Major innovations in telecommunications challenge governments and industry to devise appropriate regulatory "rules of the game" When international telegraph links became feasible in the nineteenth century, maximizing their usefulness called for new international agreements, which is how the ITU began. Similarly, the invention of radio gave rise to a need for national and international radio spectrum management.

The new global systems often referred to (inaccurately but memorably) as "Big LEOs and "Little LEOs", and more accurately as Global Mobile Personal Communications Systems (GMPCS) or global Mobile Satellite Service, represent another wave of innovation. They, too, challenge national policy makers and international institutions to find appropriate responses.

These systems (typified by ICO and Iridium among the "big" systems or Orbcomm among the "little" systems) can be considered from many viewpoints, for example those of entrepreneurs, technology providers, users, investors or regulators. This article looks at them from the point of view of the public interest, especially in developing countries. It considers three big questions:

• What are the potential benefits? How wide a range of users will benefit?
• What kinds of national policies will maximize the benefits, and ensure they are widely available to a diverse range of users?
• What is the appropriate role of international co-operation and international institutions?

The Benefits

Satellite technology enjoys a comparative advantage over other forms of telecommunication whenever the application involves more than one of the following:

• Service to mobile users; or service for locations and/or traffic flows that change rapidly
• Service to remote or geographically isolated areas
• Service to areas where the "density" of customers and traffic per square kilometre is low, so that the fixed costs of terrestrial infrastructure are excessive in relation to achievable revenues
• Connectivity to numerous locations for the same application

These are the kinds of situations where the new "LEO" systems are especially advantaged, and offer the greatest benefits. For example, "cellular extension" (the use of satellites to extend cellular coverage) meets three of the four criteria. Isolated areas are served; the users are mobile; and satellites make it economic to serve areas where the number of cellular users (and the cellular traffic) per square kilometre is relatively low, so that the fixed costs of terrestrial base stations, per user or per minute of traffic, are very high. Often, terrestrial infrastructure would not be commercially justified, and such areas might well remain unserved, unless cellular extension via satellite were available.

Economists distinguish between economic "efficiency", and "equity". The first concerns overall benefits to the economy; the second concerns whether the benefits are widely or fairly distributed. The cellular extension example illustrates the potential of the "LEO" systems in both respects.

The economic benefits of cellular services are now well-demonstrated. Users "vote with their feet" in large numbers, flocking to the cellular service as it becomes available. Over time, new categories of users emerge: business users are joined, for example, by those who use cellular for the everyday arrangements of family life.

Cellular extension by satellite increases the benefits in three ways:

• By ensuring that more people in more locations have access to cellular service
• By eliminating coverage gaps within areas partially covered by terrestrial infrastructure
• By lowering the capital cost of providing cellular service in remote low-density areas, so that the cellular operator's "value added" commercial viability – and thus contribution to GDP – are enhanced

Making the benefits of cellular available in 100% of towns and villages in a developing country by the year 2001, for example, rather than the 50% that might be reached by terrestrial cellular alone, and doing so in a cost-effective way, clearly represents a gain in economic efficiency. It is also equitable: the isolation of rural areas is reduced.

A similar case could be made (if space permitted) for numerous other applications, serving user communities ranging from trucking fleets to international business travellers.

In addition to benefits to telecommunications users, there are also important benefits to the established national telecommunications operators. Like cellular systems, the new global satellite systems will generate substantial net gains in traffic and revenues for the Public Switched Telephone Network (PSTN), and for the same reasons. Very few cellular calls (much less than 5%) both originate and terminate on a cellular phone; more than 95% originate or terminate on the PSTN, providing interconnection revenue to the PSTN operator. The great majority of these calls are new calls ("generated traffic") not carried on the PSTN before the cellular network came into operation, and made because of the availability and convenience of cellular service. The same will be true for cellular extension and other applications of the new satellite systems.

Thus the debate about "bypass" is largely misplaced in the case of global mobile satellite communications, just as it is in the case of terrestrial cellular. Some calls will be diverted from the PSTN; but the effect of this will be greatly outweighed by traffic generation and new interconnection revenues.

