TORONTO. APRIL 10, 1992
Rapid growth and mobile telephony have been synonymous for a decade. For example, in 1991, Cantel’s net new subscribers grew by over 30% and this was in a time of serious recession. World wide, there are now over 13 million cellular telephones installed, representing an incredible penetration for an industry only a decade old. Why then would we be concerned about new challenges and what obstacles might prevent this continued growth?
The first challenge is conceptual. Although I will discuss some of the particular challenges facing the cellular industry, a major challenge is convincing cellular companies that they are in the mobile communications business, not just cellular. This has been Cantel’s approach and many of our recent moves have been to enter new areas of the mobile telephone industry including data as well as voice. However, looking at the cellular industry alone, the following are some of the challenges to continued growth:
Quality and Quantity
The change to digital technology is often thought of as a move for additional capacity. While it is true that the current industry digital standard of TDMA will increase the capacity of a radio channel, initially by a factor of three and ultimately by ten or more, this was not the only reason for making the conversion. It is really just the final logical step in making the cellular network totally digital, bearing in mind that the microwave, fibre, and the switches themselves are already digital. The move is being made as much to improve the sound quality, security and to reduce interference, as it is for straight capacity reasons.
Of equal importance to the carriers, even though the digital channels are somewhat more expensive than their analogue counterparts, the increased capacity does lower the capital cost of adding a new subscriber. Ultimately the subscriber will benefit in this process.
The myths about the initial portable units, which will be dual mode, being both heavier and dramatically more expensive, have already been dispelled by initial announcements by manufacturers. When digital-only units are available in a couple of years, we should see the cost of the phones coming down to the range of current analogue product and possibly lower.
Cantel’s approach to this new challenge is to convert the entire network to digital by adding some capacity in each of the nearly 600 cell sites. This should encourage manufacturers to move ahead rapidly with digital-only portables although there will be no guarantee that all of North America will implement digital at the same time and hence roaming will still be a consideration.
The question of obsolescence for current analogue phones if often raised. Current users can be assured that analogue capacity will remain in the cellular networks for a decade or as long as there is a significant number of analogue phones in public use. It is likely that incentives will be provided to convert to digital to assist this process.
PAMPERING THE PORTABLES
Some networks were designed with vehicle mounted cellular in mind. Designing a network for good portable coverage is much trickier given the lower maximum wattage. Now that the majority of cellular phones sold are either fully portable or are units that can be used in a car or as a portable, designing a network to provide really good service becomes critical.
The use of micro-cells to provide spot coverage to address this and capacity problems often leads to placing cells very close together, lowering the power and down-tilting the antennas. The down-tilting, while it decreases the chance of interference with nearby cells, also creates an interesting problem in the service of portables in high-rise buildings. One approach to overcoming this is to then overlay the micro-cell network with cells using other frequencies. In general, these and other techniques have allowed the networks to handle portables reasonably well but the challenge remains to optimize this.
The digitization and continued optimization of the networks is gradually overcoming the problems of non- availability of channels and the more irritating dropping of calls. The next largest challenge is the limited talk time or even listening time on analogue portables. The obvious initial answer is to push for better and better battery technology. But there are other techniques that can be just as effective, e.g. the use of micro-cells which reduces the power requirements for the portable to broadcast its signal. Another technique is designing the phones with a high portion of sleep time so that they only monitor periodically whether anyone is trying to reach the unit.
Long, Thin Corridors
While the Canadian cellular companies now cover about 83% of the Canadian population, there are many areas that are still not covered. The Department of Communications has allowed higher powered cell sites to serve less densely populated areas, at least where these are away from the border or other potential interference. However, increasing the power of the cell site is a one-way solution, i.e. it does not help increasing the power of the mobile unit to broadcast its signal back to the cell site.
This should increase the interest of cellular companies in satellite technology. The MSAT Satellite, which should be placed in orbit by Telesat Mobile Inc. in 1994, offers an attractive way of reaching the many parts of the country that will never satisfactorily be covered by cellular. Other possibilities, such as Iridium may also play a role. In each case the likely cost per minute for either voice or data will be substantially higher than cellular and the capacity likely lower.
For the past couple of years, Cantel has offered hassle-free roaming across Canada. This process, known as Call Following, allows a caller to simply dial a seven digit number and the system will find the mobile user wherever he or she is in Canada. This is the way cellular was always intended to work. Regrettably, roaming is not usually that simple. The user either has to register when he gets to a new city or provide special roam numbers through which callers can make contact. Fortunately with the new IS-41 standard for inter-compatibility amongst switches of different manufacturers, roaming should become substantially easier across North America in the next several years.
Although everyone in the cellular business talks about calling people and not places, it is still places that have phone numbers. International standards are being developed for personal numbering systems that would greatly simplify the ability to reach people.
While the cost of dual mode phones will temporarily halt the continued decline in the cost of mobile units with the introduction of digital-only phones, costs will continue to fall in the future. This means that cellular carriers will have to pay particular attention to the distribution networks. The mark-up on phones is already low and this means the distributors become very dependent on the commissions paid for new activations. A challenge will become the maintenance of adequate distribution and service networks without having the commission becoming a disproportionate cost of adding a new customer. Alternate distribution methods are more possible with the increased popularity of portables which do not require installation in a vehicle in many cases.
Some obstacles to the continued growth of cellular are real and some are imagined. In either case, the industry must continue to address topics such as the following:
This has been a highly publicized problem with analogue transmission. Although a number of devices are available that provide some measure of scrambling for an analogue signal, none are foolproof and most are expensive. Fortunately, the conversion to digital provides an opportunity for very sophisticated voice security at reasonable costs.
