|Issue:||Latin America II 1998|
|Topic:||Project Simon Bolivar: From Dream to Reality|
|Author:||Leon T. Knauer and M. Veronica Pastor|
|Organisation:||Wilkinson, Barker, Knauer & Quinn, LLP, USA|
The geography of the Andean sub-region provides a prime candidate for the development of satellite-based services for everything, from basic telephony to advanced corporate and data communications. Until recently, this region was served only by Intelsat, which has the exclusive right to operate the space segment internationally. The Simon Bolivar satellite now allows these countries to fulfil their telecommunications needs under their ownership and control, turning what was once a dream into reality.
The history of satellite communications dates back to the years following World War II and the discovery of the geostationary orbit. Scientists observed that objects placed in a certain equatorial orbit around the Earth would have coverage over, or ‘see’, certain geographical points 24 hours a day. It was not long before an object capable of relaying communication – a communications satellite – was placed in orbit. By 1960, a number of countries were ready to exploit the potential of communications satellites to provide telephone service throughout the globe through a constellation of geostationary satellites. Thus Intelsat was born, a co-operative of Western countries for the purpose of designing, building, launching and operating a constellation of satellites to bring communications to all nations of the world on a cost-averaged and non-discriminatory basis. Before the ink was dry on the Intelsat Treaty, however, a number of countries were exploring ways to launch their own national and regional systems to satisfy their domestic and international needs without using the Intelsat system. The Simon Bolivar satellite project – formerly known as Project Condor – is part of this regional integration trend. The countries of the Andean sub-region, Bolivia, Colombia, Ecuador, Peru and Venezuela, are unique, attractive and expanding telecommunications markets in their own right. In the past 10 years, each country has made enormous strides in improving the state of its telecommunications infrastructure. While teledensity has doubled, it is easy to see why much remains to be done in order to develop these telecommunications markets to reach their full potential. One important area that is being developed is satellite communications because, taken together, these five countries represent a formidably attractive market for new and conventional telecommunications services delivered by satellite. This is because the geography of the Andean region, punctured by the Andean mountains, has scattered populations to whom access by land is difficult, thus making the area a prime candidate for the development of satellite-based services for everything, from basic telephony to rural areas, to advanced corporate and data communications. The unmet demand for satellite services was estimated at 40% in 1996, in Venezuela alone. Until recently, the Andean region was served only by Intelsat, which has the exclusive right to operate the space segment internationally. In the past decade, however, many satellite systerns have come to challenge Intelsat’s hegemony in both domestic and international communications, as the US, Mexico, Canada, Argentina and Brazil built their own satellite systems to respond to their national communications needs. The Simon Bolivar satellite project antedates each of those satellites by a decade. In 1984, the Andean sub-regional countries began to dream about launching a satellite system that would be under their ownership and control. That dream has now been realised with the inauguration of the operations of the Simon Bolivar satellite system in March 1998. In 1969, Bolivia, Colombia, Ecuador, Peru and Venezuela signed a landmark free trade treaty in the Colombian city of Cartagena. The Cartagena Accord aimed at gradually reducing trade barriers between the nations and integrating them into an Andean ‘common market’. Part of the integration process involved launching an independent satellite system to serve the communications needs of the five countries, internally as well as internationally. By 1983, these countries had conducted technical and feasibility studies and identified an orbital slot in the geostationary orbit for the Andean satellite system, called ‘Project Condor’. The difficult economic and political times faced by the Andean nations in the late 1980s and the early part of this decade resulted in Project Condor never seeing the light. By 1994, however, the political and economic winds of the region had changed. Telecommunications privatisation had been successfully carried out in Chile, Argentina, Mexico, Venezuela and Peru, and similar reforms were being contemplated in Bolivia and Ecuador. In each country, all but basic voice and cellular services had been or were soon to be liberalised. It was clear that the demand for new capacity in the region would soon outpace the ability of other satellite systems to fulfil it. At the same time, Intelsat was undergoing a reform process and progressively renouncing its monopoly status. In 1994, the Andean Committee of Telecommunications Authorities (CAATEL), together with the Association of Telecommunications Companies of the Andean Region (ASETA), decided to accelerate the project under a new name, Project Simon Bolivar. In August 1996, the Andean Community of Nations approved a remarkable supranational resolution regulating the use of the space segment over the five nations. The resolution legitimised the formation of a private company, ANDESAT, for the purpose of co-ordinating and implementing an international satellite venture among the five Member