Satellite Regulatory Reform Needed To Bridge International Digital Divide

By | August 27, 2003 | Feature

By Keith Bernard

Last month, two officials representing the World Summit on the Information Society (WSIS) held a press conference in Washington, D.C., outlining developments and upcoming activities for the upcoming summit. Malian Minister Adama Samassekou and Secretary-General Marc Furrer of the Swiss Federal Office of Communications concluded a week of meetings with U.S. government and industry officials. They said that recent progress had been made at the “intersession” meeting and indicated that industry and regulatory authorities will need, in the near term, to address substantive matters related to the WSIS agenda. A regulators’ forum will be held just before the WSIS to serve as the vehicle for such discussion, they added.

A balanced regulatory model that can serve the interests of both governments and industry is needed if the WSIS objectives are to be achieved. This paper explores WSIS regulatory considerations of interest to the international satellite industry.

Origins of WSIS

The 1998 Plenipotentiary Meeting of the International Telecommunication Union (ITU) adopted a resolution creating the WSIS. The resolution proposed a global examination of the “information society” and the relation of telecommunications infrastructure and policy, particularly for developing countries.

There will be two stages to the WSIS. The first meeting will be held in Geneva in December, preceded by a preparatory meeting in September. The second summit will be held in Tunis in November 2005. To date, the heads of state of 24 countries have committed to attend.

Two documents have been drafted to organise the WSIS deliberations – a Statement of Principles (which was reduced from 40 to 12 pages at the recent intersessional meeting) and an Action Plan. The focus of both documents is the eventual elimination of the digital divide on a worldwide basis.

The Action Plan considers infrastructure financing and development, policy frameworks and spectrum management as key issues in promoting the universal availability of broadband telecommunications services. To accomplish these goals, the plan proposes the signing of a Global Digital Compact between governments and industry with the ITU serving as coordinator.

Satellites and the Action Plan

The Plan’s (partial) list of issues covers:

  • information and communications infrastructure
  • bridging the digital divide
  • universal access
  • broadband
  • low cost equipment
  • low cost connectivity
  • interconnection

The text, however, only mentions satellites specifically in relation to connectivity and even then only in the context of unused satellite capacity serving as a possible means of providing low cost connectivity. Yet satellites, given the proper regulatory environment, can be a critical technology in providing telecommunications services to fulfill the “enabling environment” criteria of a market environment and standardization.

The regulatory regime described below can provide the basis for satellite’s role in the Global Digital Compact and, in doing so, facilitate meeting the chronological benchmarks contained in the plan of connectivity of villages (2010), community access points and schools (2005-2010) and hospitals (2005).

Yet, even in the developed economies, satellites have yet to serve as a widely used means of broadband deployment. In fact, Donald Abelson, chief of the Federal Communications Commission’s International Bureau has recently stated “there are probably a total of 140,000 broadband satellite users in the United States — not where we had hoped the industry would be.” This low subscriber level largely results from the use of older Ku-band satellites that provide relatively low “broadband” capabilities. There are on the horizon, however, for the United States and Europe concrete developments such as scheduled launch dates for existing or soon-to-be finished spacecraft that will use high powered spotbeams to provide true broadband capability on a wide geographic basis. The concern of the Action Plan, however, rests with the developing world where very few such concrete plans exist and satellite operators speak of “strategies” that exist only on paper.

The sad results of such past “strategies” to bring telecommunications service to developing countries are well known. The small numbers of corporate networks provided in the developing world are better characterized as cream skimming than universal access providing. The limited experimentation with services to small and medium enterprises is encouraging but hardly an attempt at bridging the digital divide. What is true for today’s services will be even more pronounced in the deployment of new broadband spacecraft.

The Global Information Infrastructure Commission (GIIC) has provided an excellent overview of this problem as part of its policy prescriptions for the WSIS. GIIC Executive Director Robert Rogers has provided some very disturbing statistics on this issue:

  • Only 8 percent of households outside high-income nations enjoy reliable access to telecommunications services, compared to 80 percent in high-income nations;
  • The worldwide penetration of Internet access is only 10 percent, with 40 percent of the population of developed countries having such access compared to 2 percent elsewhere.

The well-known disparities in telecommunications penetration, both wireline and wireless, between the developed and developing worlds underscore in graphic detail the points mentioned above.

Unfortunately, satellite services to date have failed to ameliorate this situation. To be fair, there are some satellite applications that have with today’s technology begun to serve the needs of pre-broadband capabilities.

Asian Examples

Some examples from Asia indicate the potential of satellites to address the digital divide:

  • In the Cambodian village of Robib, satellites provide two-way Ku-band (but low bandwidth) telemedicine and Internet access to schools as well as a Web site for village handicrafts that uses credit card validation provided by the Okura Hotel in Tokyo;
  • In Mongolia, 22 airports and relay stations are connected to control facilities in Ulaanbaatar;
  • The e-Bario programme in Borneo facilitates literacy classes and a Web site for tourist information;
  • Pondicherry in India has constructed eight village intranets to provide local information for industries such as fisheries and healthcare as well as consumer information for healthcare and transportation.

