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Potential Is Quite Big Provided You Put the Price of the Phones Right,"
Lundberg, CEO, ICO
Global Communications has been a regular visitor to India over the last 18 years.
Scheduled to launch its services in August 2000, Olof is carefully watching developing
economies like India to generate revenues for ICO in the long run. Since developing
economies have contributed around 60 percent of the finance.
He was instrumental in building
Inmarsat and is presently putting the right blocks for ICO to emerge as the # 1 in GMPCS
services. Pravin Prashant
COLOR="#000000">spoke to Olof Lundberg about the ICO system and its strategies. Excerpts
of the interview:
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We will have variable
tariff packages. The rural phones would be the cheapest at less than 50 cents per minute
and high end would be up to $3 per minute for a long distance remote international call.
is the status of your progress in India?
scratch like setting up the JV with VSNL, installation of the hub at Chattarpur, which is
also the Satellite Access Node (SAN) for Indian operations. We are making great progress
with the SAN at Chattarpur. The satellite control equipment is there, installation of
switches have just started, and will be completed in a few weeks time. The Chattarpur site
is very important for us as it serves as a hub for India and South Asia. It will also be
used for testing our satellite as it is the only place where we have installed the
satellite testing equipment.
What are the main challenges before ICO today?
The challenge for a global operator like
ICO is to meet regulatory requirements of different countries around the world. We have
not got the licence in the US. We are afraid whether our terms and conditions for market
access will be equal to Globalstar and Iridium. We are trying to get the licence in the US
through negotiations and discussions. In the end, we may have to challenge the US to
ensure that we can get licence on fair terms in the US.
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When do you plan to launch your services?
We are working towards the global launch
of ICO services by August 2000.
What is the tariff package you are contemplating?
We will have a variable tariff, as we
cannot have the same pricing philosophy in all countries because local markets are
different. We are going to provide international business travellers a premium service
which has to be priced equally around the world. We are going to provide attractive
package to people roaming within the country. We would try to provide service to rural
areas at the lowest possible cost. We are going to provide maritime and aviation
communication with a different pricing package.
The rural phones would be the cheapest at
less than 50 cents per minute and high end would be up to $3 per minute for a long
distance remote international call.
What is your handset strategy?
In the hand-held segment, we have
partnerships with four manufacturers–NEC, Mitsubishi, Samsung, and Panasonic. We are
having discussions with one more. For maritime applications, we deal with Nera handsets
and for payphone with Landis & Gear.
The price of handsets will be $700 for
initial low volume but will vary according to market conditions. In the future, we are
planning to go for an open interface whereby any manufacturer can build ICO phones. We are
working with two companies–Wavecom, a French company and Technology Partners of the
UK for developing the protocol stack and chipset for ICO. Manufacturers can go to them and
get the technology, thereby reducing the cost.
Is the satphone market big enough for multiple players?
I think the market is big enough for
several operators. Some of the operators are driven not by market but by political and
nationalistic instincts which are not healthy if they want to run a business. Some of them
are driven because the defence budgets have gone down and aerospace manufacturers
desperately want to get into the civil market. They really have no experience of
commercial telecom and are into it despite that.
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Does Iridium have any advantage of being the first to
start services?
The market potential is quite big provided
you put the price of the phones right. Iridium is not the first, Inmarsat was the first.
The market has existed for a while and the market will be there for the next 30 years.
Whether we come in 1999 or 2000 does not really matter. On the contrary, we can learn from
Iridium how they broke through the barrier of licensing around the world, testing the
market, testing the price points, and the demand.
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Is 12 years life-span of ICO satellite not a drawback, as
technology is changing very fast?
Not at all. First, you have to appreciate
your asset very fast if the life-time of satellite is low. Some companies will have half
the lifetime of satellite wasted before the start of service which is very bad. Twelve
years time-frame is a phenomenal advantage as you can depreciate satellites at a longer
time and have a more robust business plan. One need not invest in second generation
satellites as one does not know whether the market exists for them.
Even if the technology changes one still
has to cater to the legacy terminals and also has to cater to the existing telephone.
Nokia may come with a new model every year but there are still people using Nokia phones
that are five years old. So we have built our satellites transparent. We have put our
intelligence on the ground that means, if we want to move to a new air interface we can do
that. We can introduce an interface on our existing satellites, upgrade new software and
hardware on the SAN, change the base station at Chattarpur and other SAN, and introduce a
new type of phone. I am not saying we are doing it now but we can do that in the future.
But the point is that even if we introduce new technologies we still have to support old
phones for longer time otherwise we will lose our customers.
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What do you think about the Indian GMPCS policy?
I think the prime objective of the policy
should be to enable rapid deployment of affordable technology so that advantages can be
shared by the public as soon as possible. If you have a good telecom infrastructure, the
country benefits. So, the policy makers should try to ensure that an affordable low cost
ubiquitous infrastructure can be deployed at the lowest possible cost. So, I think it is
wise to avoid artificial prohibitive barriers in terms of licence fees.
What would be the ideal number of subscribers for ICO to
break-even?
What we need is the revenues and we get
revenues by multiplying the number of subscribers with airtime charges and the average
airtime being used. With these three parameters it will be difficult to say exactly how
many subscribers there will be because it depends on what strategy we follow when we go to
the market. So, the basic necessity for us as a business associate is to get as many
customers as possible.
What is the future of satellite communication?
I think there are three distinct market
segments for the satphone. One is the broadcast TV or one way broadband where you have
hundreds of TV channels and can also be used for outbound Internet access.
The second market segment is the two-way
broadband, where you need a high antenna gain and you have to have a lot of big antenna
which can track the satellites. This market is very uncertain.
The third market is mobile and mobile is
defined by the omni-directional antenna. To able to do that you need to compress voice.
You don’t have to point it to the satellite which can be anywhere and one can talk
wherever they are.
In the war of wireline and wireless, who is going to win?
Both will
exist. You will have offices and home which will have wired communication because they
require broadband communication. Wireless communication is ideal for an individual who
does not go for broadband video-on-demand type of applications.