*Competition from above? Satellites take to the air, despite an increasingly competitive landscape.
July 15, 1999
By Charles Mason
hile early attempts at offering global voice services
via satellite have hit some heavy seas, the overall outlook
over the next decade for such services remains rosy.
However, executives launching and selling these services are
going to have to be very savvy how they conduct their
business in what is likely to become a competitive sky.
Still A Rosy Scenario For Fixed-Voice Services?
World subscribers to mobile satellite telephony service will surpass 17 million
by 2007, according to a recent report by The Strategis Group (Washington).
But while the focus was on mobile users during the early days of these new
advanced satellite services, notably led by Iridium (Washington), that may be a
mistake.
The Strategis Group says that the rural fixed user market will achieve the
highest growth rates over the next 10 years. According to the research firm,
mobile satellite service (MSS) operators will need to take a "fresh look at fixed
telephony services if they wish to achieve their subscriber goals."
In its second edition of World Mobile Satellite Telephony Markets:
1999–2007, The Strategis Group says the Asia-Pacific region is projected to
have the largest subscriber base — over 30% of the world's total. At the
country level, China, Brazil and the U.S. will serve as the industry's largest
markets throughout the forecast period.
At the market segment level, the majority of MSS subscribers comprises
cellular roamers, international business travelers and those in vertical markets
such as the trucking industry. The Strategis Group found that the rural fixed
user market would achieve the highest annual growth rates in the MSS industry,
surpassing the mobile subscriber base by the year 2006. Latin America will
serve as the world's largest fixed market, capturing approximately 35% of the
total rural fixed user subscriber base.
The research firm identifies several factors that will significantly impact the
potential for mobile satellite services. These factors include:
Rapid buildout of terrestrial mobile telephone networks;
Availability of multiband/multimode cellular/PCS handsets; and
Technological advances that have reduced manufacturing and launch
costs.
These trends have altered the positioning of MSS relative to terrestrial wireless
networks and have resulted in new and evolving strategies by the MSS
operators. MSS operators are now developing their business models with
regard to distribution channels, pricing, potential demand segmentation,
services and regulatory issues.
Lessons From Iridium
Iridium LLC became the world's first global satellite phone and paging
company on Nov. 1, 1998. Its network of 66 (down from 77) low-earth orbit
(LEO) satellites, combined with existing terrestrial cellular systems, was
designed to enable customers to communicate around the globe.
But like many such pioneering, cutting-edge efforts, Iridium has stumbled.
Plagued with high prices and unwieldy phones, as well as complaints about
useability in certain locales, the company has been struggling with debt and
seeking ways to extricate itself from its troubles.
In late June the company unveiled a complete revamped marketing strategy,
which featured reduced and simplified service and equipment pricing.
Instead of a ‘big net approach,' the new strategy focuses on delivering
communications solutions to customers in the industrial marketplace that have
the greatest immediate need for satellite communications services.
The price reductions allow Iridium's local vendors to offer their own service
price reductions of up to 65% of the original price. In addition, each customer
can obtain a flat per minute rate for international calls.
Just weeks earlier, the company received from its lenders a 30-day waiver of
the financial covenants relating to customers and revenues under its $800
million Senior Secured Credit Facility. Iridium took advantage of this extension
to make these important changes in its marketing and distribution strategy.
Iridium is continuing to work with all of its lenders to restructure its financing.
Company executives say that while the price reductions will impact the bottom
line, they believe that the combination of attractive pricing and customer-driven
service will ultimately increase the customer base and usage, creating a
long-term success.
Other players in the satellite market for voice services include Globalstar (New
York) and ICO Global Communications (London).
Upon completion, Globalstar's 48-satellite constellation is designed to provide
digital voice services to a broad range of subscribers and users. Globalstar says
its system will meet the needs of cellular users and global travelers who roam
outside of cellular coverage areas, as well as residents of underserved markets
who will use Globalstar's fixed-site phones to satisfy their needs for basic
telephony.
Beginning late next summer, ICO plans to begin offering its satellite services.
The system will use a fully integrated space/ground network to offer digital
voice, data, fax and messaging services.
Company executives tout the fact that their phones are comparable with
today's cellular handsets, making them easy and convenient. They say they
have learned from Iridium's missteps and, in addition to having small phones,
will offer reasonable prices for both the equipment and the services.
What About Broadband Data Services?
Voice-anywhere-anytime satellite-based services have taken up a lot of
attention with the launch of Iridium. However, data services stand to make a
major contribution to the bottom line of some satellite services, according to
many studies.
According to Pioneer Consulting (Cambridge, Mass.), for example, satellites
will hold an important niche in the race among various wireless and wireline
technologies to satisfy insatiable bandwidth needs.
In a recent study, Pioneer says that while no one technology is a clear leader,
broadband satellite services fare quite well vs. competing technologies. That's
because of the unique ability of broadband satellite services to address the
goals of the Internet and a global information infrastructure, which is driving this
market. These goals include global availability, uniform technology and a tiered
pricing structure for various classes of service.
