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New International Satellite Service Players Wait in Wings.

Increasingly, many observers of the regulatory scene in Washington are concluding that the FCC's philosophy of deregulation is likely to be extended to the international satellite arena. While the accomplishments of Intelsat elicit nearly universal praise, as it prepares to launch over a hundred new international cable TV and broadcast satellite services, its ability to respond to every emerging market need around the world is beginning to be questioned. As Intelsat's fundamental role comes under greater scrutiny, the issue no longer is whether space segment alternatives to Intelsat will be authorized, but when.

There is far less certainty as to exactly what the FCC will authorize. To date, four companies have sought FCC permission to provide alternative service in the US-European corridor: Orion Satellite, Cygnus Satellite, International Satellite and RCA Americom. Orion and Cygnus propose to offer customers the opportunity to purchase transponders in a conominium arrangement, with users possibly bypassing the US common carrier ground distribution systems by constructing their own ground networks, including uplink and downlink facilities. Potential customers include heavy users of data and video channels, such as television and cable programming networks, newspapers, hotels, airlines, financial service organizations and manufacturers.

RCA, on the other hand, intends to offer direct competition to Intelsat by substituting a modified Satcom 6 satellite for the Intelsat space segment, while delivering end-to-end service on a first-come, first-served common carrier basis.

International Satellite, a subsidiary of TRT, has straddled the fence by proposing to use half of its capacity for common carrier services and the other half for outright sale to private owners. Most recently, Pan American Satellite Corporation (PanAmSat) applied to the FCC for permission to construct, Launch and operate a satellite system to serve markets in Central and South America, the Caribbean Basin and the United States. In addition to providing video and audio interconnection between Miami, New York and Latin America, PanAmSat would also make available additional transponders for internal communications in those areas outside of the United States. Other companies can be expected to apply for licenses when it appears that an FCC decision is imminent, perhaps after the White House makes public its position on the policy issues involved. Some Critical Questions

The FCC is faced with some extremely difficult questions, and its actions are being satellite industry as well as by decision-makers and entrepreneurs in a number of other countries. Some of the critical questions include: Will the FCC authorize only private satellite systems such as Orion and Cygnus, or will it allow common carrier competition from RCA and ISI? If outright sale of capacity is authorized, will the sales be restricted to 36-MHz transponders or will smaller units of, say, 18 MHz or T1 circuits be allowed? How will these satellite systems interface with existing common carriers? Will Comsat remain the gatekeeper to the Intelsat system? Will it be allowed to maintain its mark-up on the Intelsat Business Service, or will carriers and users eventually have direct access to the cost-plus pricing, structure of Intelsat? What about resale? And will the private networks be allowed to switch into the public networks?

These are the questions that preoccupy corporate planners, for the way in which the FCC answers these questions will determine what, if any, new business opportunities will emerge, and what new skills will be needed to make those opportunities a reality.

While the FCC has a central role in these policy discussions, the outcome is not dependent upon the actions of that agency alone. For example, the government-controlled PTTs around the world have a powerful stake in maintaining the status quo. Access by non-Intelsat organizations to those countries and basic communications networks is likely to be granted only when the benefits (chiefly economic) outweigh the disadvantages. In Europe, however, Britain's pro-competitive policy may prove very helpful to those companies seeking access.

What is the emerging industry going to look like? Perhaps it may not be radically different in structure from the US domestic industry.

Although an FCC license will be a prerequisite for those companies seeking to provide alternative service, access to the debt and equity markets and the presence of measurable market demand will ultimately influence how many companies flourish. Obviously, those companies having healthy capital resources, and an existing relationship with the market segments they plan to serve will have a competitive advantage.

As is the case domestically, product offerings will probably run the gamut, from the leased transponder approach where users are responsible for the design, construction and maintenance of their ground systems, to the full added-value approach where a customer will pay for complete and-to-end service on a time or usage basis.

Although the opportunity to provide the international space segment will be limited to a few well-heeled companies, opportunities to enhance the satellite capacity through ground support, resale, new network development and new services will be plentiful.

Regarding earth stations, already International Relay, ITT World Communications and TRT Telecommunications have received FCC permission to construct and operate earth station facilities for use in conjunction with Intelsat's International Business Service. As companies own networks, more attention will be focused on custom-tailoring the earth stations to their needs in cases where resolutions, reliability and security are critical, as in international television transmissions and computer communications. For others, sharing a ground stations may be more appropriate. Entrepreneurs will find many opportunities in ground system development.

Resale of capacity may also evolve into a substantial business. Companies leasing transponders may decide to make available their excess capacity to others, as often the case in the US. Some organizations will purchase or lease transponders with the sole intention of reselling to others. As you move farther away from the commodity approach toward a service offering, the amount of bandwidth in question may decrease, but the specific nature of the service may enhance its value. By adding PBXs, mobile dishes, videoconferencing facilities and computers to the circuits, services such as long-distance telephone networks, ad hoc and permanent television transmissions, electronic mail systems and packet-switched data networks are made possible. The industry is not unlike a pyramid with the few companies at the top making possible a host of opportunities for others below.

Pending the FCC decision, the political and regulatory sectors will be the principal focus of this industry. Lawyers, lobbyists and policy analysts will be busily preparing FCC requests, seeking to persuade government decision-makers of the merits of their proposals, and carefully dissecting the arguments of their competitors. New Areas of Emphasis

Assuming a positive decision from the FCC is forthcoming, these functions will become more routine and less critical as attention shifts to turning the ideas into positive cash flows. Strategic planning, marketing and systems development will become the next areas of emphasis. Even though most of the companies entering the market would have been conducting strategic analyses along the way, it will still be necessary to assess new market opportunities in light of the company's strengths and weaknesses and an everchanging environment, and to prepare business plans which translate intentions into an operational framework. Marketing experience in new product development, promotion and advertising, pricing and direct sales will be very valuable to satellite-system developers. Knowledge of video and data markets also will be quite beneficial.

The need for sophisticated engineering skills will be substantial. Engineers will be needed by the satellite companies and by companies designing their own networks, but it can be expected that the greatest need will be for system design consultants, particularly those who are knowledgeable about digital communications, bandwidth-compression techniques and security. Once the systems are operational, engineers will also be needed to oversee maintenance.

The prospects for a more diverse satellite industry are exciting as new services will be provided, users will have more options and new jobs will materialize. With the long-awaited FCC decision, a new international satellite industry may soon emerge whose multiple dimensions are still to be defined.
COPYRIGHT 1984 Nelson Publishing
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Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Author:Lemle, M.D.
Publication:Communications News
Date:Oct 1, 1984
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