Countries. Resolution 395 provides for the grant of 20-year renewable Community-wide licenses to utilise the space segment to any qualifying company. While Resolution 395 does not limit foreign ownership in Community licensees, it does require that, in order to qualify for a license, an applicant must have capital from citizens of at least two of the Member countries. In exchange, the Resolution compels the governments of the five countries to afford national treatment in landing rights and other matters to any satellite system that has received a license from the Community authorities. Licensees have three years from the date of the license to develop and launch a satellite system, but they may use the capacity of an alternate system to begin providing service during that time. The Community license entails certain universal service responsibilities, including the obligation that the systems allocate up to 7.5% of their total capacity for the use by the governments in developing their social telecommunications needs, at a 30% discount over applicable commercial rates. Member countries may file complaints against a satellite system before the Cartagena Accords Commission, for failure to comply with its responsibilities. The Commission is empowered to impose sanctions up to and including revocation of the Community license. Unlike its predecessor, Simon Bolivar will be entirely funded and operated by a private corporation composed of over fifty telecommunications organisations from the Andean subregion. The potential investors met in Cartagena, Colombia in 1995, executed a Memorandum of Understanding establishing a Project Management Committee, established a capital fund, and undertook further capitalisation commitments, subject to the results of feasibility studies and obtaining a suitable orbital slot for the new satellite. ANDESAT, which was formed as a result of these meetings, has its headquarters in Cali, Colombia. The studies commissioned by CAATEL, ASETA and ANDESAT identified two possibilities for developing the system. The first was to purchase an existing satellite in order to enter the market quickly. The second was to invest in a new satellite built to fit the specific telecommunications needs of the Andean countries. In the end, the project is being carried out by a combination of both alternatives, partly due to an orbital slot dispute between ANDESAT and the Mexican Solidaridad. The original studies identified the 109 W.L. orbital position as suitable for Simon Bolivar, but political delays in the implementation of the project resulted in the slot being reassigned to Mexico’s satellite system. Solidaridad has been renamed SatMex and is now in the process of being privatised. As a compromise in the orbital slot dispute, it has offered the Simon Bolivar satellite system transponder space at advantageous rates, permitting Simon Bolivar to begin operations this month. The SatMex arrangement inures to the benefit of both parties, as it permits SatMex to operate at near full capacity from the start. Simon Bolivar has located another suitable orbital position, which it has registered with the International Telecommunication Union (ITU). It is now conducting final co-ordination meetings with several administrations. A strategic investor will join the ANDESAT partners in developing a new state-of-the-art satellite. Once the satellite is in orbit, in the year 2000, all the services currently carried by SatMex will migrate to the Simon Bolivar II bird. The project is now in its final phases of implementation. Technical and market studies have determined that there is substantial demand for new telecommunications services, such as improved data transmission links, value-added services and direct to home broadcasting. But Simon Bolivar will also fulfil important universal service needs. The system is required to provide rural communications and broadcasting services to neglected areas in the five countries, in addition to telemedicine and remote classroom capabilities in rural areas. On February 27th, 1998, Simon Bolivar received a Community license under Resolution 395, permitting it to utilise the space segment in all Andean countries in time for its March 2nd, 1998 service launch using SatMex. Its major shareholders are the pre-eminent telephone companies of the five Andean nations: ENTEL Bolivia, TELECOM, Empresa de Telecomunicaciones de Bogota (ETB), Empresas Publicas de Medellin (EPM), Empresas Publicas de Cali (EM Cali) in Colombia, EMETEL, from Ecuador, Telefonica del Peru and CANTV of Venezuela, as well as several large media concerns, and other domestic and international telecommunications service suppliers. In all, about 85% of the capital will be private and 15% will come from public enterprises. Analysts have estimated that Simon Bolivar is in a position to garner almost 50% of the Colombian telecommunications market, 23% of Peru’s, 20% in Venezuela’s, and 9% each on Ecuador’s and Bolivia’s. Business networks are expected to account for half of the traffic. Thus ANDESAT will have two years to build up a customer base and meet the obligations of its authorisation before actual operation of the Simon Bolivar separate satellite commences. Conclusion One factor which should assure success is that the Simon Bolivar satellite will place a signal over the US, thus capitalising on the flow of voice, data and other communications among the Andean sub-region, and between them and the US. Notwithstanding several obstacles, the countries of the Andean region have finally been able to obtain their own national and regional satellite system. The Simon Bolivar satellite will allow these countries to fulfil their domestic and international telecommunications needs – turning what was once a dream into reality.