The Storm Before The Calm?

Tuesday, October 12, 1999
Advances in satellite communication product and service technology seem to have outpaced many of the markets they seek to serve. However, despite some jittery times for the big three global satcom providers, it appears that maritime and offshore markets stand to gain real, bottom-line-driven results by adopting the latest communication technology solutions. The maritime industry has traditionally — with its generous mix of large corporate and small independent ownership — taken considerable flak for its collective conservative nature in regards to the integration of advanced technological products and systems onboard vessels, large and small. Much of the criticism is undeserved, as vessel owner operators around the world have embraced advances in propulsion and electronics (although, it must be noted, that many changes have been “forced” by legislative and/or prevailing market demands.) Communication technology advances, particularly the ability to communicate ship-to-ship and ship-to-shore via satellite links, have truly been astounding in the past few years. In general, as the world drives (but sometimes stumbles) toward the theoretical global economy, it becomes more critical that instantaneous communication is always available, from any spot on the earth to any other spot. Enter the “Space Race” 1990s style, with companies investing billions of dollars building global satellite communication coverage. The players — Iridium, Globalstar and ICO —are well known, as they have been covered within these pages as well as those in other business and consumer press for the better part of the decade. But the industry that could seemingly reap a rose from nearly any seed it had sown has suddenly lost a bit of its bloom, at least in investor’s eyes, as serious questions are being raised in the wake of Iridium’s Chapter 11 filing late this summer. At press time Iridium was in full swing re-organizing its balance sheet and marketing plans, and current management seems determined to keep the network, which cost an estimated $6 billion to put in place, alive. Key to the system’s future will be the continued commitment from Motorola, which owns about 18 percent of the company. Next to step into the box is Globalstar, which was scheduled to debut service on its own $3.8 billion network late last month. Before it even flicked its switch “on,” however, Globalstar has already felt the power of association, as investors recently punished the company to the tune of about 30 percent, mostly from the effects of Iridium’s troubles. However, Globalstar is betting on its higher flying, less technically complex satellites and more modest pricing (estimated $1,200 to $1,500 for a handset and up to $3 per international call minute (estimated)) to hit the air running, so to speak, and attract many customers in key markets such as fishing and offshore. (It is worthy to note that Iridium has slashed its prices for both handset and airtime, and today matches those presented by Globalstar). With ICO scheduled to enter the fray next year, the choices of product and system will expand considerably. When the competitive smoke screens do clear, however, it will be abundantly clear that advanced, global communication capabilities will exponentially enhance the process of shipping products across the world’s oceans, as well as along the millions of miles of coastlines and inland rivers. Every day there are new examples of how companies are using technology to make operations more safe and efficient, from the use of satellite communication to update electronic charts to beaming signals regarding scheduling back to headquarters. As prices drop even further, new markets will open naturally, much as has happened within the cellular telephone service community. Crew aboard a variety of smaller workboats and fishing vessels may be compelled to purchase phones and service to keep in touch with family and friends, while innovative operators may even use this type of service to maintain crew loyalty and retention. In the offshore realm, the advent of deepwater oil and gas discovery and recovery mandates communication systems which can adequately service the rigors of the operational environment. And despite the recent downturn in offshore production around the world, the market is a good long-term bet for providers of advanced satellite communication products and services. According to the U.S. Department of the Interior's Minerals Management Service (MMS), deepwater drilling (1,000 ft. and deeper) shows the greatest potential of development. By year-end 2003, the MMS estimates as much as 63 percent of the oil production and 29 percent of the daily gas production will come from deepwater reserves.


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