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Global Competitiveness of US Advanced-Technology Industries

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Global Competitiveness of US Advanced-Technology Industries Global Competitiveness of U.S. Advanced-Technology Industries: Cellular Communications Investigation No. 332-329 t>ublication 2646 June 1993 U.S. International Trade Commission !,)' i ., t~' ortable ~Phones' Local Service Provider II ~7 e Telecommunlcatlon Switching Office Washington, DC 20436 U.S. International Trade Commission : COMMISSIONERS Don E. Newquist, Chairman Peter S. Watson, Vice Chairman David B. Rohr Anne E. Brunsdale Carol T. Crawford Janet A. Nuzum Office of Operations Robert A. Rogowsky, Director Office of Industries Vern Simpson, Director Norman McLennan Division Chief Susan Kollins Branch Chief Staff assigned: Richard Brown, Project Leader William Bien Melanie Posey Douglas Puffert Don Sussman Support Staff: Phyllis Boone, Cindy Payne, Wanda Tolson Addre~ all communications to Secretary to the Commi's.sion United States International Trade Commi~ion Washington, DC 20436 l U.S. International Trade Commission Washington, DC 20436 Global Competitivenes·s of U.S. Advanced-Technoiogy Industries: Cellular Communications l>lication 2646 June 1993 PREFACE Following receipt on June 11, 1992, of a request from the Senate Committee on Finance {appendix A), the U.S. International Trade Commission instituted the three requested investigations, Cellular Communications (investigation 332-329), Aircraft (332-332), and Computers (332-339) under section 332(g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)). The purpose of these investigations is to examine the global competitiveness of the U.S. cellular communication, aircraft, and computer industries, respectively. These investigations follow three competitive assessments provided to the Finance Committee during September-October 1991. This report is the first of the current three and examines the cellular communications industry. Copies of the notice of the investigation were posted in the Office of the Secretary, U.S. International Trade Commission, Washington, DC 20436, and the notice was published in the Federal Register (57 F.R. 33971) on August 19, 1992 {appendix B). The Commission held a public hearing in connection with the investigation on January 27, 1993. All persons were allowed to appear by counsel or in person, to present information and to be heard. In addition, interested parties were invited to submit written statements concerning the investigation. The information and analysis provided in this report are for the purpose of this report only. Nothing in this report should be considered to reflect possible future findings by the Commission in any investigations conducted under statutory authority covering the same or similar subject matter. TABLE OF ·CON-TENTS Page Preface ............................. ,, ............... ; ...................·. • . · i Executive summary .................... : ..... ·.· ......... ·.. : ..·. ·.. ~ . : ................ ~ . ix Abbreviations .......................................... : .......................·. xiii Chapter 1: Introduction Purpose of study .................................... ·......................... ·. 1-1 Approach .......................................................... ;.................. 1-l Scope of study ................ ,.......................................................... 1-1 . Organization of study . 1-3 Chapter 2: The cellular communications industry Evolution of cellular communications . .' ......· ........ : ............................... ·. 2-1 Cellular telephony ................................. ; .................... ·. ·. 2-1 · Cellular phones ........ : ............. ; . 2-1 Radio base station equipment ....................... : .................... , . 2-2 Cellular switches ......................... : ; ............................... ·........ 2-3 Earlv markets ..................... ; ......... : . .. 2-3 The ~volution of cellular technology and the globai markei .................... ~ ........ ; . 2-3 Competing standards ........................ ; ............ ; ................ ; . 2-5 Personal communications .................. ·............. ; ........................... : . 2-6 The U.S. cellular communications industry . : ......... ; ...•............. , . 2-6 · Regulatory implications ................. ·... : .. , ....... -_...... .> ••••• ·•..•. : • , •• : • • • • • • • • • • • 2-9 ·Chapter 3: Competition in the cellular communications industry. · · Introduction ........................ _.............. · ..... ·....... ; ...·. .. .. .. 3-1 The competitive assessment fr.iinework ........ : ...............• .... '.: . .. ,.. , .... : ..... ; . .. 3-1 Competition among cellular service providers ....•. , .... ·..... ·.. ·.·.~-.:........ •. 3-2 The assessment of competitiveness· ....... ., .. ; . : .. • .. ::....... : . .'..... · ....... : . ~..... 3-2 The tenns of comi)etition ........... , . : . , _. ...... .' .......... : .· .