This has also provided considerable copy for the media. While it is not statistically demonstrable that there is a higher accident rate for people using hand held cellular phones while driving, intuitively one would acknowledge that anything that distracts a driver from the primary task of handling a vehicle should be treated seriously. In-car phones have both hands-free operation and the ability to pre-store numbers. When properly used, these two features should mean that the driver never has to pick up the handset. Cantel will not endorse non-hands-free product. We also encourage all those who are going to use their portables in a car to get a unit that can be used in the car in a hands free mode. This has the additional advantage of allowing the unit to operate at a full three watts where required rather than the .6 watts maximum of a standard hand held.
The argument has been made that carrying on a conversation can itself be a distraction. However, this is no more distracting than carrying on a conversation with a companion in the car and is likely no more distracting than changing a tape, turning on the radio, smoking or other distractions.
Having said this, however, the cellular companies undertake a major safety program to educate the public on responsible use of this new technology.
Although less well publicized, the increasing number of telephones also increases the incentive for fraudulent use. Phones can be cloned, Electronic Serial Numbers (ESNs) can be detected over the air and used fraudulently and a variety of other ingenious techniques constantly crop up. Fortunately, the industry is able to take strong counter measures and this problem, while certainly a potential obstacle, appears to be at least controllable.
Electro Magnetic Radiation (EMR)
A problem that crops up occasionally has really nothing in particular to do with cellular telephones. This is the concern that any device that gives off any kind of electro magnetic radiation may be a potential health hazard. The power of portable units, which are held close to the head, has been carefully selected to stay well within any known hazardous operation. However, as concern has been expressed from time to time, about devices such as an electric razor, an electric blanket or even a toaster, one might anticipate that this concern will arise again in the future. The industry is continually monitoring this. Again there is no statistical evidence of any type of problem.
While there is a single analogue standard for North America and the same standard applies in some other parts of the world and while there is a single digital standard in North America (TDMA) at the present time, there unfortunately is not full international compatibility for portable cellular units. In a number of countries Cantel simply makes reciprocal arrangements, e.g. U.K., Japan, whereby a Cantel subscriber can pick up a unit in the country to which he or she is travelling and be billed on Cantel. However, this is not an elegant solution. Hopefully, smart phones can be developed with interchangeable chips, allowing them to operate on different frequencies and standards.
THE BIG CHALLENGE
As noted earlier, the biggest challenge of all, however, is recognizing the immense potential of all forms of mobile communication. Alert cellular companies should be constantly seeking new frequencies for new applications. One might consider it natural for a 100- year old monopoly to be concerned about new technologies. It is amusing to see how quickly even the 10-year old cellular industry can suddenly act very protective of its technology and treat new approaches as frightening competitors.
Cantel has always viewed new technology as a way of broadening its service offerings. When new 900 MHz national paging frequencies became available, Cantel was one of the bidders and a successful applicant. We also believe that international paging is important and specifically sought and obtained an additional North America-wide paging frequency which we share with Skytel. We believe that paging is a logical adjunct to cellular technology and the incredible growth rate we have enjoyed in the first couple of years of offering this service seems to bear this out.
Cantel pioneered the transmission of data over cellular frequencies. However, this tends to be very wasteful of voice grade frequencies as one has to switch an entire channel to handle sometimes a very limited amount of data. The answer, of course, is a publicly available, digital, over-the-air, packet switch network. Cantel has introduced a service called Mobitex, using non-cellular frequencies and currently has development contracts with a number of major organizations in a variety of fields such as trucking, dispatch and warehousing.
Cantel recently bid for one of the new frequencies for Air-to-Ground service. While this is not a huge market, it is clearly mobile and hopefully in the future, one would be able to use one’s own personal portable with one’s personal phone number in a plane.
Undoubtedly, other mobile operations will be added to supplement the overall service package Cantel is developing. Specialized Mobile Radio (SMR) would be typical of this type of expansion.
This brings me finally to Personal Communications Systems. As noted earlier, the problems of handling individual floors of high-rise buildings is best handled by some form of micro-cell. The ultimate micro-cell is a PCS approach, using a small cell designed to serve only perhaps a couple of hundred meters. This has the advantage of further reducing the battery power (some PCS units operate on a couple of penlight batteries) and if different frequencies are made available as is proposed, there should be no interference with the cellular frequencies which can then be used for truly mobile, as opposed to portable traffic.
If these PCS frequencies can be used for the floor of a building, effectively providing a fully mobile replacement for the fixed PBX, then the same approach should work around the home, in shopping malls, schools, airports or other public locations. This is the attractiveness of the PCS concept to Cantel. We believe that these new systems will be complimentary to cellular rather than directly competitive, although, there will of course be some overlap. Bear in mind that the PCS hand-held units will not be able to operate effectively in moving vehicles and because of the requirement of a great many mini-cells, they will not provide anything like the ubiquitous coverage of cellular.
Naturally, if there is somewhat less capability, then there will have to be a somewhat lower price. We really view PCS as being a new marketing opportunity rather than a distinctly new technology, although, of course, there are elements of that in the proposed new systems.
Cantel has been actively testing these systems and looks forward to being a supplier of this new service in the near future.
A WORLD-CLASS GROWTH INDUSTRY
While there are plenty of challenges, there are really few obstacles that are not being addressed and which will not be overcome. Estimates have been made that by the year 2000, nearly half the world’s telephone traffic will be handled at one end or the other by a mobile unit. If this projection is even close to correct, mobile telephony will continue to be one of the world’s major growth industries in the decades to come.