 | Issue: | Latin America I 2001 |
| Article no.: | 1 | |
| Topic: | Telecom’s Opportunity Explosion Or What Happens When Internet and Wireless Meet Broadband | |
| Author: | Arunas G. Slekys | |
| Title: | Vice-President, Corporate Marketing | |
| Organisation: | Hughes Network Systems | |
| PDF size: | 72KB |
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Article abstract
The Internet and ‘wireless’ have revolutionised the telecoms industry. Wireless reaches 500 million subscribers, but the 300 million user Internet is growing faster at 50 percent per year. Internet commerce might exceed a trillion dollars annually within five years. Content, though, not airtime, will drive profitability in telecom. Broadband will be needed to deliver content and reduce congestion. Satellite broadband transmission will provide the lowest cost mass distribution of content.
Full Article
No one would dispute that internet and wireless technologies have each independently revolutionized the global telecom industry. One has fundamentally redefined telephony, freeing people to communicate without bounds. The other has fundamentally changed how we interact and collaborate amongst ourselves, and with our computers. Together, they already represent a worldwide, trillion dollar economic engine that’s growing in excess of 40 percent annually. And, if that weren’t enough, we are now on the threshold of introducing broadband technology into the mix. This promises to yield a virtual ‘revolution-cubed’ of value-added product and service opportunities. Let me share this vision with you and in particular, as it relates to satellite broadband meeting internet and wireless. Starting with the largest of these three telecom revolutions first, mobile wireless now reaches almost half a billion subscribers, with mass market penetration rates exceeding 60 percent in some countries such as Finland and Sweden. China will soon reach 100 million users and not surprisingly, is on its way to being the single largest market in the world. “The possibilities of harnessing higher throughput mobile data, up to 1MBps with so-called 3G systems, is why licence costs have been so high.” Not to be outdone, Latin America boasts over 60 million wireless users, more than the number of landline phones. From prior monopolistic service regimes, virtually every country in the region now embraces a dynamic, highly competitive service environment. Over half the total population of around 500 million can choose from two operators; about 20 percent can choose from as many as five. Sometime in 2003, the wireless industry globally will celebrate its twentieth anniversary and exceed one billion untethered subscribers — more than landline has been able to achieve in over 100 years. Wireless has succeeded as primarily a voice service, with only low bit-rate data capability. The possibilities of harnessing higher throughput mobile data, up to 1MBps with so-called 3G systems, is why licence costs have been so high. For example, almost US$40 billion was bid for six licences alone in the UK. Notwithstanding the great success of wireless, it’s the world’s point and click Internet community that has the higher growth rate; at least 50 percent compounded annually. There are now an estimated 300 million internet users globally. More importantly, where wireless is still mostly an airtime voice business with data usage limited to simple messaging and e-mail applications, Internet usage has become an integral part of modern business, improving overall profitability by lowering supply chain costs and inefficiencies. As a result, the realisation has occurred that it’s not the traffic capacity or airtime itself that has the greatest value, rather it’s the commerce resulting from transactions that take place on these channels. Pundits are predicting that Internet commerce will grow exponentially, possibly exceeding a trillion or more dollars annually within the next five years. But regardless which “hockey stick” growth curve you may believe will occur, it is safe to conclude that content-driven service opportunities, and not airtime, will represent the dominant engine for profitability in telecom. This brings us to the third revolutionary force, which is essential to unlocking the full potential of content services, namely broadband. By way of background, total internet traffic is exploding, doubling every six months. And congestion now occurs regularly, as the demands of e-commerce and consumer mass market users grow. Consider just how many gigabits are consumed daily by millions of kids around the world downloading music from sources such as Napster; the number of zeros in the total traffic equation becomes almost unfathomable. And broadband just makes it go faster. For example, using the latest DirecPC home satellite system means my 13 year old daughter can download a song in less than three minutes, at a 400kbps rate, rather than the 30 minutes that her pal requires using a conventional 56kbps flex modem. What child can live with such a disadvantage? Putting it more appropriately, what child’s parent won’t be talked into closing this technology gap, particularly if the cost of service is not substantially more. And why wouldn’t the same issue of price /performance impact business customers? As Sam Walton, founder of the very successful Wal-Mart retailing chain once explained, broadband data services indeed can represent a competitive edge. He justified the installation of VSAT’s throughout his several thousands of stores in the US because he wanted to video-conference with every store manager every Monday morning, in order to review that week’s operational plans. It may explain why Wal-Mart continues to be a profitable retailer despite the downturn in the economy. In the war to supply broadband internet or intranet access, or simply home entertainment services, satellite faces competitors such as XDSL, cable modems and other fixed wireless forms of technology ‘pipes’. Even though the pie is big enough for all to gain their fair share, satellite has one fundamental competitive advantage over any terrestrial technology. It will always be the lowest cost means to distribute multi-media content to many locations simultaneously, on