|Issue:||Asia-Pacific II 2002|
|Topic:||Asia Pacific Infrastructure – Building Tomorrow Today|
|Organisation:||G3 Global Communications Consulting|
Gregg Daffner is the President of G3 Global Communications Consulting, providing business development, regulatory and transactional advice to communications and information services companies. He specializes in strategic planning for enterprises engaged in satellite, broadband and emerging e-commerce applications. Prior to this Gregg served in a variety of positions including: Chief Strategic Officer for PacAmTel Broadband; Vice President for Global Market Access for Lockheed Martin Global Telecommunications; Senior Vice President and Chief of Strategic Planning for Lockheed Martin Intersputnik based in London; Head of Broadcast and Fixed Satellite Services for Cable & Wireless Hongkong Telecom. He also acted as an independent consultant to numerous ventures including Hughes’ SpaceWay Asia-Pacific, Orion Network Systems and Columbia Communications Corporation; Vice President for Market Development and Regulatory Affairs for PanAmSat; and Director of International Policy for the National Telecommunications and Information Administration (NTIA) of the U.S. Department of Commerce. Mr. Daffner is a practised attorney. He practised with NTIA, Jenner & Block and Arent, Fox, Kintner, Plotkin and Kahn in Washington DC. He is a dedicated member of both the Board of Trustees and the Executive Board of the Pacific Telecommunications Council (PTC). Since 1994 he has also been a Founding Executive Board Member of the Asia Pacific Satellite Communications Council (APSCC). In addition to all his achievements he is also a founding member of the Satellite Industry Association (SIA) and the Alliance for Competitive International Satellite Services. In a prior accomplishment Mr. Daffner was a based in New York filmmaker and video artist.
Telecommunications infrastructure is sadly lacking in much of the Asia – Pacific region, without adequate telecommunications. Universal phones and Internet availability could fuel economic development. The region’s government, recognize this but lack resources to build the systems. As anchor tenants of private sector networks, they can insure their viability, provide cost-effective e-government services and underwrite the means for regional economic development. The next – generation satellite – based networks would provide a cost – effective way to rapidly extend service availability.
Introduction The ‘chicken and egg’ question in e-commerce and, more broadly, the Internet, comes down to which comes first – content or infrastructure? While the obvious answer may be that infrastructure necessarily comes first, to enable the transmission of content, nevertheless without the content, which requires faster delivery, bigger pipes and more advanced severs/processors, there will be no incentive to build the requisite infrastructure. Indeed, one theory of why much of the first dot com wave of broadband infrastructure failed (and drove those broadband infrastructure providers into bankruptcy) over the past year is the lack of broadband content which required the infrastructure in the first place. And while timing may not be everything, it is critical to synchronize the deployment of capital-intensive broadband infrastructure with the development of the content that will run on this infrastructure and, in fact, pay for its operation. There is a difference if e-commerce infrastructure is customer – driven or technology – driven. If it is the former it has at least a fighting chance of being commercially accepted and successful. However, if it is the latter it is all too often that the pet project of technology geeks hot in pursuit of building a better mousetrap regardless of the likelihood of customer needs or acceptance. An enormously painful example of this might be the Iridium low earth orbiting mobile satellite programme. Iridium, a successful technology company developed a very sophisticated solution in search of a problem and its five plus billion dollar failure almost dragged its founding company Motorola into bankruptcy. The other dimension to be alert to is the almost inexorable process of commodity within the infrastructure. As new, more cost – effective and efficient technology is developed and deployed it drives the cost of services down. As additional firms invest in similar infrastructure technology to successfully compete, the price and value of their services drop, transforming the former ‘hot’ product into a commodity, often with margins so reduced that it may be impossible to recoup the initial investment. While this may appear bad for infrastructure investments it actually functions to propel infrastructure firms into offering value-added services and higher – return applications. We will soon examine a case of an Asian satellite company that did precisely this. A universal service has traditionally been defined as having a telephone in every home. This definition derived from the principle that there is a human right – ‘the right to communicate.’ It has been characterized as making service available at affordable prices accessible to people of various income levels. With the advent of the Internet it has been expanded to include high – quality information services available, regardless of geographic location or restrictions such as disabilities. There are three key features of universal service: availability, reliability and affordability. But exactly to whom is it affordable? Government telecom officials, particularly politicians, love to talk about affordable universal services. Unfortunately the reality is quite different, especially in Asia today; the truth is that the public trough is empty. Once again as countries across South East Asia are headed toward recession, governments are trying to spend their way out of the morass, and naturally, public sector deficits are ballooning in an attempt to stimulate consumption. Public debt is now equivalent to almost 60% of GDP in Thailand, 87% in Indonesia and around 100% in the Philippines Business Monitor International, September 2001 Report). Thus, governments are in no position to underwrite the build-out of new infrastructure. They can, and should, be the anchor tenants for privately built networks. With this approach the governments can more cost – effectively provide critical information and intensive services, for example, e-government and tele-education and tele-medicine. Satellites Among the most promising broadband infrastructures are the next – generation satellite systems. What distinguishes these projects from traditional satellite infrastructure is their ability to provide low – cost, mass-market telecomm-unications and information services directly to end – users. This contrasts with the traditional satellite model where the systems linked Hub-to-Hub national gateways and required all traffic to be routed over additional terrestrial systems. Next – generation satellites can provide ubiquitous global communications services, bridging the gap between info ‘haves’ and ‘have-nots’ (the digital divide). The satellites are operated by private companies that believe they can profitably offer services throughout the developing world. The virtue of satellites in particular and the wireless infrastructure generally, is that they are ideally suited for both mobile communications services and fixed, thin – route, rural and remote services. Geographically, the focus of the next generation satellite systems are those areas with the least developed terrestrial infrastructure. Rural and remote villages will constitute a primary customer base. This is possible because, unlike terrestrial infrastructure, satellites are distance insensitive. Satellites are just antennas located very high above the ground (geo-stationary satellites are 23,400 miles from the earth) and therefore and cover a much wider area than terrestrial-based antennas. Thus remote villages are automatically covered by satellite systems, even satellites that are primarily focused on serving wealthier urban areas. Accordingly, remote villages are free riders, covered by the satellite system without additional cost to the system operator. Any additional costs would be for ground equipment, which can be financed by governments or international aid organizations, or even the operators of national services. These new systems and technologies will have a profound effect on access to the emerging information economy. The traditional incumbent telecom provider, frequently a PTT, is seriously concerned about the economic consequences of bypassing existing operations. Still, this challenge can be viewed as an opportunity to vastly expand service coverage and make universal service a reality. Those incumbent operators who ignore or oppose these technologies do so at their own peril. Satellite infrastructure has two components: the space segment (the satellites themselves) and terrestrial equipment (customer premises equipment or CPE) that communicates with the satellites. Serious issues often turn the latter into a battleground: • Will national markets be effectively open to the importation, ownership and use of the earth station terminals? • Will there be serious impediments to certification and type approvals of terminals? • What is the likelihood of a unified regional approach? • Will access and interconnection to existing networks be possible? The good news is that, globally through the International Telecommunications Union, the Global VSAT Forum, and regionally through the Asia Pacific Economic Cooperation Telecommunications Group (APEC TEL), a set of new, more open rules and arrangements have been fashioned. The ITU has promulgated a comprehensive approach and established a Memorandum of Understanding (MOU) ‘to facilitate the free circulation of [next – generation satellite] user terminals’. Meanwhile, APEC established a Mutual Recognition Agreement (MRA) on Conformity Assessment to harmonize type approval requirements for terminals in the region. Generally speaking, there are two kinds of broadband satellite solutions: first – generation and next – generation. The first – generation broadband systems deployed in the 1990s use traditional satellite infrastructure that generally consist of large satellite beams covering entire countries or continents, but employing more sophisticated ground systems than traditional satellite networks. Examples are Hughes Network Systems DirectPC (2 way) and Gilat’s Starband. These