Roaming in New Directions

Global roaming is an important value-added service, and the demand for it is increasing, but so far it has not been a major source of revenue for carriers.

"(Usually, only) 1% to 2% of revenue comes from roaming," said Michael Krier, The Strategis Group senior consultant.

According to John Murphy, Systems/Link director of international sales, roaming is a "sellable" element. People like to know they are able to roam, but the percentage of subscribers who actually do it is small. Global roaming has been mainly a service used by international business travelers. But only about 5% of those globetrotters make up a carrier's subscriber base, and that 5% travels only about 10% of the time, according to Krier.

On the other hand, global roaming could generate significant revenues because globe-trotting subscribers use their phones more, Murphy added. Still, carriers have not pushed global roaming aggressively.

Now, as new options become available (Iridium is set to launch this month, and three other providers are scheduled to go up in the next few years), competitive carriers increasingly will be looking to satellite providers to offer near seamless global roaming.

Forming Alliances According to David Avirom, GTE Wireless group manager of strategic marketing, carriers will team with satellite companies if it means they can offer customers more. For example, GTE Wireless and TSI jointly offer Global Roam, a service that allows international roaming to more than 70 markets worldwide.

"Carriers are going to look at ways to expand their coverage in any way they deem is the best method," Avirom said. "(GTE) is certainly exploring every opportunity to make sure our customers have the opportunity to use their phones throughout the world."

Krier said competition spurred the idea of using satellites to provide roaming services about 10 years ago, but coverage wasn't that good. Now coverage has improved, so satellite providers have changed their strategy and are selling their services through cellular carriers.

According to Murphy, the five or six satellite providers that are operating now, or soon will be in service, are positioning themselves as complementary services for carriers. They are marketing directly to wireless carriers with the hope of forming alliances. But global roaming is complex on several levels. Before partnerships can work effectively, wireless and wireline service providers must make comprehensive agreements that are broader than just fee arrangements, according to Joseph Bonocore, national director of communications for KPMG's information, communication and entertainment division.

"It could be wireless to wireless, or wireless to landline or landline to wireless," he said. "How do we develop the appropriate relationships to make that transaction seamless?"

Bonocore said in the long-distance landline business, the international carriers associated with connecting a line-based phone call between countries have designed and agreed to a standard fee schedule. "On the wireless side, it's not as sophisticated (there is no international agreement)," he said, "so it becomes more complex in terms of someone trying to provide worldwide global roaming as a service."

Satellite companies are trying to address this problem, Bonocore said.

"The satellite companies are coming on board with the feeling that there would be significant market opportunity for them to be a 'carrier to the carriers' and also to provide a service to the local cellular companies," he said.

According to Bonocore, wireless carriers looking for bigger footprints and opportunities are considering or already have made significant investments with companies such as Iridium and Globalstar to provide global roaming capabilities. But because of different business practices, present carrier/satellite company agreements may prove to be a huge obstacle.

"It's a complex issue trying to sort through all those agreements, and satellite companies are going through that now," Bonocore said. "Agreements between countries must be worked out, including access charges, utilizing landline facilities and other issues. Second, you're talking about a segment of the total wireless marketplace, and in order to justify the growth and the money that's being invested in global roaming businesses, you have to justify it more than just on (a subscriber) who travels to Asia once a month."

Bonocore said carriers are going to have to justify the cost of agreements with satellite companies in terms of providing other services as well. For example, when phone systems are out during a disaster anywhere in the world, companies such as Globalstar or Iridium could bring in phones and connect communications again. The other option is providing service in remote areas of the world where it is not possible or cost-efficient to set up major landline and/or wireless facilities.

Carriers who have agreements with satellite providers realize the benefits.

"There are agreements already between countries that provide customers with near global roaming," said Steve Fleischer, Bell Atlantic Global Wireless international wireless division director of corporate communication. "Adding an element of satellite service will at least provide customers an alternative for complete global roaming."

One example of a carrier/satellite partnership is Bell Atlantic Global Wireless' Stet Hellas, a Greek provider signed up with the Iridium system. The Greek market is ideal for this kind of service because one of its largest business segments is global shipping, which requires traveling in areas where traditional services are not available.