•· ... ·•. ~ ............. ·. ~ . 3-2 Cost management skills ; ·.. ; .... : .... >......... ; ..... : ... ·. , ... •.. .. ... .. 3,2 ... Technical skills ...................... ; . :.- . ...... ·... ~-; .........: .. • .. · ...... ·...•... 3-4 ·Network configuration expertise .- ... , ...... _; ............ ·..... ·............... 3-4 · Software expertise . ~- .... : .. ; ..... ; ........ ·· .......... ·.• ;-. ; ....... ·. 3-4 Marketing expertise ............................. ·.... , ." ........ ·..... · • . 3-4 Other factors .................... : .............. : ................... ·.... ·.. 3-5 Competition among cellular network equipment manufacturers : : . • . 3-5 The assessment of competitiveness ... ~ .......... , . 3'"'.5 The tenns of competition ...... : ......... : ....... ·..... ·.... : . .. .. • . .. 3-5 Technical capabilities ........... ·... ... ... ... ... ... 3-5 · Switches ......................· ... '··· ...... ·..................... ... ... 3-5 Switch capacity ..... .- ........................ ,..................... • . 3-6 Call data processing ...... ·................................... • . 3-6 Software-based functions ........................ • . .. 3-6 Cell site equipment .............· ......... .". .. 3-7 iii TABLE OF. CONTENTS-Continued ~ ... ! . Page Chapter 3: Competition in the cellular communications industry-Continued After-sales se1'Vice ... •. 3-7 Price . ... 3-8 Competition among cellular phone manufacturers . 3-8 The assessment of competitiveness . • . 3-8 The terms of competition ..................................... ·. 3-8 Price ................................................................... ,_ 3-8 Design features ................. : .... ·. 3-9 Size and weight ...........................................• ; .. ~ . 3-9 Talk time ........ ·. .. • . 3-9 Chapter 4: Government policy . .. Introduction ........................... : ; ... : ·... : . .. ". ·: :·:...................... 4-1 Licensing ............................................................ ; . ; . 4-1 United States ............................................................. ~ . 4-1 · Analog cellutar systems .. .. • . 4-1 · Digital cellular systems . 4-4 Japan' . ..................................... ·.......... , . 4-4 Analog eellular systems . 4-4 Digital cellular sys.terns .......................... : ............... ; . .. 4-5 Europe .......•..... , . 4-5 Analog cellular systems ........................................ ; . 4-5 Digital cellular systems ................................. -. ........... ·............ 4-5 United Kingdom .•................................ ~ . 4-5 Germany ................................................. , . 4-6 France ................................................... , . 4-7 Scandinavia ............................ ; ........ -. ........ ; . .. 4-7 Other . '. .' ... '... : ... ~ .'· ......... : .................................. -. 4-7 Emerging cellular marke~ ................•............ ; . 4-8 Analog cellular systems . 4-8 Digital cellular systems ............................ : . 4-8 Spectrum ....................................................... : . .. 4-8 United States ................................. -. 4-9 Japan . .. ... 4-10 Europe ............. , ......................... -. 4-10 Emerging cellular markets.................................................... 4-10 Standards . 4-11 · United States . 4-11 Japan . 4-14 Europe . 4-14 Emerging cellular markets .................................. : . 4-17 Modified final judgement . 4-17 Procurement . .. 4-19 Personal communications . 4-19 United States . 4-20 Japan . 4-21 Europe ........................ ._ . 4-21 IV • : . '. ~·. ·:; . I • .. ;. ·.. .TABLE·- OF -CONTENTS-Continued Page Chapter 5: Competitive assessment Chapter introduction ...........................................- ....................... 5-1 Cellular service providers . ........................... ; .............. 5-1 Introduction. ................................ · · .. · · · · · · · 5-1 Key cellular markets ... ·. ·.. " . ................................... ·..... 5-1 United States. ............................. : ........... 5-1 Europe ....... -. ............... ~ .................. ; .......................... 5-2 Consortia formation ............................. ·.......................... 5-{i Government licensing ................ , ..................................... 5-{) Japan ................... -........... · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 5~1 Emerging cellular markets ............................................................ 5-7 Evidence from statistical analysis .............................. " ...................... 5-9 Summary and outlook ............................. -................................ 5-9 Cellular network equipment manufacturers ................................................ 5-12 Introduction ................................ ·............................ ·· .. · · · .. · · 5-12 Factors influencing competitiveness ...................................................
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