 | Issue: | Latin America IV 1999 |
| Article no.: | 2 | |
| Topic: | The impact of GMPCS on wireless competition in Latin America | |
| Author: | Armando Vargas-Araya | |
| Title: | General Manager | |
| Organisation: | ICO Global Communications, The Americas, USA | |
| PDF size: | 32KB |
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Article abstract
Despite efforts, to foster competition, to fragment ownership and control of public telephone services, three companies, considered together, already control almost 75% of fixed and cellular services. These operators will, no doubt, be in a very strong position when the current restrictions on ownership and control are liberalized and when the regional companies are allowed to compete freely throughout the country.
Full Article
This sentiment is well understood throughout Latin America, whose people mastered effective communication-in the form of hieroglyphics, a complex calendar and a superb network of roads across the Andes-many centuries before satellite technology promised global telephony for all. If he were alive today, Neruda might well have appreciated the new communications networks that are influencing the region in the beginning of the 21st century. Telecommunications growth in the 46 countries and territories south of the Rio Grande has been explosive. Just a decade ago, telecommunications services in Latin America were largely monopoly businesses, with privatisation only just beginning to take hold. Average teledensity in 1990 was 6.28 lines per 100 inhabitants, and ranged from 1.24% in Nicaragua to 3.6% in Uruguay, according to Baskerville Communications Corporation. In 1998, average teledensity was 11.95%, with a range of 3.4% in Nicaragua to 25.2 % in Uruguay. Wireless communications in Latin America have a similar story to tell. The number of wireless subscribers grew by a spectacular 740% since 1995, according to Baskerville, from 3.5 million cellular subscribers in 1995 to an estimated 26 million by the end of 1999. The advent of mobile satellite telephony, or global mobile personal communications by satellite (GMPCS), is expected to play a substantial role in fuelling further growth, by connecting more people in more places throughout the region. GMPCS will allow direct communication at anytime, anywhere in the world, using satellite phones that are compatible with cellular networks. The ICO Global Communications network, for instance, when operational in the second quarter of 2001, will use 10 high-powered satellites in two planes operating in a medium-earth-orbit of 10,390 kilometres to provide low-cost digital voice, data, fax and a range of messaging services via lightweight pocket-sized phones and other communications devices. GMPCS is expected to playa role similar to that of terrestrial cellular in Latin America’s telecommunications evolution. What fuelled the growth of cellular was the ability to meet the pent-up demand for basic communication services, the result of a limited supply of phone lines under the government-owned PTTs and the increased economic activity experienced in the region during the 1990s. Later on, as economic recession overtook Latin America in the mid-90s, many industry analysts predicted that the cellular growth rates would fall. Interestingly, the opposite happened, as businesses and consumers reacted to the economic recession by taking advantage of the increased productivity provided by wireless communications. This trend will continue, as governments attract new foreign investments by privatising their telephone systems, by awarding new cellular licenses and by laying the foundation for the acceptance of GMPCS. In the past decade, the introduction of cellular networks in Latin America provided the only real competition to the entrenched PTTs, where basic telephone services and long-distance services were previously only available from the national monopolies. And consumers benefited greatly from the advantages brought by competition between cellular operators and the privatising telephone companies. They saw the introduction of new products, such as pre-paid subscriptions for wireless services and calling-party-pays billing structures, which worked together to keep prices low. The business user became the driving force for expanding telecommunications coverage. Wireless subscribers were no longer satisfied with using cellular phones in their city, state or province. Consumers demanded the ability to use their cellular phones in every city in their country – from major metropolitan areas and state/provincial capitals to smaller population centres. And, as competing cellular networks fought to provide the most coverage in their domestic markets, some of them began to jump national boundaries and expand internationally, first to neighbouring countries and later to major business centres of North and South America. So market-driven cellular operators responded by implementing international roaming, both within Latin America and in the U.S. and Canada. A few decided to mirror the region’s commercial interests elsewhere in the world by offering special solutions for cellular roaming to major European and Asian countries. As cellular companies in the region followed the drive to digitise their networks to increase capacity, cellular marketers benefited from the possibility of deploying new digital services. This network upgrade, together with fierce competition in the cellular environment, stimulated the launch of new value-added services, including data transmission, short message services (SMS), caller ID and voice mail waiting indicators. Introducing these network services brought to the public new applications for digital cellular phones, including sending and receiving files and emails on the road or at airports; the possibility of sending a page, a message, or an email directly to the phone; avoiding the hassle of regularly checking the cellular voice mail, since now the phone was able to ‘indicate’ when a voice mail was waiting to be heard; and deciding when to answer a call depending on who is calling. Soon subscribers will have the ability to check stock quotes, sports results and weather reports right on the cellular phone. We have identified two key drivers of cellular growth working in parallel: coverage expansion and introduction of value-added services. Thus, cellular companies that desire to stay on top of, and differentiate from, the competition, and who desire to continue to be leaders in their marketplace, must pay close attention to these drivers and use them to their advantage. GMPCS systems will allow cellular networks the possibility of expanding their coverage to their entire country. ICO’s system, for example, will integrate with existing and future cellular/personal communications services networks, and will extend the benefits of mobile communications to any user anywhere in Latin America and throughout the world. ICO’s products and services are ideal for potential users of personal voice, paging, data and fax communications scattered across the enormous and fertile regions of Latin America. Millions of entrepreneurs and commercial enterprises are out of reach due to the limited coverage of conventional terrestrial systems. Oil and gas, mining, forestry, fishing, road transportation, construction, eco-tourism and farming are just some of the thriving industries that will benefit from the most suitable and affordable communications. GMPCS subscribers will be able to make and receive calls in rural, remote and suburban areas that lack cellular coverage. End users will be able to enjoy the same services and features experienced in their normal cellular subscription, all the time, and in between cellular coverage areas, through the utilization of a cellular/satellite phone. Most importantly, cellular companies may provide this “complete” coverage, using the same cellular phone number and subscription, charging for the services while on “satellite mode” in the same cellular bill. Secondly, cellular companies can provide these complementary “satellite based” services, as an additional value-added service to their portfolio of products. These services are easy to implement following industry standard procedures, and simple to market, just like any other supplementary service. GMPCS will mean the end of social isolation, and will create new jobs and offer greater educational opportunities for residents in remote areas. Thus, the benefits of GMPCS based services to cellular networks are two-fold: on one side they fill the gap in the industry trend and customer expectation of expanded coverage, and on the other they provide a complimentary service which cellular operators can use as competitive differentiation. GMPCS systems provide the latest incarnation of a series of commercially available services, which embody the two key drivers of cellular growth in the last decade. Besides bringing telecommunications technology to underserved regions, GMPCS also will add a source of competition for existing terrestrial and wireless carriers. Wireless operators changed the commercial equation by offering businesses and individuals the ability to forego the wait for a fixed line by going directly to mobile operators for their personal and commercial telecommunications needs. Satellite services will add a new dimension by offering even affordable alternatives to fixed VSAT technologies. Because GMPCS requires no terrestrial infrastructure such as cabling or cellular towers, customers will be connected to the global telecommunications infrastructure without having to endure an excessive waiting period for connection to the service. Conclusion With the introduction of GMPCS services the competitive landscape in the cellular world will be altered by market driven wireless companies (cellular and PCS) that satisfy the requirements of the end user market segments by providing value-added services and expansion of coverage to their customers. And the promise of GMPCS will connect more people in more places than the great poet Neruda ever thought possible.