Maximizing The Benefits

How can national policy makers ensure that the potential benefits are fully realized, and widely available? While circumstances vary between countries, there are several broad policies which can be recommended generally:

1. Governments should enable fair and vigorous competition among global mobile satellite systems by a policy of non-discriminatory licensing of services and facilities, regardless of their ownership or their "home" country (in practice, all the systems have broad international ownership). Non-discrimination should extend to radio-spectrum management and radio licensing. The resulting competitive pressures on the satellite operators, combined with high fixed costs, will give them powerful incentives to find ways to fill their capacity throughout the day and throughout the world. That in turn will encourage innovation in applications, and flexible pricing. Both will help widen the benefits of satellite services: the operators and their national partners will need to seek out the full range of potential users, as diverse as truck owners and operators, agricultural traders, humanitarian agencies and fishing fleets.
2. Regulation should be light-handed, with the regulator intervening only when necessary to ensure fair conditions for competition, or to correct market failures, if any. This will minimize costs and complexity for governments, and cost and risk for each satellite operator and its national partners. Global satellite systems involve large up-front investments and significant risks: it would be unwise to compound the risks and discourage investment by creating regulatory obligations and constraints where vigorous commercial competition will ensure that national goals are met.
3. Governments should encourage fair terms of interconnection in both directions between the PSTN and the new systems, with interconnection charges bearing a reasonable relationship to costs. This helps to make satellite services affordable, and means that all telephone users benefit, by being able to place calls to satellite terminals (including dual-mode cellular phones) at reasonable prices. Similarly, roaming agreements between global mobile satellite operators and terrestrial cellular operators are desirable, giving cellular customers the option of a dual-mode phone that can access satellites wherever terrestrial coverage is not available. These users will not all be international travellers: many others will have such a requirement from time to time, for example when they are in rural areas. With "light handed regulation", interconnection and roaming agreements will usually be, and should be, arrived at by commercial negotiation. Regulators can and should create a favourable climate for this, but may sometimes need to intervene if agreement cannot be reached.
4. Governments can help create a global market for user terminals (thus minimizing their price), and also maximize their usefulness, by:
1. issuing "blanket licences" or "class licences" for categories of terminals, based on technical "type approval", and not requiring licences for individual terminals
2. seeking convergence of "type approvals" among national regulators, so that as far as possible the same terminal types are approved throughout the world
3. waiving customs duties and formalities for individual terminals brought into a country temporarily by visitors

International Consultation And Co-operation

Global mobile satellite systems are inherently international (though many applications are national or regional). Timely deployment with maximum benefit requires a degree of convergence among national regulatory policies (as in the case of type approvals for terminals). International co-operation therefore has an important role. The preferred approach on a worldwide basis seems to be an informal consultative process, leading to voluntary convergence of policies, rather than new binding international agreements.

Nevertheless, certain countries are also pursuing some of the same goals through negotiations in the World Trade Organisation's Group on Basic Telecommunications (GBT). The voluntary approach being pursued through the ITU's World Telecommunications Policy Forum, and the WTO/GBT approach should be regarded as separate and complementary: the former will involve many more countries in a voluntary consensus; the latter may well take a substantial group of countries further in the direction of comprehensively open markets, through a binding agreement.

The ITU moved early to encourage informal consultations. In 1994, the Regulatory Colloquium, an informal professional body meeting under ITU auspices, (not an inter-governmental body) published its Chairman's Report on GMPCS, offering six "suggested points for consideration by national policy makers"; and a detailed Briefing Report. Subsequent discussions involving governments, regulators and operators have pointed to an emerging consensus in favour of voluntary guidelines that could be widely accepted by national regulators. This is reflected in the Secretary-General’s report to the ITU Forum. While hammering out such a consensus is never easy, the opportunity clearly exists for enhanced international co-operation, benefitting telecommunications users, telecommunications operators, and national interests generally throughout the world.

| Back to the WTPF Home Page |