city branches

With the announced China Telecom and China Netcom re-organization, the southern provinces will remain in the China Telecommunications Corporation while the northern provinces will move to the China Netcom Communication Group Corporation. Both groups expect to receive 3G licenses eventually, but there is no timetable yet. Mr. Pan believes that PHS will be around for a long-time in China due to its low cost.

After our meeting, Mr. Pan asked his staff to give us tour of PHS CS deployments around the city. First we took a look at a CS mounted right on the roof of their office. It was a Kyocera 500mW CS mounted outdoors with ISDN 64kbps backhaul. From the roof we saw many other PHS CSs and antennas mounted on the tops of buildings throughout the city.

We then took a ride along the coastal highway around the island, where there were no tall buildings. To solve the problem with CS sights, Fujian Telecom co-located its CS with the 110 service's (China's 911 service) security camera poles. The antennas were mounted of the way up the approximately eight meter poles. The CSs were below the antennas with advertisement boards surrounding them so that you could not see the CSs. The poles were located 1,200 meters apart.

After seeing the CS deployments we visited retail stores to look at handsets. At a street corner right next to a China Telecom office, there were three mobile phone retail stores. Only one sold PHS phones. They had one PHS phone on display for 1100 RMB (approx. US$133). In contrast, there were more than 50 GSM phones in display ranging from 700 - 4000 RMB (approx. US$85 - 483).

Xiamen, China

The retail clerk said that most of its customers who buy PHS phones already own a GSM phone. Customers buy and use the PHS phones because it has cheaper airtime. For business people, they use GSM phones for business trip and important in-town phone calls. For young consumers that do not need roaming, they still use GSM for SMS and games. SMS is popular because it is cheaper than talking on the phone - users can compose offline and not use airtime.

When asked what the PHS MoU could do for China Telecom, Mr. Pan suggested that the PHS MoU could provide an avenue for the provincial companies of China Telecom to influence the PHS vendor community.

As we parted, Mr. Pan expressed enthusiasm for future PHS MoU meetings to be held in China and said he would be happy to provide support if a meeting were held in Xiamen. Mr. Pan said Xiamen has one of the best PHS services in China. In addition, Quanzhou, a city one-hour bus ride away, has the largest number of subscribers in China at 400,000. Xiamen currently hosts many visitors from other cities in China interested in deploying PHS. Given its sub-tropical climate, Xiamen does seem like a good candidate city for a December PHS MoU general meeting.