Forecasts indicate each technology will face significant competition from
broadband satellites after 2002. By that time, global LEO satellite
constellations are expected to be in orbit and current direct-to-home (DTH)
providers will have launched their own Ka-band satellites for a mix of
narrowcast digital video services and broadband access services, says Scott
Clavenna, senior analyst at Pioneer.
Clavenna says that cable modems will lead the market in terms of total
subscribers throughout the forecast period. Satellites are predicted to gain a
larger revenue stream because of their ability to address residential and
business customers equally well.
Pioneer says that because satellites provide service on a global or continental
basis, they are well-positioned to address the access market with unique
advantages. The success of DTH satellite services has paved the way for
broadband satellites, according to the study. Broadband satellite constellations
will effectively create space-borne Internets that will improve on the current
terrestrial Internet and provide a global broadband backbone and access
infrastructure.
The concept of providing high-speed wireless connectivity, both for mobile and
fixed uses, is increasingly attractive given developments in technology and a
downward spiral in costs.
Inmarsat (Washington), for example, says it plans to introduce new capabilities
that will support 64 kbps integrated services digital network
(ISDN)-compatible communications using new portable units the size of a
notebook computer and weighing around 9 lbs. These capabilities are being
designed to integrate corporate information technology (IT) networks with
global mobile satellite communications.
Andrew Ivey, marketing manager of projects at Inmarsat, says that by using the
Inmarsat network, companies will be able to extend their local area network
(LAN) and wide area network (WAN) capabilities beyond their physical
boundaries into a global area network to work with customers, suppliers and
manufacturers.
Ivey says that 40% of traffic today on the Inmarsat network is data. He
believes that figure will grow to 70% by 2003.
Broadband Internet In The Sky
Executives at Teledesic Corp. (Bellevue, Wash.) coined the phrase
"Internet-in-the-sky" long before most people were talking about the explosive
bandwidth requirements that are now commonly discussed. The system is
arguably the most ambitious of its kind. While some naysayers doubt its
viability, they concede that given the financial and brainpower of its backers, it
would be foolish to discount it.
The Teledesic Network is the child of wireless telecommunications pioneer
Craig McCaw with the strong backing of Microsoft (Redmond, Wash.)
Chairman Bill Gates. According to backers of the project, this high-capacity
broadband network combines the global coverage and low latency of an LEO
constellation of satellites, the flexibility and robustness of the Internet and
"fiber-like" Quality of Service (QoS).
The Teledesic Network is designed to bring affordable access to interactive
broadband communication to all areas of the earth, including those areas that
could not be served economically by any other means. Teledesic's system can
serve as the access link between a user and a gateway into a terrestrial
network, or as the means to link users or networks together. Covering nearly
100% of the earth's population and 95% of the land mass, the Teledesic
Network is designed to support millions of simultaneous users.
The system consists of a ground segment (terminals, network gateways and
network operations and control systems) and a space segment (the
satellite-based switch network that provides the communication links among
terminals). Terminals are the edge of the Teledesic Network and provide the
interface both between the satellite network and the terrestrial end-users and
networks. They perform the translation between the Teledesic Network's
internal protocols and the standard protocols of the terrestrial world, thus
isolating the satellite-based core network from complexity and change.
Teledesic terminals communicate directly with the satellite network and support
a wide range of data rates. The terminals also interface with a wide range of
standard network protocols, including Internet Protocol (IP), ISDN,
asynchronous transfer mode (ATM) and others. Although optimized for service
to fixed-site terminals, the Teledesic Network is able to serve transportable
and mobile terminals, such as those for maritime and aviation applications.
The company says that most users will have two-way connections that provide
up to 64 Mbps on the downlink and up to 2 Mbps on the uplink. Broadband
terminals will offer 64 Mbps of two-way capacity. This represents access
speeds of up to 2,000 times faster than today's standard analog modems.
The ability to handle multiple channel rates, protocols and service priorities
provides the flexibility to support a wide range of applications, including the
Internet, corporate intranets, multimedia communication, LAN interconnect and
wireless backhaul. In fact, flexibility is a critical network feature, since many of
the applications and protocols Teledesic will serve in the future have not yet
been conceived.
Terminals also provide the interconnection points for the Teledesic Network's
Constellation Operations Control Centers (COCC) and Network Operations
Control Centers (NOCC). COCCs coordinate initial deployment of the
satellites, replenishment of spares, fault diagnosis, repair and deorbiting. The
NOCCs include a variety of distributed network administration and control
functions, including network databases, feature processors, network
management and billing systems.
Teledesic's network uses fast-packet switching. Communications are treated
within the network as streams of short, fixed-length packets. Each packet
contains a header that includes destination address and sequence information,
an error-control section used to verify the integrity of the header and a payload
section that carries the digitally-encoded user data (voice, video, data, etc.).
Conversion to and from the packet format takes place in the terminals at the
edge of the network. Each satellite is a node in the fast-packet-switch network
and has intersatellite links with other satellites in the same and adjacent orbital
planes.
July 15, table of contents
Copyright 1999 Advanstar Communications. Please send any technical comments or
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