Could the consortia behind Globalstar, Inmarsat, Iridium and Odyssey have gone wrong in their calculations?
The primary audience for the worldspanning, dual-mode GSM/PCN telephone and fax services - World Business Travellers (WBTs) - may not be the right target, according to Stephen Garside of Inter-Media Exchange, the Munich-based communications consultancy.
A recent issue of the International Herald Tribune put the number of WBTs at five million. The German trade communications magazine, Funkschau, thinks that two fifths of them - or two million road warriors - plan on using these point-to-any point communication systems on an occasional-to-regular basis.
WBTs - also commonly referred to as a 'road warriors' - are purportedly prepared to pay top dollar to be universally accessible and to have unimpeded access to data and their international business environments. They maintain these links by adeptly using batteries of portable cellular phones, laptops and printers.
This description will strike some observers, confronted with the spectacle of top executives incapable of turning on their PCs, as somewhat unrealistic. But even if the description is accurate, the problem for the consortia is that even after the huge initial investments (see Table 1) they will still have annual operating costs in the hundreds of millions of dollars. And who is going to pay?
Not just the road warriors. "Fifty per cent of our market is fixed-site," says David Benton, Manager of Public Relations at Globalstar. "And we are expecting to expand rapidly in developing countries and rural areas, bringing us to profitability in our second year."
Inmarsat also expects to reach outside the business sector, as Jeremy Green, Senior Commercial Division Officer of I-CO, explains. "We expect to meet the needs of many purely domestic travellers, who live, work or travel outside areas of cellular coverage - and there is also wide scope for non-mobile services."
John Windolph, Director of Corporate Communications at Iridium, takes a positive view of the marketplace. "There is room for competing satellite services," he says. "We expect to have 650,000 voice subscribers by the year 2000, or less than half of one per cent of the predicted market of 150 million. And concerns about the allocation of the spectrum will be resolved by the ITU's World Radio Conference, immediately after TELECOM 95."
Stephen Garside disagrees with the consortia. "They have miscalculated. Instead of planning for two million customers, they should have been aiming at serving the needs of the 'Sohos' (the Small office, home office customer segment). Because the Sohos far outnumber and far outspend the warriors, they are the ones actually making or breaking new communication services.
"It's a mistake which has also been repeatedly made by trade analysts and journalists," Garside points out. "These writers have failed to predict many of the trends now emerging on Europe's communication services market, including the rapid growth of pagers, callboxes and other offshoots of the ongoing mobile telephone boom, the transition from faxing in all of its forms to E-mail, and the rise of CTI (computer telephony interchange) systems as the ultimate telecoms cost-suppressant."
"All of these trends are being engendered by Soho customers, and specifically by their perception that an investment in communication products and services would solve their problems," Garside concludes.
This investment is taking massive dimensions. According to a recent report issued by BIS Strategic Decision, Europe's Soho sector alone could spend up to US$ 118 billion on ICT hardware from 1994-2000. On a per capita basis, the 250 million European Soho units plan to increase their total media outlays by 15 per cent per year during this period. Advanced communication products and services will probably account for the bulk of this investment.
"This major flood of investment has been set off by a series of relatively minor, mundane causes," says Mathias Plica, a Munich-based analyst covering Europe's mobile communication market. "Take the Sohos' move into mobile telephones, currently the dominant trend on Europe's communication services market.
"Traffic jams, late aeroplanes, vandalized telephone booths and every other cause of delay or aggravation have probably done more to transform mobile telephones into an item of mass consumption than any technological breakthrough," Plica adds.
"Many Sohos suddenly realized how practical a mobile telephone could be while sitting in a traffic jam or trying to find a telephone which actually worked," he points out.
The sum totals of these individual epiphanies have been the 50 per cent rates of annual growth in the number of mobile communication subscribers. Not surprisingly, this growth has been strongest in those areas in which standard telephone systems and communication-based services are most underdeveloped. In Europe, that area is central and eastern Europe.
Initial results from the region's countries with functioning mobile telephone systems (primarily Hungary, the Czech Republic, Estonia, Croatia, Slovenia and partially Russia, the Slovak Republic and Romania) point to mobile telephony having a 'brilliant future' in central and eastern Europe, reports the trade magazine Public Network Europe. Also getting promising footholds on these markets are VSAT (Very Small Aperture Terminal) satellite-based communication systems and PCMCIA (Personal Computer Memory Card International Association) laptop mobile link technologies.
