Main applications in the field of telecommunication - Overview of market assessment issues
From INVESaTWIKI
Main applications in the field of telecommunication - Overview of market assessment issues
The recent record of market assessment and forecasting
in the satellite industry is mixed at best. Limiting
the review to new services aimed at the general business
and consumer markets, some have succeeded beyond the
expectations of analysts, such as direct broadcast satellite
(DBS). After its US launch, DBS service gained the record
for the fastest rate of adoption of any consumer electronics
product (until that record was recently surpassed
by digital video disk players). On the other hand, the
widely-anticipated market for Global Mobile Personal
Communication Systems (GMPCS), provided by firms
such as Iridium, Globalstar, and ICO, has failed to
materialize. As with any advanced communications service,
predicting the adoption of new satellite services by
individuals not a very easy endeavor.
Assessing the market success potential of broadband
satellite systems requires the consideration of a broad
range of factors. Only some of those factors are within
the span of control of satellite operators. Therefore, operators
will have to make choices as to which factors they
will address in their business strategy. In the domain of
technical factors, as an illustration, decisions on system
technology and design allows operators to make tradeoffs
among various capabilities; for example, choosing
a MEO system design over a LEO system reduces complexity
but increases latency and other disadvantages.
The costs of a poor market assessment are enormous.
The recent experience of the Iridium satellite constellation
provides some insight into those costs. Executives
at Iridium have admitted publicly to some poor choices
in market assessment and strategy. For example, the
company targeted its services towards global business
users. The added functionality of Iridium did not justify
the cost of the service; furthermore, global roaming provided
a very small addressable market for Iridium, as
global business users account for only a tiny fraction of
total mobile telephone usage. As Iridium was unable to
meet its target dates for subscriber levels, the company
was unable to meet the covenants on its debt. Iridium’s
major creditors forced the company to declare bankruptcy
and seek dissolution under Chapter 7 of the US
bankruptcy code.
There is now some evidence that the bankruptcy of
Iridium has “poisoned the well” for future satellite systems.
Most broadband satellite systems require billions
of dollars in capital for satellite construction, ground
station networks, launch costs, and other expenses. Due
to their design, LEO and MEO systems must have
enough satellites in orbit to provide uninterrupted global
coverage before they can enter service— this means that
the up-front investment required is substantial. While
most of the broadband satellite systems proposed so far
have secured sufficient capital to start operations, the
public capital markets have signaled that they will not
invest significantly in new systems, and that future
attempts to raise public capital for satellite systems will
be very difficult (O’Rourke, 1999).
Given these very high stakes, a careful consideration
of the exact position of broadband satellite systems in
the competitive broadband communications market is
needed. This entails the assessment of the strengths and
weaknesses inherent in broadband satellite service, and
how those characteristics affect the threats and opportunities presented by the market environment (see
Table 1). [1]
References
[1] E.G.Carayannis, J.Alexander
"Virtual, wireless mannah: a co-opetitive analysis of the broadband satellite industry".
