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In a recently released study, "Satellites in Cyberspace: Opportunities for Internet-Based Satellite Ventures," Datacomm
Research Co. and Farrar & Associates examined the mobile satellite industry's past, present and future. contact Datacomm Research at 314/514-9750, or
e-mail them at info@datacommresearch.com.
Jeff Vayda
Customer-driven Sales Approach Will Drive Future
Mobile Satellite Growth
As the mobile satellite services (MSS) sector moves into the next decade, industry companies need to shed their
technology-driven enthusiasm and embrace total customer solutions in order to remain competitive and to continue to attract
sufficient capital from investors in order to design, build, launch and operate new satellite systems.
In a recently released study, "Satellites in Cyberspace: Opportunities for Internet-Based Satellite Ventures," Datacomm
Research Co. and Farrar & Associates examined the mobile satellite industry's past, present and future.
The most fundamental conclusions of the study are:
"Data will become the dominant mobile satellite market, and voice will become a necessary but secondary offering" (See
charts 1 and 2 for voice vs. data equipment and service forecasts); and
"Technology-driven days of satellite communications are over," the industry has to get "better at listening to the
marketplace and creating demand, not just space-age networks," and mobile satellite operators need to capitalize on
satellites' ubiquity of coverage.
Specific conclusions found in the report include:
Iridium LLC's [IRIDF] financial crisis creates an interesting investment opportunity, similar to Nextel [NXTL] in late
1994. The key question is whether Iridium can be modified to deliver high-speed Internet access to fixed locations.
Geosynchronous satellites will succeed in broadcast markets while low-Earth-orbit satellites will dominate interactive
markets. Simple bent-pipe designs are preferable to complex "intersatellite links."
Globalstar L.P. [GSTRF] has several advantages over Iridium, but both services suffer from the same basic problem: a
telco business model.
The report sketches the history of the mobile satellite industry, beginning with Inmarsat in 1990, and including Qualcomm
Inc.'s [QCOM] OmniTracs, Orbcomm [ORB], MSAT and second-generation mobile satellite service providers Iridium, ICO
[ICOGF] and Globalstar. The study focuses on lessons learned, ingredients for success and potential pitfalls.
According to the report, the mobile satellite market of the future lies in tracking and monitoring cars, trucks, boats, pumps and
machines, with results "readily available to hundreds of millions of Internet browsers talking to mobile satellite-enabled servers
around the world."
According to the study's estimates (in table 1), 60 million potential satellite mobile data units represent a total $12 billion in
hardware sales. Even if total penetration rates reach only 10 percent (and rates will vary across sectors), "mobile satellite data
would still account for $600 million in annual service revenues and $1.2 billion in equipment...just in the U.S."
The study acknowledges that it will take most of the next decade to reach these revenue levels.
Additionally, the study predicts that mobile satellite data will take off in the United States first before catching on in the rest of
the world.
The study's positive outlook for mobile data is reflected in the belief that Globalstar's success is assured if Qualcomm's 280,000
OmniTracs subscribers migrate to Globalstar's network.
The corrective action the study recommends to mobile satellite operators is in response to "bad" and "good" news market
forces. Bad news market forces are:
Lack of product differentiation - providers need to know how much of a premium, in terms of cost and product
packaging, users are willing to pay for the ubiquity of mobile satellites.
The impact of cellular buildout - providers should adapt their business models in response to, and in anticipation of,
expanding cellular coverage and falling prices. Similarly, operators need to consider the existence and growth of VSAT
rural telephony.
Competition from regional systems - regional players Thuraya and ACeS will together cover 50 percent of the world's
population and enjoy both lower costs and the benefits of nationalist sentiment as compared to global mobile players
Iridium, ICO and Globalstar.
Good news market forces are:
The success of terrestrial mobile data - deregulation of the electric power industry is a catalyst for increasing
automated meter reading (AMR) needs. Terrestrial wireless has responded to some of this demand, but "the only
solution for hard-to-reach meters is mobile satellite service."
The success of GPS - the $8-billion-a-year GPS industry is poised for take off. Two-way wireless can partake in
GPS's growth, complementing GPS's one-way weakness with two-way capabilities. (The reality of this combination was
covered in our sister publication, Space Business News, Oct. 14, 1999, Motorola To Produce, Market XM Satellite
Radio Receivers.")
The success of e-commerce - according to thestudy, wireless technologies will play a major role in e-commerce, filling
gaps in end-to-end information chains.
The convergence of satellite and terrestrial costs - with satellite and terrestrial equipment prices rapidly converging,
"the only obstacle left to satellite and terrestrial pricing equality, apart from technical issues, is service costs."
In order to capitalize on both bad and good news market forces, the mobile satellite industry must:
Dramatically shorten infrastructure development time (a suggestion with which many strongly agree given that
satellite services' wireline and wireless competition has much more incremental infrastructure requirements than satellites)
- the study recommends that operators not build so much capacity, as it delays service rollouts and is superfluous. It also
suggests that the industry work on a development cycle of fewer than three years rather than the current six-to-10-year
timeframe.
Develop applications first, infrastructure second - according to the study, "with few exceptions, satellite vendors tend
to design and develop their infrastructure before they really understand the applications."
Reduce dependency on third-party service providers - mobile satellite service providers must have a much better
understanding of, and get more involved in, their marketplace
Exploit the booming Internet and GPS markets - the study suggests combining both of these booming markets,
something that only Orbital Sciences has done among mobile satellite operators. Also, satellites broadband operators
need to position themselves to extend the Internet's reach.
Make data the No. 1 priority and treat voice as an application - Little LEOs need to expand beyond messaging and
Big LEOs need to develop a comprehensive data strategy as soon as possible.
The study predicts that at least one, and perhaps both, of the regional mobile satellite voice systems will survive. In a zero-sum
scenario, if a second regional system survives, it would most likely come at the expense of one Big LEO system. Big LEO
voice systems must focus on data services.
The full report includes an executive summary; in-depth sections on business applications, technology, opportunities and threats;
and profiles of dozens of companies. For more information on the report, contact Datacomm Research at 314/514-9750, or
e-mail them at info@datacommresearch.com.
Potential Satellite Mobile Data Markets
Market Market Size Estimated Monthly Revenue
Marine 3 million recreational boats $20
Aeronautical 1.4 million airplanes $35
Automotive 130 million cars $10
Railroads 1 million rail cars $30
Monitor & Control 10+ million possible objects $15
such as meters and wells
Trucking 700,000 trucks; 3+ million trailers $15
Government Difficult to estimate No data
Totals 60 million potential units nearly $500 million
Source: Datacomm Research, Farrar & Associates, Phillips Business Information, Inc. |