All three systems are being employed as a way of compensating for deficiencies in the countries' standard telecom networks; specifically, to procure services and transmit corporate data. International businesspeople in Prague or Budapest, states the Central European Economic Review, routinely use mobile telephones to book flights - via Paris-based travel agents - or to relay the day's results to their main offices.
But as Plica points out, while solving a wide range of problems, mobile telephones cause others. "They often cause disturbances at meetings or concerts; they're expensive to use; service is subject to interruption; they're easy to steal - and they're not always suitable for use indoors."
Pagers, on the other hand, are unobtrusive, ultra-reliable and very cheap - and hence uninteresting to thieves. A pager costs between US$ 50-100. Using it will run you from zero to some US$ 150 a month, depending on the distance and sophistication of coverage selected.
Riding the wave of dissatisfaction with mobile telephones, sales of pagers have been skyrocketing around the world. Economic and Management Consultants, Inc. is forecasting a quadrupling in the number of pagers worldwide from 1993-2000, to bring the total number in use to some 130 million.
Europe is very much part of this trend. Scall, Germany's newest paging system, secured 100,000 customers during its first six months of service, making it the continent's fastest growing service. Not coincidentally, a number of consortia have announced plans to introduce 'high-end' paging services (with two-way capabilities and larger message content and geographic coverage) over the next 12 months.
The mobile telephone sector has also been participating in the trend towards paging and messaging. Personal Communication Services (PCS) such as 'call boxes', a form of voicemail, represent the sector's fastest growing area. To capitalize on this growth, Europe's mobilcom service providers have been introducing a variety of new services, including 'display only' and 'signal only', messaging and 'blocking out'. In the latter, subscribers specify when they are to be reached - and by whom.
"All these PCS are predicated on the same premise - that the end-users want to decide when and how they are accessible," says Plica.
The next product to profit from a major shortcoming of mobile telephones - their airwaves overload easily at trade fairs, train stations or anywhere in downtown areas - is the 'dual mode phone'. Ericsson recently received the initial order for such phones. The purchaser is a Swedish customer, and the delivery date is early 1996.
Put simply, this phone employs the ultra-efficient DECT (Digital European Cordless Telecommunication) standard at ranges of up to 1.2 kilometers from its 'home phone', using the GSM one anywhere else. For those wishing to upgrade their 'roam phones' into 'handies', or vice versa, an American company is now marketing a 'conversion card'.
For Sohos, Ericsson's innovation has very practical, very welcome implications. It means having to buy only one phone, instead of two, plus better transmission quality and lower charges.
And lowering charges is very much a main concern of the Sohos, who, unlike the prodigal, rather mythical road warrior, don't have unlimited expense accounts to draw on.
This concern has impelled the Sohos' mass influx into the world of on-line communication services. The number of Europe's Internet users has been increasing at a rate of 3 to 4 per cent per month.
Helping impel that rise: the discovery that (still largely one-way, with two-way now available) telecommunicating via the Internet results in savings of between 30 and 80 per cent. This discovery has caused European voice telephony use on the Internet to double over the past year. However, it still accounts for less than 5 per cent of total transactions. These rates of saving are much higher than those offered by call-back services, hitherto the number one cost-cutting hit on Europe's telecom market.
Within offices (PABX and Key Systems) big changes have been brought about with computerized voice processing, and the increased use of voicemail and voice messaging systems. For homeworkers, however, it has been the development of switches capable of integrating voice and data that have had the biggest impact. And now that both digital key systems and PABXs are able to support Computer Telephony Integration (CTI) 'call centre' facilities can be totally integrated.
Facilitating this has been the further development of such attractive CTI phoneware as the Telephony Services Applications Programming Interface (from AT & T and Novell) and the Telephone Applications Programming Interface (from Microsoft and Intel).
The world market for CTI software has already achieved an impressive size, according to Ovum, the English communications market research organization, amounting to US$ 432 million in 1994. That figure is set to increase 14-fold by the year 2000, predicts the organization.
Impelling that trend is the emergence of a new generation of CTI hardware. One example is the phoneboard developed by Codis Computer GmbH of Ottobrunn, Germany. Both computer keyboard and telecommunications dialling system, it comes with attachments for both telephone and mouse and connects directly into the computer.