systems have lower terminal costs ($1000+) than traditional satellite infrastructures – the earth stations are nearly five times cheaper than even VSATs (Very Small Antenna Terminals). Additional bandwidth cost savings is achieved by more efficient spectrum use and advanced signal coding technologies. Proposed next – generation broadband satellite systems include: iPSTAR, M2A, Hughes Spaceway, Alcatel’s Skybridge, Lockheed Martin’s Astrolink, Teledesic, and Wildblue. Some of these may start operations late this year or 2003, but many will never materialize. These promise even lower bandwidth costs (5 – 10 times) and lower terminal sizes and costs (under $1000) – overall, the saving in cost is about eight times less expensive than traditional VSATs. They compete with last – mile terrestrial alternatives (cable and DSL), especially for the under privileged, suburban and remote areas. The Internet has evolved from a network for text and static images into one used to support substantial e-commerce and bandwidth – intense multimedia and dynamic content. One of the problems of the Internet today is that it is not fully equipped to handle the demands for rich media content. This requires developing broadband distribution capabilities to provide users with a fast, reliable and high – quality experience. One of the most promising approaches is through content delivery networks (CDNs). This uses technologies such as content replication, multicasting, cacheing and edge servers to move content closer to the end – users. CDNs employ enhanced infrastructures that overlay the existing Internet with strategically located ‘edge servers’ to improve network performances. CDNs serve four market segments: ISPs, the consumer/entertainment market, the broadcast and cable TV industries, and the enterprise/B2B market. iPSTAR will be one of the first in the next – generation satellite systems to be launched to serve Asia. This is not the only system under development, but it seems closer to being implemented than most. In any event, iPSTAR has many of the virtues of next – generation satellite infrastructures and provides a taste of what future satellite delivered broadband services may look like in Asia. The iPSTAR broadband satellite system is a subsidiary of Shin Satellite Corporation that, in turn, is a subsidiary of the Shinawatra Group – Thailand’s largest private telecom company. IPSTAR, a geostationary satellite system, will have greater bandwidth capacity and, therefore, will be more cost-effective as a ‘last – mile’ broadband solution vis-à-vis DSL or cable modem. Multiple spot beams allow greater frequency reuse. User earth stations for 2-way service will have 90 cm antennas. The satellite will provide 35 Gbps of two-way services using the 90 spot beams. It will have an additional 5 Gbps of broadcast capacity. Traditional satellite infrastructure provides about one gigabit of total throughput per satellite. Therefore, if the iPSTAR satellite costs about the same per satellite, it may be as much as 40 times lower than it would be for traditional satellites. This will enable its operators to offer bandwidth and services at much lower prices and still maintain comparable profit margins. The satellite’s nearly three to one inbound to outbound traffic ratio is optimized for the Internet’s asymmetric and liberal nature allowing bandwidth sharing among many users (see Figure 1). Shin Satellite plans to offer a suite of application services. iPSTAR will provide broadband Internet services including for downstream B2C (see Figure 2). They will provide basic access services for high – speed Internet, value-added services for multimedia, VOD, VPN and games. They will offer both direct-to-user services and provide their capacity integrated with other ‘last – mile’ solutions including DSL, cable modem, WLL, MDU and MTU. Satellites offer great opportunities for rapid broadband infrastructure build-out in Asia, but they are only a part of the total solution. For the most part, they are complementary to fibre and terrestrial wireless solutions. One shortcoming is that geostationary systems suffer from transmission delays the round trip of an earth station signal to the satellite and back to another earth station, a distance of nearly 47,000 miles, takes about 0.5 seconds. This renders them less than ideal for real – time interactive communications. These satellites use higher frequencies, readily blocked by rain, a problem in high rainfall areas such as Southeast Asia. If this can be overcome, due to the distance insensitivity that the satellites are exposed to, they could be ideal for long hauls and communications to remote locations where terrestrial alternatives are impractical or too expensive. Conclusion Some have said that the lack of economic development causes poor telecommunications. I believe that the causal link between infrastructure and development is exactly the reverse: that primitive telecommunications sustain poor economic development. If governments in the region help the infrastructure of e-commerce to take root and leave the market-place free to determine what services and applications it will offer, they will set the stage for the creation of new modalities of commerce and power their economic engines.