a global basis. Witness the overwhelming success of the ‘direct-to-home’ satellite based subscriber TV and home entertainment systems whose lower capital cost, higher revenue per subscriber and lower churn than cable systems proves the point and bundling of internet and entertainment services is just beginning to occur, so expect further escalation in the never-ending battle for the customer. But the theme here is not the victory of any one technology over another. Never does technology alone win business wars. No, this story is rather about how best to deliver the highest quality of bundled content services, whether voice or data or video or multi-media information, to both enter-prise and consumer customers, in the most affordable and user-friendly manner. And stress the word content. Profitability of service providers will be measured in transaction revenue, not in minutes of use. Think of the channels as commodities to be given away. The spoils will go to those operators whose value proposition brings the most appealing and valuable content to customers, when and where they want it. It should be no surprise why AOL, the world’s largest internet operator, merged with Time-Warner, the world’s largest media company. It is all about the new content service possibilities that are yet to be packaged from the intersection of their respective company offerings. And that is why the Hughes partnership with AOL makes sense for both of us; because we can now gain market insight from the world’s largest Internet provider and develop exciting new families of hybrid television and internet products. “You can now be watching your favourite programme or sports event while […] engaging in interactive messaging with other viewers.” Indeed, the home or SOHO, small office/home office, is becoming a primary broadband market opportunity and what better way to start than by enabling the convergence of television and internet services, which is what the AOL box does. You can now be watching your favourite programme or sports event while staying in touch with important news such as stock reports, or engaging in interactive messaging with other viewers. Order up your favourite Chinese take-out or pizza; do your on-line banking; some day perhaps even vote! Goodness knows, the United States could learn how to implement a more modern voting system. Speaking of broadband internet, our DirecPC satellite service delivers high speed, 400kbps turbo Internet access; easier and faster to install than cable-based systems. It is rolling out globally and we expect successful mass market penetration rates such as we have experienced with DirecTV , which now approaches 10 million customers in the US and over one million in Latin America. An advanced two-way version is just now being piloted, which bypasses the cable plant entirely, thereby opening up even more interactive broadband opportunities to the home, such as personal video-conferencing, distance learning and so on. My 13 year-old daughter wants it so she can deliver maths tutoring to younger kids who simply learn better and faster from someone of their own generation. The two-way unit lets her reach a larger audience and helps her earn more money to pay for her future college education! (I hope she saves some of it rather than just enjoying it all by shopping). “Besides interactive distance learning, virtually any other form of multi-media traffic can be efficiently distributed using satellite broadband…” From an enterprise perspective, the power of multi-media broadband satellite networks is being proven in virtually every vertical sector. As just one example, General Motors, the world’s largest automotive manufacturer, is able to train its management and technical personnel in any office, anywhere in the world, via the GM University. Each student is able to instantly access interactive distance learning modules, which are cached locally on our new generation of multi-media VSATs. Multi-megabits per second of traffic throughput can be delivered to any dish and then selectively disseminated to different users at different PCs. Besides interactive distance learning, virtually any other form of multi-media traffic can be efficiently distributed using satellite broadband, whether campus-wide, city-wide or continent-wide; such as Visa International’s recently announced VSAT network for credit card processing that spans 28 countries in Latin America and the Caribbean. So what lies beyond the success of satellite broadband today and future generations of yet higher capacity systems, which will have throughputs 1000 times greater than today’s, or any other transmission technology for that matter, whether terrestrial or satellite? The message should be clear that it is not selling the transmission pipes alone. If we believe that content is king and transactions spell profitability, then the ultimate winning formula may be found by marrying together the broadband worlds of satellite and 3G mobility wireless. Neither alone is the right technology for the whole solution space. No, it’s rather in the right combined architecture. What better way than satellite to distribute multi-media content to any geographic location globally, anytime? And why shouldn’t services carry on beyond a geographic point and follow the customer ‘on-body,’ using 3G channels? Whether it’s my laptop, or PDA, or portable phone or a yet-to-be-invented wireless appliance and whether I am in Washington, Shenzhen or Beijing, it is I who should decide what content I want and when it should be delivered. Unfortunately, there is simply no one technology, nor vendor or operator alone, that can realize this dream of selling comprehensive and compelling content services to targeted customers, whether fixed or mobile, anywhere, anytime in a seamless, universally available manner. And that’s because the opportunity scope is simply too broad and complex. “All of us in this exciting telecom space […] should be able to find ways to win, but only if we seek to do it together.” The answer lies in three things: partnering, partnering and partnering. All of us in this exciting telecom space — vendors, operators, and content owners alike — should be able to find ways to win, but