Technical Challenges According to Systems/Link's Murphy, solving standards issues has been a major hindrance in offering seamless global roaming. Currently, global roaming is complicated by the many different standards, including AMPS, GSM, CDMA, TDMA and JDC. For example, subscribers with an AMPS-capable handset cannot use it in Europe, where GSM is the predominant standard.

The mobile satellite sector hopes to alleviate this problem. Satellite companies want to attract people who travel a lot and travel to countries where their phones can't operate on the same technology as in their home markets.

Having a single phone that customers can use in any market wherever they go around the world also is a concern for carriers. Dual-mode phones can alleviate this problem somewhat.

Dual-standard is more challenging. The two most widespread standards, AMPS and GSM, differ in several areas, including frequency, signaling protocols, air interface, data formats and identification methods.

Critics argue that although satellite providers will offer a viable way to bypass the standards issue, the problem will not be solved anytime soon.

"As you see more GSM carriers in North America and South America, they're going to have to roam with their AMPS neighbors. That's another impetus for solving the interstandard problem," Systems/Link's Murphy said. "They're not going to do that by satellite. If I'm a carrier in Canada, and my biggest roaming partner is 10 miles away, I'm not going to sell my subscribers a satellite phone so they can roam."

Besides interoperability concerns, carriers also have to consider business-related issues. Carriers will have to invest in interface systems that could support the billing and customer-care activities of providing global roaming services.

When any wireless roaming call is completed, the controlling switch creates a call-detail record, used for billing and controlling fraud. But information from a roaming call might take six weeks to get back to the carrier, and so it appears on the bill months later. The GSM and AMPS protocols differ in the call-detail records they create and present problems for carriers who need to exchange billing data. Also, call-detail records get translated into the CIBER or NAIG TAPS format used by billing systems and clearinghouses worldwide.

Satellite providers can alleviate some of these headaches by acting as gateways that connect carriers and provide information about subscribers, no matter where they are. For example, Iridium translates the CIBER into TAPS format and delivers that data to carriers.

But carriers will have to change their business practices to make it work. Murphy said the exchange of call-detail records is on a monthly cycle in the ANSI-41 world, but GSM reports call-detail records within a 36-hour period. A gateway provider can't deliver information daily if it gets information only weekly, and carriers who want to use the service will have to adjust. One side will have to wait for information, or the other side will have to deliver faster.

As satellite networks come on-line, operating and systems issues, including everything from identifying clearinghouses to identifying systems changes, mean more costs to upgrade and modify systems to support billing and customer services.

Cost Issues There also are some financial challenges associated with global roaming.

"For the first time, wireless carriers are addressing new business issues, such as managing foreign exchange exposure," KPMG's Bonocore said. "For example, how does a U.S. user in France pay for wireless service -- in dollars or francs?"

Another financial stumbling block is how much to charge subscribers. How do carriers provide roaming in the most cost-effective way? Bonocore said they will have to take a critical look at how the network is going to be structured and what it will cost to maintain it. Carriers will have to price service by taking into account all potential costs associated with it.

Bonocore said there is a wide discrepancy in terms of cost as it relates to how the networks and agreements would be configured.

"Some satellite companies are developing their networks so that calls will move from satellite to satellite," he said. "Others have developed the technology where it would limit the time that the call would have to be in the air and take it down to landline network as quickly as possible."

In addition, no one is 100% sure potential customers will flock to sign up for satellite service because they must buy special handsets, which cost about $3,000, and roaming costs probably would be higher, with calls ranging from $1 to $7 per minute.

But, like the cellular market, the high costs of satellite service may come down as the service attracts more subscribers.

Brad Stevens, AT&T wireless data division spokesperson, said there is a certain pioneering group, or early adopters, who will want the service. Over time, he said, cellular phones have gone from a cost of $1,000 or $2,000 to 1 cent or free as part of a bundled package, and satellite phones probably will follow the same path.

