JOHANNESBURG, South Africa-Globalstar could be the last hope for global mobile personal communications by satellite (GMPCS) survival in Africa. During a heated debate at the Satcom Africa ’99 conference held recently in Midrand, South Africa, many participants concluded that after the setbacks experienced by both Iridium and ICO Global Communications, Globalstar is “the only savior.”
However, as the operator launches its service over Africa during this quarter, it must show mobile satellite services from low- or medium-earth-orbit satellites are commercially and technically viable.
It is a critical time for GMPCS companies, and the industry is carefully watching to see what will happen. Financial backers are nervous and generally waiting for developments before committing further funds. For their part, potential users are holding back before deciding what system to use.
“The GMPCS industry may have been [hyped] as a money-spinner at one stage, but it is not so,” said E. N. OleKambainei, chairman of the GMPCS MoU and a registered engineer in Tanzania. “It is not a money-spinner, it is not the explosive industry the cellular mobile industry has turned out to be, nor is it in the same notch as the Internet. The attitude of the industry must change to a `go slow and be realistic’ mode.”
The advantage Globalstar will have is the opportunity to learn from the mistakes of Iridium. As for ICO, it announced it would commence service in August 2000. But since then, ICO has also run into financial difficulties. However, a plan for $1.2 billion in investments from Craig McCaw, a U.S. telecom pioneer, and Subhash Chandra, an Indian media entrepreneur, could rescue ICO, which will be closely watching Globalstar.
One positive impact of Iridium’s shaky start is the resulting, significant reduction in prices-from US$1,500 to US$750 for handsets and 50-percent cuts in paging service costs. In addition, service prices have being reduced and simplified, with Iridium and Globalstar more involved in distributing the service.
Iridium has moved vertically in its marketing strategy. Initially, Iridium targeted frequent international business travelers, and its pricing reflected this approach. When it became apparent this strategy contributed to low sales, the company reassessed. The main target users now are government and industrial users.
For example, Iridium Africa launched its services in Nigeria in mid-November targeting mainly the oil, mining and agriculture industries. Potential users within these industries are often located in areas outside the coverage areas of terrestrial and cellular networks.
Iridium Africa also introduced in Nigeria the National Ownership, Mobile Access, Disaster Communication (NOMAD) social responsibility program and donated six phones-each with 1,000 free minutes of airtime-to the Nigerian government. Governments throughout the world are recognizing the importance of these phones for disaster communications. Iridium phones were used to coordinate search and rescue efforts following the recent devastating earthquakes in Turkey and Taiwan.
Paving the way
Some of the hurdles Iridium Africa has experienced as the first GMPCS service provider on the continent include licensing problems. James Rege, director of government and regulatory affairs for Iridium Africa, explained that most African countries do not have licensing mechanisms in place for GMPCS providers. The governments prefer instead to use the word “authorization.”
In addition, it can take up to two years to obtain a license in certain countries. The South African government, for example, is still trying to amend its telecommunications act to accommodate GMPCS operators. Until that is done, no licenses will be issued.
It also is difficult to obtain GMPCS MoU and type approval from certain African governments. Market access also presents a problem, with fixed-line service providers fearing their monopolies will be threatened. Access to the public network thus has become problematic and interconnection tariffs are high.
In addition, there is a total resistance by governments, regulatory agencies and PTTs to commercial agreements. Considering the investment involved and the importance of global footprints, such implementation delays can be astronomically expensive.
Future market demand
Three years ago, some analysts had bullish forecasts for GMPCS. Merrill Lynch forecast 32 million GMPCS users worldwide by 2007. Merrill Lynch also forecast that fixed GMPCS users would be small in number because of competition from low-cost very small aperture terminal (VSAT) and wireless local loop (WLL) services. A more recent study by U.K.-based market research firm Ovum predicts 11 million GMPCS users by 2007.
Globalstar’s South African forecast is based on about 2 percent to 3 percent of cellular users taking up GMPCS to extend their cellular coverage, according to Louisa Van Beek, project director for Globalstar SA, based in Pretoria, South Africa. The market for fixed GMPCS users is negligible, she said, unless a franchise service provider is prepared to subsidize the airtime to make it affordable to low-income people in current underserved areas.
“I think we all know that GMPCS services are not cheap,” said Van Beek. “But it is a niche market to some extent, and Globalstar’s market research indicates that for our target market sectors, potential customers find pricing of US$1.50 to US$3 per minute acceptable when it is the only convenient means of communication available. And this is where Globalstar, and also ICO I believe, will pitch its prices: US$1.50 to US$2 for local (national or regional) calls and in the region (of) US$3 per minute for international calls.”
GMPCS companies such as ICO and Ellipso are not revealing publicly their expected end-user charges, partly because it is too early to do so and partly because they are waiting for Iridium and Globalstar tariffs to be established.
“But beware of early statements about prices as low as 10 U.S. cents per minute. Usually these refer to wholesale satellite charges, with the system at full capacity,” said Van Beek.
