Cellular phone usage has consistently racked up double digit growth rates over the past decade with the number of subscribers growing from an estimated 4000 users in 1985 to over 700,000 users as in 1999. Over the past five years, the average compound growth rate was over 50 per cent per annum. The most important technological development in the cellular market in the 90s was the introduction of digital services. Pacific Link was the first to launch a digital network in Hong Kong (and the region) introducing IS-54 TDMA service in October 1992. SmarTone followed in February 1993 with the launch of its GSM network, again a regional first. Six months later, Hongkong Telecom CSL launched its GSM network and was the first provider to offer coverage in all the major road tunnels and the Mass Transit Rail system. In May 1995, Hutchison Telephone launched its GSM network and has plans to launch IS-95 CDMA services in 1996.
Ultimately, all the digital cellular networks will wind up with seven and a half MHz of radio spectrum with the cellular spectrum accommodating 550,000 subscribers by 1998 taking cellular penetration to nearly 9.5 percent of the population. So far the only time bandwidth limitations affected most users was in 1992 and 1993 when lack of capacity in analog networks was partially to blame for decelerating cellular phone growth temporarily from a nearly 50 percent growth rate in 1992 to about 23 percent in 1993.
The introduction of digital services, and significant drops in handset prices, turned this situation around and in 1994, the local cellular customer base grew by 140,000 subscribers or 48 per cent. From nowhere three years ago, the number of digital cellular users grew to over 300,000 by February 1998. Today digital systems accommodate 50 per cent of Hong Kong's cellular customers. In fact, there are now more users of portable digital handsets (224,150) than users of analog equivalents (214,780) according to OFTA figures. Where once handsets carried five-digit price tags, today's cellular entry point has now been reduced to generally under HK$1000.with the wide availability of used handsets and one-way services.
One way cellular services were introduced by Pacific Link and Hutchison in 1995. Pacific Link was the first to market this service launching its 'Walking Phone' service through its Telelink CT2/paging operation in the first quarter of 1995 aiming at CT2 users frustrated by CT2's distance and switching limitations. Pacific Link priced its service rates about HK$100/month higher than CT2 rates and currently offers handsets at prices starting under HK$1000. By May 1999, the company managed to attract some 50,000 subscribers. Hutchison responded by launching its CallPhone service in June 1995. Like Pacific Link, Hutchison offered this service through its paging operation. One-way services notwithstanding, in the overall cellular market Hongkong Telecom CSL is the market leader with a 34 per cent share followed by Hutchison which has about 25 per cent of the market.
Cordless Telephone 2 or CT2, has succeeded spectacularly in Hong Kong despite receiving poor consumer acceptance elsewhere. CT2 and paging markets have synergistically benefited each other and, as with pagers, CT2 handset prices have dropped over 50% in the past two years.
There are currently three active and one dormant license. The three major CT2 operators, Hutchison Tien Dey Seen, Chevalier Telepoint and Pacific Telelink have enjoyed healthy growth rates (Hongkong Telecom holds the fourth license).
All three boast an install base of well over 10,000 based stations between them and industry experts expect that there will be 700,000 CT2 subscribers by the end 1999. Interestingly, though CT2 is not available in the United States, most CT2 handsets in use in Hong Kong are made by American firms, Motorola or AT&T. French (Dassault) and Japanese firms (Kenwood, Sony) are also offering CT2 products locally.
At present, the three providers boast an install base of well over 10,000 based stations between them and according to OFTA, there were 178,515 CT2 subscribers at the end 1994. In 1995, Hutchison and Chevalier began offering two way CT2 services allowing users to receive as well as place calls from a handset (within range of a base station).
Wireless data services
In 1994 Motorola established its Motorola Air Communications operation to offer wireless data transfer services including fax, on-line financial data and CompuServe services. The service is based on a 19.2 kbps network with Hong Kong the first of what Motorola hopes will be many Motorola Air Communications sites around the world. Motorola Air Communications launched its max wireless data service in Hong Kong in May 1995. The network is based around Motorola's DataTAC 5000 cellular data network. The max service allows users of personal digital assistants, palmtop and notebook computers to run various wireless applications through a combination of a Motorola Personal Messenger 100D, a wireless PCMCIA data modem capable of transmitting data at speeds of up to 19.2 kbps, and software. There is a version of the software that operates under Windows and another version that operates with the Hewlett-Packard Palmtop Systems Manager on 200LX palmtop computers. At present, all data and faxes are routed through the DataTAC 5000 network and each Max users is assigned his own Internet electronic mail address. A user cannot, for example, dial into another service provider with whom he has an account.
An upgrade is being planned that will allow users to dial directly into Internet service providers, electronic bulletin boards or send or receive faxes directly as well as send and receive electronic mail from LAN-based systems and send messages to pagers. Motorola also plans to introduce voice mail services through max by the end of the year. Further down, Motorola revealed plans to allow Max to operate in wireless local area network environments and two way Chinese character messaging.
In addition Motorola, which has invested US$40 million in the Hong Kong network, plans to link the Hong Kong network with DataTAC 5000 networks that have been established in Singapore, Malaysia, Thailand and Australia to provide roaming wireless data services. AsiaPAC Radio Data Net, a consortium of Asian telecommunications carriers founded by Motorola AirCommunications, is handling the integration. A range of wireless applications is already being developed for max. The first to market will be AirBroker, an application being developed by Sun Hung Kai and Reuters that will provide minute-by-minute updates on financial data from international stock exchanges. U.S. firm RadioMail, which provides wireless messaging services, plans to introduce messaging and paging services through max in Hong Kong. Motorola will charge subscribers based on the amount of data transferred through the network. It announced four rate packages including a four month promotional package where users pay HK$688 for unlimited usage. After the promotion period ends, subscribers will have to pay a HK$500 registration fee and choose the rate plan. The first costs HK$200 and allows users to transmit 225 free 512kb-packets. A second package costs HK$400 and allows the transmission of 500 free packets while a third costs HK$700 and lets users send 1000 free packets.
Paging
Despite the fact that there are 38 different paging companies in Hong Kong, the market is an oligopoly with three firms, Hutchison Paging, ABC and Star, holding an over 80 per cent share. Paging growth rates have remained strong over the past five years due in large part to the introduction of new services including international paging, new types of pagers, innovations in service plans and a drop in pager prices by as much as 50 per cent over the last year.
Hutchison continued to dominate the market with a 47 per cent market share with Star and ABC holding second and third positions, respectively. The remaining 18 per cent of the market is shared by smaller competitors such as New World Paging, BB Telecom, Asia Paging, Wharf and others.
Growth in paging is expected to slow, yet remain strong; in 1998 the paging market grew some 15 percent; for 1999 this figure is expected to be 12 percent. . As of February 1998, there were about 1,100,000 paging subscribers in the territory. The most significant technological development will be the introduction of high speed paging technologies, such as ERMES, later this year.
PCS/CAS
OFTA has stated that given the right price and spectrum availability, there is the potential for mobile service penetration rates to exceed fixed line rates. Given this underlying premise, and the fact that spectrum availability has limited capacity growth in cellular services, OFTA issued a consultative paper to the industry for mobile services.
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