This paper proposes a physical layer for advanced metering infrastructure (AMI) applications and its transmission scheme, where extremely narrowband channel is used. First, we design a narrowband physical layer transmission specification based on AMI service requirements. Then, we investigate a suitable transmission scheme, focusing on single-carrier and multi-carrier (i. e., OFDM) schemes. By discussing performance and implementation issues, we suggest a single-carrier transmission for our AMI system rather than narrowband OFDM.