Site: International Maritime Satellite Organization (Inmarsat)
99 City Road
London, ECTY 1AX
Date Visited: September 9, 1997
WTEC: A. U. Mac Rae (report author), J. N. Pelton, K. Bhasin, S. Townes
Inmarsat was formed in 1979 to provide satellite communications to ships at sea and distress and emergency communications. It now provides mobile communications services to customers at sea, in the air and on land. It also provides navigation capability to enhance the positioning accuracy of both the U.S. GPS and the Russian GLONASS systems. Space segment revenue totaled $364 million in 1996, broken down as 75% maritime, 23% land mobile and 2% aeronautical. Seventy-nine countries have a financial investment in Inmarsat and it operates in about 160 countries plus all the oceans of the world. The U.S. signatory (COMSAT) has the largest investment in Inmarsat, with a 23% ownership, followed by the U.K. with 9.4% and Japan with 8.0%. Revenues increased from $328 million in 1995 to $364 million in 1996.
The council that oversees Inmarsat's activities has agreed to investigate the possibility of the privatization of this entity.
Inmarsat's R&D budget, about $700,000 1996, is used to investigate the potential for new services and applications of existing services. As can be expected, since it has global owners, Inmarsat does not receive any R&D support from ESA. ICO Global Communications was initiated by Inmarsat, but those funds were kept quite separate from the mainstream R&D funds. The four main areas of R&D are international contracted work, extension of in-house expertise, tracking and influencing development of standards, and services and applications development. Typical studies include current terrestrial services, better utilization of existing space segment, advanced coding techniques, and DBS, navigation and high bandwidth services. During a discussion on voice compression our hosts mentioned that the terrestrial mobile environment is quite harsh, implying that the new mobile satellite entrants into this field may experience difficulty providing acceptable service with 2.4 and 4.8 kbps voice.
While an appreciable part of its business is terrestrial mobile, this has been a difficult market to grow. The "Mini-M," the Inmarsat laptop PC sized terminal that sells for ~$3,000, is an attractive terminal for customers. The typical customer pays ~$3 per minute, while customers on-board cruise ships pay ~$10 per minute. The biggest problem in growing this business is not necessarily the cost of the terminal or the per minute charges, but national regulatory environments. Restrictive "landing rights," in particular, inhibit the widespread use of the terminal. Despite the fact that Inmarsat is a global consortium, many nations do not allow the use of Inmarsat terminals within their borders. The United States, one of Inmarsat's owners, for instance, prohibits their use, presumably to protect AMSC. Other potentially large user countries that ban the use of these terminals include Italy, China, Greece and Singapore. In many countries landing rights costs are very high; the highest being the Congo with a $7,700 annual fee. Several thousand dollars per year is quite common. Another barrier is high customs duties, starting with the highest of 70% from Uganda. One can't help but wonder how Iridium, Globalstar and ICO will fare unless these national regulatory barriers are eliminated. Nationalism, or perceived nationalism, continues to be very much in evidence, as ICO still has not been cleared to use their spectrum in the United States, since this spectrum is presently occupied by users that are requesting billions of dollars to move to other portions of the spectrum. Village phones constitute another potentially attractive market that has been difficult to break into, due to ability to pay and high cost of financing issues.
Recognizing the importance of expanding into new markets, Inmarsat formed Project Horizons in 1995 to identify new mobile high data rate market opportunities. It is also looking at increasing its navigation and position determination services, but the open issue is the role of the U.S. government in the continuous commercial use of GPS.Clearly, Inmarsat recognizes the importance of obtaining more favorable global regulatory standards and WRC-97 rulings. Since it does not have the staff to cover all such meetings it focused attention on the preparation for WRC-97. One such area of attention, which is needed to enhance the globalization of satellite services, especially at L-band, is to resolve the differences in the use of spectrum between regions, particularly 1 and 2.
Inmarsat will be facing increased competition when the new mobile satellite systems initiate service. To date, its ability to improve its terrestrial mobile service competitiveness has been hampered by national regulatory policies. It needs permission to operate in more nations, reduced (or no) license fees, and freedom to transport terminals across borders. While there have been several favorable national decisions in recent years, many more are needed to ensure Inmarsat's continued role in global terrestrial mobile communications. It continues to have a strong presence in the maritime market, but that too can be subject to erosion, which Inmarsat recognizes, and it is investigating new service offerings, especially those at high data rates and in navigation and position determination.