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Telenor Carves Out Profitable Niche

By | August 11, 2003

      Despite an industry-wide downturn, aeronautical satellite communication services are gaining momentum.

      Offering aeronautical services can be a “very sound business for service providers who own and operate a global network of ground earth stations,” said Michael Bonard, the director of aeronautical services at Rockville, Md.-based Telenor Satellite Services.

      Industry observers also are recognizing the value of aeronautical communications and other niche services where satellites hold a technological edge and provide a rare opportunity to turn a profit.

      “Aeronautical satellite communications services is a market that has been evolving for many years, and may finally have come of age,” said Andrea Maleter, technical director at Futron Corp., a Bethesda, Md.-based market forecasting and consulting firm.

      Telenor is the world’s largest provider of global aeronautical communications services via satellite. With four earth stations, Telenor offers aeronautical capabilities using Inmarsat satellites to commercial, government and business aircraft operating over all parts of the globe. “Operating four earth stations also gives us operational efficiencies that we, in turn, can use to make our services easy for customers to use,” Bonard said.

      Telenor also offers aeronautical communications via the Iridium Satellite system for aircraft operators with limited communication requirements.

      Bonard stressed that Telenor is the only aeronautical services provider that owns and operates its entire network of earth stations. As a result, the company’s competitors are forced to operate a “piecemeal system that is less reliable and more cumbersome for operators to use.”

      He added, “We also have implemented the most advanced switches at all our earth stations.” The switches are important because they distribute calls to different destinations over the public switched telephone network (PSTN).

      Telenor provides nearly 50 percent of all of Inmarsat’s global aeronautical service. Demand is growing, particularly among business travelers on board commercial airliners. Roughly 70 percent to 80 percent of aeronautical service revenues come from commercial business passengers, Bonard said. Such users need to communicate “instantly,” he added.

      As a result of this demand, an increasing number of airlines are upgrading their in-flight communications infrastructure. This demand is generating revenue opportunities for earth station operators, such as Telenor and Inmarsat.

      Demand also is growing from government and corporate aircraft users, he added.

      Data Messaging

      Messaging via satellite now routinely occurs between the aircraft and the ground for air traffic control, logistical and dispatch information. Those communications help to monitor fuel levels, engine performance and other vital systems of an aircraft during flight.

      The use of satellite communications for such services can generate “tremendous operational cost savings” for airlines, Bonard said. Such capabilities also can prevent costly aircraft diversions at a time when airlines can ill afford needless and unplanned expenditures.

      “We have a fully integrated system that provides high quality service and a round the clock system of customer care,” Bonard said. Customer care provides important support to help users successfully place calls, send e-mails and access the Internet, as well as troubleshoot technical issues that sometimes occur between the earth station and the airborne equipment.

      Telenor is one of the aeronautical service providers offering short message services (SMS) to airline passengers. Such services facilitate the sending of e-mails from aircraft and have become a “hot seller,” Bonard said. Virgin Atlantic and Cathay Pacific are the first two airlines in the world to offer that capability on their commercial flights.

      The popularity of ISDN and mobile packet data service (MPDS) is also growing among airline passengers. Telenor’s Swift ISDN connects a digital device to an ISDN line without using a modem, thereby eliminating an extra step in the communications process.

      Swift ISDN also offers a constant speed with high reliability and low errors. It is a special network overlaid on the voice network, he explained.

      Telenor has built ISDN-capable earth stations and in April 2002 became the first company to offer ISDN in flight, Bonard said.

      Another innovation for Telenor is its just-launched Swift MPDS service that provides “always on” connectivity. “The advantage for users is to avoid paying for the duration of the connection,” Bonard said. “This data service is more cost-effective than ISDN for browsing the Internet. A user pays for the amount of data transferred, not the amount of time spent online.”

      Swift MPDS is expected to have a high take up rate because it will allow passengers to surf the Internet at a reasonable cost while in flight.

      “In the past the key demand was for airline services rather than passenger communications, in part because of the cost of calls,” Futron’s Maleter said. “But today’s passengers are used to having constant communications on the ground – either phone or email – and they are demanding similar access in-flight. Since so many people now travel with laptops, there is a ready market of users with the ability to plug in and dial in.”

      Tim Logue, a telecommunications consultant with the Coudert Brothers law firm, said, “Telenor’s success with aeronautical services highlights that, even in the current environment, it is possible to successfully exploit a niche market. However, to do so, you have to have the right technology and facilities, and the market, meaning the customers and those who control them – in this case the airlines — have to be ready for it. Too often in recent years, we have seen markets that were not ready to be exploited despite fantastic investments. Aeronautical services, after nearly 30 years of development, appear to finally be ready for exploitation.”

      –Paul Dykewicz

      (Tom Surface, Telenor Satellite Services, 301 838 7805; Andrea Maleter, Futron Corp, 301/347-3450; Tim Logue, Coudert Brothers, 202/736-1816)

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