Dear Jim: Here are my thoughts on The Big Question you ask: Is there a real business here?
I'll hands down accept your presupposition/premise that the system is at least superior to Iridium's and that initial users will in general have satisfactory experiences, my own aberational experience excepted gleefully. In fact, it's not even a stretch to do that for me, because technically, i believe Globalstar's system design is superior to Iridium's. I love the simplicity of Globalstar's bent-pipe and especially the multi-path satellite view capability that allows more than one bird to service the customer at once, there by effectively ameliorating the one-path only "obstructed view" phenomenon that Iridium was designed with. Oh and let's not forget the wonder and quality (not to mention capacity) of CDMA which I happily use (and enjoy!) via terrestrial means on Sprint PCS when visiting the US.
But, with respect to the business case: will this (Globalstar, Iridium, ICO, et al) ever signup enough paying customers to cover their costs let alone make a profit? On this point i am, well, dubious at best (even though i love the Vision and Technology aspects!).
Here's why: Because from where I sit here in beautiful Prague I just can't get over the hump of The Demand and Demographics shibboleth of who the customer is and what is their ability to pay for it? Simply put, I believe The Players are going to be hard pressed to rustle up the necessary subscriber counts to ever make this a profitable businesss.
Firstly, to me its as simple as looking at the the history of two other satellite networks that offer "like-services", the length of time they have been in operation, their service prices, and the most telling of all: the number of paying customers they have signed up.
Inmarsat (http://www.inmarsat.org) and its 86 members who are generally Big Telcos and communications providers around the world started offering its "spot beam" Mini-M sub-notebook sized mobile satellite service in 4Q96 on the Inmarsat-3 GEO's has according to recent press reports i read signed up about ~45K subscribers to date (that would be in addition to the 100K other subscribers they have on their system). Service charges on Mini-M costs around $1.5-3/min USD (with a monthly subscription fee of $0-75 USD) for fully terminated calls anywhere on earth.
The other satellite provider to offer like-services is American Mobile Satellite Corp (AMSC) (http://www.ammobile.com) with one GEO covering most of North America (CA, US, MX, et al + surrounding coast lines. As of their FY98 results announced on March 4 press release said they have signed up a total of 13K subs since they initiated their SkyCell service years ago with service costs around $1-2.50/min USD (with a monthly subscription fee of $0-175 USD with between 0 and 175 minutes included).
Looking at these two microcosoms in the Mobile Satellite Sector (MSS), to me, the "coming attractions" trailer was pretty obvious. Especially if you contrast the MSS micocosom with that of the microcosom of the development of mobile telephony.
In the case of mobile telephony, at least when i bought my first "car" phone for my 21st birthday in 1978 for 3K US (in 1978 bucks) it didn't even have direct dial capability, calls had to be placed through a mobile operator and cost 40 cents for the first minute to use and 80 cents for each additional minute in the San Francisco Bay Area. Demand by far outstripped supply. Rates in other parts of the country, such as New York were much more. This car phone was about the size of a small bread-box or a couple of shoe boxes that required a day to install and sat in my trunk. So, yes, the phones were bulky, they cost a bundle and they were expensive not to mention difficult to use (kind of all the things we've heard about Iridium), but yet, more people wanted to buy these than there was capacity to service them. Prices were high inorder to discourge use, but that didn't stop people from clammering to get on. Then cellular came along, and as they say, all the rest is history.
Contrast this with the MSS business. IMHO: Inmarsat and AMSC in the US have pretty much supplied the needs of extant market -- there is no really "pent up demand" here for MSS as there was with pre-cellular mobile telephony.
If you listen to the MSS proponents, they will tout the needs of billions of people who have never made a telephone call. To me, this not a sufficient demographic quotient, nor does it establish the demand. You also have to ask how will these billions of potentials in these under/non-served markets will pay for MSS services? Especially in light of the alternatives, such as profiled in the WSJ 06/25/99 article "It Takes a Cell Phone--Nokia Phone Transforms A Village in Bangladesh" where a woman bought a Nokia phone and resells airtime for 25 cents a minute. Then comes along Gilat with its 15 cents a minute VSAT fixed-line service.
You will also hear about the business traveller market. You will hear about forestry, oil rigs, aviation, marine, out-of-coverage cellular, and government this and that. None of these have been seen to be large by Inmarsat, AMSC or Iridium. In fact, AMSC's big initial thrust was just these out-of-coverage cellular customers -- see where they are today...
So at the end of day, for me The Business Case here all comes down to this illusory demand from a questionable demographic segment. To me, I just don't see it and this all regretfully adds up, or rather doesn't add up to (what i seem to be quoted for time and again) as "a zero billion dollar industry"
(http://search.nytimes.com/search/daily/bin/fastweb?getdoc+site+site+50182+0+wAAA+%22zero%7Ebillion%7Edollar%7Eindustry%22 and search.nytimes.com.
So with this all the above said, to answer your specific questions:
The big question then becomes demand. Is it there in the numbers being thrown out by BS and others?
No.
So it all comes back to demand. How big is it?
Big enough so that Inmarsat is profitable, not big enough that AMSC has ever been profitable, nor IMHO will Iridium, Globalstar, ICO and the other hopefuls in the MSS business.
Are we kidding ourselves or is it near the numbers being touted?
Yes. Big time kidding-- to many people got caught up in the fervor, believed, and at the end of the day drank the Kool Aid.
If its there, is this group going to exploit it or screw it up like Iridium?
It's simply not there. Iestimate is 50K (fifty thousand) paying telephone subs on Globalstar this time next year (give or take a free leg of lamb or three).
I don't think 1.50/min is the determining factor.
Violent agreement with you here. The issue here is the ol' refrain of The Demand and Demographics of the supposed potential customers for an MSS product/service, not the $1.50/min.
Hope this answers your questions and doesn't raise more questions or issues than answers! (I do have other issues with Globalstar's business structure, but i'll save those for a future discourse).
Best regards,
Geoff Goodfellow
Prague, CZ |
