An Article by a G* exec:
telecommagazine.com
Clearing the Hurdles to
Global Communications
Services Delivery
Satellites
Navigating service contracts on a country-by-country basis can be tricky. An
in-country partner can make a world of difference.
Gerry Canavan
Despite incredible technological advances in the past decade, there
are still vast pockets of remote and/or underdeveloped areas of the
world that lack basic communications services, and many of the areas
that do have service do not conform to widely-adopted technical
standards. This makes it difficult and expensive, or even impossible,
for international businesses and governments to communicate.
Global mobile personal communications systems (GMPCS)--which
can include satellite-based wireless voice, wireless data, Internet,
e-mail and messaging--were created to answer these connection
needs and to provide communication services from a small handset
terminal to any location in the world at anytime.
Satellite telecom companies are answering the rapidly increasing
demand for GMPCS services, and, in so doing, are tackling issues of
international cooperation regarding licensing, regulation, customs and
trade with a success that serves as an example to other international
business segments.
Crossing the Borders
Before a company can enter another country and conduct business, it
must, at minimum, notify government agencies of its intent to do
business and agree to operate within the laws of the land. Satellite
telecom companies must also address other specific issues to
successfully conduct business. Most concern licensing. For instance:
What radio-frequency spectrum is available to the service
provider?
Is this radio-frequency spectrum in a bandwidth that could be
harmful to nearby residents?
If so, who is responsible for notifying and/or relocating those
residents?
What licenses, other than the radio-frequency spectrum
allocation, must be secured?
What about customer privacy: What are the country's laws on
the encryption of voice and data traffic being sent through the
communications network?
Faced with these questions and challenges, GMPCS providers have
recognized the significant investment in time and resources that is
required to get their services up and running on a country-by-country,
or even region-by-region, basis on their own. These providers have
chosen to cooperate with one another on a global scale, addressing
these issues with unprecedented success, maximizing profitability and
maintaining the ability to execute services based on their individual
business models.
In the ITU Memorandum of Understanding (MoU) developed in
February 1997, the GMPCS industry and many governments and
regulators agreed on the need to establish regional, and preferably
global, arrangements (under the ITU's auspices) to facilitate the
introduction of GMPCS services around the world. Participants
recognized the necessity to standardize regulations and work together
to harmonize certain technologies, network components and
frequency spectrums.
One of the key issues resolved in the MoU sheds light on the logistics
and complications of providing global telecom service. Those
unaccustomed to international business travel or foreign service may
not be aware that the simple act of carrying a handset telephone
terminal into another country can set customs officials on edge. Before
the MoU, even if an individual got a handset through customs, the
ability to use it within the visited country was severely limited, if not
prevented. Now, many of these regulations have been standardized
throughout participating ITU countries, and approved terminals are
marked with a common symbol, allowing handsets to be both
transported and used reliably throughout participating countries.
The ITU also made significant strides regarding the thorny issue of
data privacy. MoU participants agreed to release requested data
traffic originating in, or routed to, the national territory to recognized
national authorities, provided the data release did not interfere with
customer confidentiality. While this may seem like a fancy legal dance
around the privacy issue, without this simple understanding, satellite
service providers would not be able to take the first steps towards
setting up business.
Inside the Borders
While the ITU has made it easier for GMPCS providers to establish
service around the world, it has not resolved every issue. Some of the
more perplexing questions facing GMPCS providers as they enter
various countries are related to the umbrella issue of licensing between
the satellite service provider and the national and local companies that
provide telecom service in host countries. Ultimately, satellite service
providers find that when they define their international business model,
they resolve this problem themselves.
A description of how one type of satellite call is made helps clarify the
complex issues involved among the various companies. For a
domestic long-distance call, software inside the user handset will first
determine if the call can be routed using a local and/or national cellular
system. If this service is not available, the call uplinks to a satellite and
downlinks to either a regional or host-country gateway, then travels
through a local telephone network to the recipient. For an
international long-distance call, the process is similar, with the addition
of one or more countries, depending on where the gateways are
located.
This complex call path creates many local and national regulatory
issues outside the ITU's guidelines. In addition, the satellite service
provider must have a keen understanding of all the national and local
markets it plans to serve. What is the target market? What sort of
customer base will be available? What types of channels do they need
to set up to reach the end user?
The Business Model and Licensing
GMPCS providers typically follow one of two models: a centralized
“manage all phases of the business, including in-country licensing from
the home office;” or a decentralized “let the local companies run the
business in-country” approach.
The centralized model is resource-intensive and requires the provider
to establish and navigate regulatory relationships, distribution channels
and customer relationships.
However, in the decentralized model, an in-country partner--a
national and/or local service provider--owns and manages the
gateways and markets and distributes satellite services in its operating
areas. The GMPCS provider sells access to its system (wholesale
minutes) to its partners, typically in an “exclusive rights” arrangement.
With this approach, the national and local providers obtain all
necessary regulatory approvals and own and operate the gateways
necessary to serve their respective markets.
This model is a win-win for both the GMPCS provider and its
partners. The satellite service provider is free to concentrate on its
GMPCS core business, since its in-country partners have the
knowledge and relationships required to resolve most of the
regulatory issues associated with international telecom business and
most of the tariff issues. Host countries prefer this approach because
all calls that originate or terminate there will pass through the local
ground station and a percentage of the charges related to each call
will go to the national network, creating a welcome revenue stream.
Of course, one of this model's challenges is creating consumer brand
awareness for the satellite service provider. With strategic partners
and national and local service provider agreements that utilize their
own brand names, how do satellite providers extend their brand
names to the end user? Many of the national and local service
providers want to strengthen their own brand awareness, and one of
the best ways to do this is to cobrand with the satellite service
provider. Such agreements give the national and/or local provider:
the right to use the satellite company's branding in all of its
advertisements;
access to all of the company's materials for the point of sale;
unrestricted use of the company's logo on handsets or LED
displays.
In the centralized model, the satellite service provider owns and
manages the gateways either through subsidiary companies set up in
the various countries or through a worldwide communications
backbone network.
While the centralized model may make corporate accounting a little
easier, it's no picnic dealing with international regulatory and tariff
issues. In some cases, entire banks of international trade lawyers are
hired just to set up operations in a country. Multiply that by the
number of countries in which the satellite provider plans to do
business and you have quite a legal bill.
The centralized model also fails to take into account an issue that may
be even more critical to a provider's success--local expertise. For
each country in which the satellite provider operates, internal expertise
has to be built in areas such as government procedures, customer
preferences and distribution channels. This can be a time-consuming,
expensive process, eating away at resources that could otherwise be
used in the core expertise of GMPCS.
The Borderless Market
We are fast approaching a time of seamless communications
throughout the world, but many issues remain. The ITU and national
regulators are currently addressing issues such as global roaming and
a standard for multiple access methods, keys to true universal
worldwide access.
Meanwhile, satellite service providers are rapidly setting up business
around the world. Decentralized and centralized business models will
produce different pricing schemes and quality of service. Will this
industry be viable? Which companies will profit? Clear answers may
not surface for many years. Global communications
customers--themselves an evolving entity--will ultimately answer these
questions and, in so doing, help define an industry.
Gerry Canavan is senior vice president of marketing at
Globalstar, where he is responsible for global branding and
advertising, public relations and trade show activities. |