only if we seek to do it together. Hughes is proud to have a successful history of partnering in Latin America for satellite systems. We are now positioned to continue that tradition and win together in this emerging new world of wireless, internet and broadband services. And that takes trust and mutual respect. No one would dispute that internet and wireless technologies have each independently revolutionized the global telecom industry. One has fundamentally redefined telephony, freeing people to communicate without bounds. The other has fundamentally changed how we interact and collaborate amongst ourselves, and with our computers. Together, they already represent a worldwide, trillion dollar economic engine that’s growing in excess of 40 percent annually. And, if that weren’t enough, we are now on the threshold of introducing broadband technology into the mix. This promises to yield a virtual ‘revolution-cubed’ of value-added product and service opportunities. Let me share this vision with you and in particular, as it relates to satellite broadband meeting internet and wireless. Starting with the largest of these three telecom revolutions first, mobile wireless now reaches almost half a billion subscribers, with mass market penetration rates exceeding 60 percent in some countries such as Finland and Sweden. China will soon reach 100 million users and not surprisingly, is on its way to being the single largest market in the world. “The possibilities of harnessing higher throughput mobile data, up to 1MBps with so-called 3G systems, is why licence costs have been so high.” Not to be outdone, Latin America boasts over 60 million wireless users, more than the number of landline phones. From prior monopolistic service regimes, virtually every country in the region now embraces a dynamic, highly competitive service environment. Over half the total population of around 500 million can choose from two operators; about 20 percent can choose from as many as five. Sometime in 2003, the wireless industry globally will celebrate its twentieth anniversary and exceed one billion untethered subscribers — more than landline has been able to achieve in over 100 years. Wireless has succeeded as primarily a voice service, with only low bit-rate data capability. The possibilities of harnessing higher throughput mobile data, up to 1MBps with so-called 3G systems, is why licence costs have been so high. For example, almost US$40 billion was bid for six licences alone in the UK. Notwithstanding the great success of wireless, it’s the world’s point and click Internet community that has the higher growth rate; at least 50 percent compounded annually. There are now an estimated 300 million internet users globally. More importantly, where wireless is still mostly an airtime voice business with data usage limited to simple messaging and e-mail applications, Internet usage has become an integral part of modern business, improving overall profitability by lowering supply chain costs and inefficiencies. As a result, the realisation has occurred that it’s not the traffic capacity or airtime itself that has the greatest value, rather it’s the commerce resulting from transactions that take place on these channels. Pundits are predicting that Internet commerce will grow exponentially, possibly exceeding a trillion or more dollars annually within the next five years. But regardless which “hockey stick” growth curve you may believe will occur, it is safe to conclude that content-driven service opportunities, and not airtime, will represent the dominant engine for profitability in telecom. This brings us to the third revolutionary force, which is essential to unlocking the full potential of content services, namely broadband. By way of background, total internet traffic is exploding, doubling every six months. And congestion now occurs regularly, as the demands of e-commerce and consumer mass market users grow. Consider just how many gigabits are consumed daily by millions of kids around the world downloading music from sources such as Napster; the number of zeros in the total traffic equation becomes almost unfathomable. And broadband just makes it go faster. For example, using the latest DirecPC home satellite system means my 13 year old daughter can download a song in less than three minutes, at a 400kbps rate, rather than the 30 minutes that her pal requires using a conventional 56kbps flex modem. What child can live with such a disadvantage? Putting it more appropriately, what child’s parent won’t be talked into closing this technology gap, particularly if the cost of service is not substantially more. And why wouldn’t the same issue of price /performance impact business customers? As Sam Walton, founder of the very successful Wal-Mart retailing chain once explained, broadband data services indeed can represent a competitive edge. He justified the installation of VSAT’s throughout his several thousands of stores in the US because he wanted to video-conference with every store manager every Monday morning, in order to review that week’s operational plans. It may explain why Wal-Mart continues to be a profitable retailer despite the downturn in the economy. In the war to supply broadband internet or intranet access, or simply home entertainment services, satellite faces competitors such as XDSL, cable modems and other fixed wireless forms of technology ‘pipes’. Even though the pie is big enough for all to gain their fair share, satellite has one fundamental competitive advantage over any terrestrial technology. It will always be the lowest cost means to distribute multi-media content to many locations simultaneously, on a global basis. Witness the overwhelming success of the ‘direct-to-home’ satellite based subscriber TV and home entertainment systems whose lower capital cost, higher revenue per subscriber and lower churn than cable systems proves the point and bundling of internet and entertainment services is just beginning to occur, so expect further escalation in the never-ending battle for the customer. But the theme here is not the victory of any one technology over another. Never does technology alone win business wars. No, this story is rather about how best to deliver