According to Bonocore, carriers should not have any trouble enlisting subscribers.

"There is a segment in the marketplace that has need for and would utilize satellite service, meaning more subscribers or more revenue per subscriber for carriers," he said.

In addition, globetrotting business travelers have more capital to pay for such a service.

"The people who want this service belong to the high-profit segment and so there will be a tendency to offer that service when it's available," Bonocore said.

But carriers must provide pricing information to customers so they fully understand what the costs will be, he said.

Sky's the Limit? Although the initial challenges may seem daunting, satellite providers are supplying a service that isn't available today on a large scale, Fleisher said.

Carriers' roles will be those of resellers of the global roaming service rather than providers, but they may be cautious about their levels of involvement with satellite companies. AT&T's Stevens said internetworking -- using two different wireless networks to try to either expand footprint or improve coverage -- may be an important development in the future, but it is complex.

"We've seen companies link satellite and terrestrial-based networks for a few years, but the reason they haven't taken off is there is a significant degree of complexity in handing off between those two networks," he said.

According to Fleischer, carriers are eager to offer the service in any way they can because of the potential customer base. Bell Atlantic Global Wireless's proportional POP for global roaming customers is 176 million, for example.

As businesses continue to globalize, carriers acknowledge that satellite services are one more way they can stay competitive.

Fleischer said Bell Atlantic Global Wireless will "minimize whatever the financial impact would be and at the same time provide a service that would be both simple and cost-effective for the consumer."

Though the percentage of people who would use this service is relatively small now, he said it will grow as businesses globalize and the economics of international travel improve.

"(Satellite) is a complementary service, so it makes sense to be able to offer that as a value-added service to that niche that is looking for it," he said.

According to Bonocore, intercontinental roaming is becoming a reality with the investments that are being made in the satellite companies.

Fleischer said satellite companies will continue to create more agreements with carriers in order to provide services for their subscribers.

"The satellite providers are coming up with a new service with no base," he said. "They are going to be looking to existing carriers to help them develop that base."

Satellite providers can benefit carriers by bringing more attention to roaming.

According to Avirom, when those carriers or satellite companies launch their services, a great deal of attention will be placed on roaming and other roaming services, which will really grow the business.

The question for wireless providers in the future may not be whether to offer satellite coverage, but how to offer it. And, as making a roaming call gets easier and cheaper, the global transactions are going to increase, whether carriers are ready or not.

"Wireless carriers have to rethink their systems," Bonocore said, "specifically their processing systems, and look at the option of handling global roaming calls as an integral part of the system rather than being processed on an exceptional basis."

The $5 billion Iridium project, the product of 12 years of labor by hundreds of engineers, will be switched on this month. If it works as planned, users never will be out of touch, anywhere, though that kind of connection will not come cheap.

The Iridium service provides a phone that works anywhere on the planet, enabling carriers to offer seamless global service, regardless of standards. But will subscribers bite? One negative is the phone itself, which is the size of a brick.

Even John Windolph, Iridium LLC's executive director of marketing communications, said the phone would scare people.

"If we had a campaign that featured our product," he said, "we'd lose."

But the phone currently is starring in a $180-million worldwide advertising campaign that includes the tagline, "If you're going to own the world, you'll need a phone that can follow you around it."

If it doesn't take over the world, Iridium will force the industry to take notice. The Iridium network is designed to act like any other roaming network, only with a boundary-free service area. The network integrates land-based phone lines, local cellular coverage and satellites, and uses a constellation of satellites in a lower orbit than conventional communications satellites. Its pagers and phones will communicate with a network of 66 satellites orbiting 420 nautical miles above Earth and connect to a land-based cellular network joining more than 200 service providers in 90 countries. Fourteen regional ground-based switching stations around the world will receive and direct Iridium calls.

Carriers no longer can ignore satellite providers. If Iridium, whose prime contractor and biggest investor is Motorola, fails, others will be waiting in the wings. Globalstar ICO will launch in 1999, Globalstar will be up in 2000 and Ellipso, scheduled to launch in 2001, will offer calls starting at just 50 cents a minute.