"The days of the standard, desk-top phone may well be coming to an end," says Garside. "For deskwork, it will be replaced by a CTI system interfacing with either ISDN or standard computer networks. For everything else, a dual mode DECT/GSM phone will be used. These will be linked to either Europe's existing or new network operators, the latter via a radio pick-up, or to the mobile systems."
Boosting the Sohos' use of computer networks as a main communications carrier has been the problems that some users have been experiencing with another standard telecommunication system - the fax.
Sales of fax machines in the Soho area have been rising strongly, generating a corresponding rise in the consumption of fax paper. Quick to grasp that the latter is undesirable for reasons of cost, its drain on storage space and its impact on the environment, many neophyte faxers have quickly bought fax modem equipment for their PCs. Unfortunately, paperless faxing has often proved to be beyond their technological ken.
Enter (rather belatedly) E-mail. After a slow start there are now over 400,000 European 'members' hooked up with Internet connectivity providers, and this number is rising dramatically. CompuServe alone estimates that its subscriber numbers will double in the next twelve months. Expansion at this rate has also been putting an end to another homely staple of European business life - the diskette delivered by courier service.
"We're finally seeing small and medium-sized companies following the lead of Europe's multinational and finance houses and engaging in EDI (Electronic Data Interchange) and EFT (Electronic File Transfer) on a regular basis," says a CompuServe connectivity expert.
In a continent of 52 widely varying countries, the repercussions of this trend are enormous. Thanks to EDI, companies and individuals can now circumvent their own local labour and shopping regulations, and organize their working, ordering, purchasing, shopping and even social requirements as they wish. This 'liberty' has its disadvantages, though, and all over the world the regulatory debate continues. Never has there been a communication tool as powerful, as useful, or as open to abuse, as the Internet.
Traffic jams, theft and other indignities of daily life are also triggering the debut of Global Positioning and Communication Services (GPCS), in the Soho sector. First developed by the American and Soviet military communities, GPCS are now widely employed by TTT (Truckers, Traders and Technicians).
According to Germany's Ostwirtschaftsreport, some 125,000 trucks outside of Europe are now linked into such systems, which work on a two way basis. Via 24 satellites, the driver receives information as to his or her location, with rates of accuracy of up to 10 metres. Via the same satellites and an automatic broadcast unit implanted within the truck, this information is relayed to its owners, who are also kept appraised as to the truck's inventory.
Europe's transport sector has had wide access to GPCS systems since early 1992. These systems are generally supplied as part of packages including EDI and intermodal integration services, allowing freight forwarders to through-route cargoes from supplier to final recipient, and to prepare waybills and invoices on a just-in-time basis.
While speeding up through-times and cutting down paperwork, the GPCS' major benefit has been to slash truck theft, especially in southern and eastern Europe. "Knowing that their potential prey is being tracked, truck thieves aren't willing to risk being on the wrong end of a game of hide-and-go-seek," reports Logistik Heute, the trucking trade magazine. "Armed with accurate directions, truck drivers finding their way in these areas are no longer sitting ducks for such thieves," the magazine adds.
In 1994, the first GPCS for Europe's non-transport professionals was launched. Developed by BMW, the 'Carin' (Car Information and Navigation) system costs DM 6900. According to BMW, Carin has already proven to be a success, with some 2,500 terminals being sold during a recent six week period.
Carin's success has led to the introducing of two other such systems, with at least four more reportedly ready for launching by 1996, which was recently labelled the "year that GPCS will come of age."
There are good reasons for the tag. In 1996, the first GPCS covering all of Europe will be coming on to the market - at prices well below DM 2700. More importantly, these systems will be equipped with what is being called 'automatic traffic management capability'.
In plain terms, this means that the system will be instantaneously appraised of traffic jams and other mishaps occurring in 'its' automobile's route. To avoid them, the system will automatically reroute the car. In doing so, the navigator will rely on information relayed by the Traffic Message Channel, set to go into operation in 1996.
The channel, in turn, is to be linked to highway-side electronic monitoring systems, which will automatically register and report any interruptions in the normal flow of traffic. Such systems are now being tested in the German states of North Rhine-Westphalia, Baden-Württemberg and Bavaria.
Equipped with the appropriate sensors, these systems are also being linked into prototype summer smog prevention systems, in which rising levels of ozone automatically trigger speed limits, and into pay-for-highway-use schemes. The latter is being tested in Germany's Saarland.
Faced with rapidly increasing rates of car theft, Europe's insurance industry is now pushing to make the GPCS' automatic position broadcasters standard equipment in all new European-made cars.
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