the highest quality of bundled content services, whether voice or data or video or multi-media information, to both enter-prise and consumer customers, in the most affordable and user-friendly manner. And stress the word content. Profitability of service providers will be measured in transaction revenue, not in minutes of use. Think of the channels as commodities to be given away. The spoils will go to those operators whose value proposition brings the most appealing and valuable content to customers, when and where they want it. It should be no surprise why AOL, the world’s largest internet operator, merged with Time-Warner, the world’s largest media company. It is all about the new content service possibilities that are yet to be packaged from the intersection of their respective company offerings. And that is why the Hughes partnership with AOL makes sense for both of us; because we can now gain market insight from the world’s largest Internet provider and develop exciting new families of hybrid television and internet products. “You can now be watching your favourite programme or sports event while […] engaging in interactive messaging with other viewers.” Indeed, the home or SOHO, small office/home office, is becoming a primary broadband market opportunity and what better way to start than by enabling the convergence of television and internet services, which is what the AOL box does. You can now be watching your favourite programme or sports event while staying in touch with important news such as stock reports, or engaging in interactive messaging with other viewers. Order up your favourite Chinese take-out or pizza; do your on-line banking; some day perhaps even vote! Goodness knows, the United States could learn how to implement a more modern voting system. Speaking of broadband internet, our DirecPC satellite service delivers high speed, 400kbps turbo Internet access; easier and faster to install than cable-based systems. It is rolling out globally and we expect successful mass market penetration rates such as we have experienced with DirecTV , which now approaches 10 million customers in the US and over one million in Latin America. An advanced two-way version is just now being piloted, which bypasses the cable plant entirely, thereby opening up even more interactive broadband opportunities to the home, such as personal video-conferencing, distance learning and so on. My 13 year-old daughter wants it so she can deliver maths tutoring to younger kids who simply learn better and faster from someone of their own generation. The two-way unit lets her reach a larger audience and helps her earn more money to pay for her future college education! (I hope she saves some of it rather than just enjoying it all by shopping). “Besides interactive distance learning, virtually any other form of multi-media traffic can be efficiently distributed using satellite broadband…” From an enterprise perspective, the power of multi-media broadband satellite networks is being proven in virtually every vertical sector. As just one example, General Motors, the world’s largest automotive manufacturer, is able to train its management and technical personnel in any office, anywhere in the world, via the GM University. Each student is able to instantly access interactive distance learning modules, which are cached locally on our new generation of multi-media VSATs. Multi-megabits per second of traffic throughput can be delivered to any dish and then selectively disseminated to different users at different PCs. Besides interactive distance learning, virtually any other form of multi-media traffic can be efficiently distributed using satellite broadband, whether campus-wide, city-wide or continent-wide; such as Visa International’s recently announced VSAT network for credit card processing that spans 28 countries in Latin America and the Caribbean. So what lies beyond the success of satellite broadband today and future generations of yet higher capacity systems, which will have throughputs 1000 times greater than today’s, or any other transmission technology for that matter, whether terrestrial or satellite? The message should be clear that it is not selling the transmission pipes alone. If we believe that content is king and transactions spell profitability, then the ultimate winning formula may be found by marrying together the broadband worlds of satellite and 3G mobility wireless. Neither alone is the right technology for the whole solution space. No, it’s rather in the right combined architecture. What better way than satellite to distribute multi-media content to any geographic location globally, anytime? And why shouldn’t services carry on beyond a geographic point and follow the customer ‘on-body,’ using 3G channels? Whether it’s my laptop, or PDA, or portable phone or a yet-to-be-invented wireless appliance and whether I am in Washington, Shenzhen or Beijing, it is I who should decide what content I want and when it should be delivered. Unfortunately, there is simply no one technology, nor vendor or operator alone, that can realize this dream of selling comprehensive and compelling content services to targeted customers, whether fixed or mobile, anywhere, anytime in a seamless, universally available manner. And that’s because the opportunity scope is simply too broad and complex. “All of us in this exciting telecom space […] should be able to find ways to win, but only if we seek to do it together.” The answer lies in three things: partnering, partnering and partnering. All of us in this exciting telecom space — vendors, operators, and content owners alike — should be able to find ways to win, but only if we seek to do it together. Hughes is proud to have a successful history of partnering in Latin America for satellite systems. We are now positioned to continue that tradition and win together in this emerging new world of wireless, internet and broadband services. And that takes trust and mutual respect. Conclusion As one of the world’s greatest thinkers of the twentieth century, Mahatma Ghandi, put it, “I do not want my doors closed and windows stuffed. I want the breezes of all lands to blow through my house. But I refuse to blown off my feet by any of them.
