‘All Ambitions of Providing GMPCS Service in India Need to Be Tempered with Solid Business Case’ – Dr Bishnu Das Pradhan, senior vice-president and general manager, ICO

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Though Global Mobile Personal Communications
by Satellite (GMPCS) is still in the nascent stage, companies like Iridium, ICO, Ascom,
and Globalstar have arrived here to tap the market potential. ICO, one of the
front-runners in GMPCS, has found a leader in
Dr Bishnu Das Pradhan for
developing its business in India. He is working closely with the company’s investor
and partner, VSNL, to form a JV which will look after the marketing activities of ICO in
India. Speaking to
Pravin Prashant, he unveils the activities of ICO India and its future
strategies. Excerpts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Satellite is very
expensive, so any satellite-based communication would be expensive.

“All Ambitions of
Providing GMPCS Service in India Need to Be Tempered with Solid Business Case,”

Dr Bishnu Das Pradhan, senior vice-president and general
manager, ICO.

 

What is the present
status of ICO in India?

The Satellite Access Node (SAN) at
Chattarpur, near Delhi, is in the final stages. The equipment has been installed and the
provisional spectrum has been allocated for testing the equipment. Once the first
satellite is launched, the SAN centre will also have the capability of testing the
satellite. Discussions are on with the wireless adviser office for getting the approval
for frequency spectrum to operate ICO services in India.

We are working closely with VSNL to form a
JV in which VSNL and ICO would be partners along with the Indian partner who would be
strong in marketing and would be able to drive the company. The new set up along with the
equity structure would be formalized by the end of the year. This JV will have the
exclusive right to carry out all the marketing and distribution functions.

What do you feel about the clearance of licensing issues
by DoT?

VSNL, one of the partners for ICO in
India, has submitted the licence applications before the policy was announced. But with
the GMPCS policy being announced, the licence application has to be put up in the context
of the policy.

Regarding 16 percent revenue sharing agreement of DoT for
operating GMPCS services in India …

In principle, revenue sharing is one of
the most profitable arrangements and it is a win-win situation for both DoT and GMPCS
service provider. I am in favour of revenue sharing. But, the question is how do we share?
The business we are talking about is predominantly a trading business where bandwidth is
bought from a wholesaler. As usual in the trading business, one lives on a relatively
small margin otherwise the end user is unable to afford to buy the service.

If the services are unaffordable, one
would not be able to sell the bandwidth. As the traders work on a relatively smaller
margin, one should drive for higher volumes and keeping a lower percentage would make
sense. We will also keep a lower percentage as our objective is to minimize the cost,
increase the volume, and increase the utility of service.

Apart from the cost of the ICO system and
the operational cost, we have also to pay interconnect charges to DoT and for holding
rights to VSNL for operating ICO services in India. Once you minus that amount, what we
have for profit is not very high. For DoT to say 16 percent and to make it more expensive
will not generate enough money for them. So, our objective of increasing the revenue gets
defeated. DoT has to look from the point of increasing the volume and optimizing the
service requirement. It is in that context that if it is 16 percent, it is a no-win
situation.

What would be the role of VSNL in the ICO project?

VSNL has three roles to play. That of an
investor, banker, and SAN operator.

Many companies are planning to provide GMPCS service. What
do you feel about the Indian market?

We look at GMPCS in India from a regional
point of view. Regional system has its drawbacks and limitations of capacity imposed due
to usage of GEO systems and those by footprint. The cost of these systems is in the order
of a billion dollar and so one has to justify the returns. So, all ambitions of providing
GMPCS service in India need to be tempered with very solid business case.

My own assessment at this point of time is
that it will be very difficult to justify purely from the financial point of view.
Satellite is expensive in comparison to fibre optics and even the risk associated with the
satellite is much more. The regional operator has to keep at least a hot stand-by in the
ground instead of it in the orbit, which is deployed by most of the global GMPCS players.
If something happens, one can switch over to it and so the process remains unaffected.

What is the ideal number of GMPCS subscribers for India
and how much is ICO targeting for?

Statistics have shown that around 4-5
percent of cellular subscribers on a world-wide basis will go for GMPCS services. In my
view, we can expect the percentage to be higher given the size of our country and the
state of cellular network presently.

Opportunities are galore depending on how
businesses are developed for different market segments and we are focusing on how to go
about it. We have to develop businesses in speciality sectors, where systems capability
can be fully exploited. Our market potential would be more than 40 percent.

Where can GMPCS services be deployed?

It is available for total global mobility
to zero mobility at a fixed location. Fixed, obviously is for remote sites which are rich
in natural resources, agriculture, oil, and mining, where we see it being put to use.
Then, of course, we have high income residential people in remote, rural, and local areas.
At the national level, we have the usage by the trucking system, tourist services, and bus
services. The system is put to use for security in border areas and for faster
communication deployment in disaster affected areas. The GMPCS service is also useful for
airlines industry, media, and others.

How can one make GMPCS service affordable?

Affordability is one issue that always
comes up. There are two ways of looking at the price. The first approach would be to price
the product by regions and by market segment and maximizing the returns from a global 24
hour capacity. The second one would be to focus on speciality segment where these become
the only means of communication and by doing so, we are moving towards the village
telephony concept.

Is it feasible, on the part of service provider, to deploy
GMPCS service for village telephony?

Satellite is very expensive, so any
satellite-based communication would be expensive. Villages have to be selected very
carefully based on certain parameters rather than deploying in all of them. Study results
show that payback for Rural Automatic Exchange (RAX) could be as low as two years if we
put RAX in a village which has certain characteristics. However, it can be as high as 25
years if not properly followed. By putting up a phone which has STD and ISD capability,
the revenue that could be generated in some of these locations is fully justifiable.

Having said that when I
look at GMPCS, there is an enormous capacity that is being wasted. If we can use this
capacity for village telephony applications, the cost can be minimized. All we need is to
have a phone terminal to the village and say where we have to dial. We have to find ways
to see that this capacity will be given for free for a particular time period. Instead of
going waste, let us use it in village telephony application.

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