While these limited applications are promising, there has been no real widespread availability of these services. Generating widespread availability of satellite broadband services and having operators make substantial efforts at business development and commitment to deploy assets requires an examination of the present regulatory regime.

As GIIC states, if the information society is to be more than “mere metaphor,” specific activities and commitments are required that revolve around the principles of private sector investment and reliance upon marketplace forces as articulated in the Action Plan.

The Broadband Initiative

Director-General Ahmed Toumi of the International Telecommunications Satellite Organization (ITSO) has provided a valuable contribution that can serve as a framework for providing the necessary conditions for satellite to play the strategic role envisioned. This framework envisions a broadband memorandum of understanding (MOU) that includes:

  • an ITU allocation of C- and Ku-band spectrum specifically allocated to broadband;
  • a pro-competitive and harmonized regulatory framework; and
  • a global standard for terminal equipment to lower prices via manufacturing economies of scale and enhance competition among satellite operators.

Adoption of such a framework necessitates change by both governments and the satellite industry and this is best seen as a recognition of a fundamental premise – satellites are an important technology to provide telecommunications services and should be incorporated into a generally liberalised regulatory regime.

All telecommunications technologies have unique characteristics. Landline systems have distance-sensitive cost structures but low marginal cost on dense routes. Wireless systems are becoming more spectrally efficient and innovative at frequency re-use for nationwide networks. Satellites can provide high quality service over large geographic areas. When dealing with licensing these various competitive technologies, regulators need to keep in mind that the objective of maximizing consumer benefit (price and choice) is best met by a liberalised regime that maximizes the degree of competition among all market participants regardless of the technology employed.

With this objective, it is clear that many of the current regulatory restrictions placed on satellites run counter to true liberalisation and need to be eliminated. Specifically:

  • Regulators should adopt an “open skies” policy licensing all satellites that provide coverage via ITSO’s proposed MOU;
  • Gateway requirements that effectively restrict satellites to the provision of national service should be eliminated;
  • Licensing fees should be limited to cost-recovery;
  • A regional European-style “one-stop-shop” should be instituted to ease the licensing process for VSATs;
  • Elimination of restrictions on data rates for terminals that meet all other MOU provisions; and
  • For VSATs that meet the global open standard (interoperability), individual terminals should be license exempt. The European Radiocommunications Office, a European Conference of Post and Telecommunications Administrations (CEPT) organization, has developed such a model based on size and transmit power (restricted only by distance from airports) and similar licensing arrangements could be extended to equipment that conforms to the interoperability provision of the MOU.

To be effective, governments would have to adopt this model on a regional basis if satellite operators are expected to assume the commercial risk of building a system with regional coverage.

For the satellite industry, the only requirements to be met to take advantage of this liberalisation are:

  • accept the global standard for terminal equipment;
  • accept meaningful commitments for service delivery. An enforceable milestone schedule for actual progress should be incorporated into licenses granted as a means of revoking authority should the milestones not be met.

The critical factor identified by ITSO in this framework is clearly the interoperability provision for terminal equipment. Carl Shapiro and Hal Varian in their book Information Rules have demonstrated that an open standard generates substantial benefit to consumers by effectively making the network larger. [Metcalf’s Law argues that the value of a network to a user grows exponentially with the size of the network.] Additionally, interoperability reduces technology risk for users and thereby supports increased investment. The elimination of consumer “lock-in” to a particular standard increases the competitiveness of the market, as baseline features are common across manufacturers.

Yet, in the context of general telecommunications liberalisation, interoperability is nothing more than the baseline network interconnection requirement contained in the licenses of terrestrial operators under every major regulatory regime. Interconnection and number portability (to provide maximum consumer choice) are now recognised as essential aspects of a competitive marketplace, for both fixed and mobile communications. Placing the VSAT interoperability requirement in this general context merely reflects improved consumer choice – as well as supporting manufacturing economies of scale – so that full competition can exist among satellite operators, just as interconnection/number portability requirements generate competition among terrestrial operators. The objective is the same — a truly liberalised telecommunications regime to provide maximum consumer benefit.

Recently, the two U.S. satellite radio operators – XM Satellite Radio [Nasdaq: XMSR] and Sirius Satellite Radio [Nasdaq: SIRI] – have with the encouragement of the FCC begun to develop a satellite radio that is compatible with both systems. Clearly, there is no technical restriction to such developments. A comparable effort for satellite broadband services can be a major element in fulfilling the WSIS Action Plan.

Next Steps

The recent ITU World Radiocommunication Conference has placed the ITSO broadband initiative on the agenda for its next meeting in 2007. Both the ITU Administrative Council and its Radio Assembly have approved technical studies to identify orbital resources and spectrum for the initiative.

The development of complementary regulatory policies can, along with the above, make the goals of the Action Plan a reality.

Keith Bernard is senior vice president of the Telecommunications Management Group (TMG). An economist, Dr. Bernard has over 20 years experience in the industry and has held both corporate and government positions in the United States, Hong Kong and Ireland. He can be reached at: tel: 703/224-1512 or e-mail keith@tmgtelecom.com.

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