In December 2009, VT iDirect, Inc. (iDirect), a company of VT Systems Inc (VT Systems), announced that SpaceCom International deployed a GSM cellular backhaul service based on iDirect's satellite communications platform to rural sites in Afghanistan with immediate plans to expand throughout South and Central Asia. The company said further that the initial deployment in Afghanistan results in significant bandwidth cost savings for GSM operators.
Isn't it a dangerous place and thus risky and not ideal to engage in private commerce? Doesn't the country represent decades-old conflicts that continue to be fought today? Wouldn't the U.S. push to send more troops as well as engagement by other foreign armed forces present government and military initiatives and thus market prospects in that segment? So instead of tapping GSM operators, shouldn't satellite industry companies, specifically a company like iDirect that has been known to serve U.S. Military needs, perhaps continue cultivating and targeting the DoD rather than Afghanistan's mobile phone service providers?
Before we answer yes to the questions above, iDirect and SpaceCom may be on to something. Consider the following:
The above are a few samplings of initiatives and results in Afghanistan's wireless industry. In 2007, about 12% of Afghanistan's 25 million people had cell phones. By 2009, mobile penetration stood at an improved 30% of the country's higher population base of 28.4 million. Internet penetration was still relatively low at 2%, but this was definitely a marked improvement compared to 2002 levels. More importantly, the mobile web is likely where the next wave of wireless growth will take place. Also worth noting is that the country's telecommunications and IT sector employs more than 50,000 people, and the country is positioning itself to open opportunities for trade between districts as well as with other countries.
So why Afghanistan? There is basically a thriving market, government entities in pursuit of their goals are using mobile platforms and technologies to achieve those goals, and the country is positioned for higher bandwidth usage with the development of the mobile web for e-Commerce.
In 2007, calling rates in Afghanistan stood at about 10 cents per minute, with the least expensive phone cards on sale for the equivalent of $1. In terms of coverage, service was "generally" available in the country's 34 provinces. Growth in just two short years in wireless penetration was helped by affordability of service costs on the end user side.
On the supply side, infrastructure costs helped reduce mobile providers' operational costs. iDirect and SpaceCom International are tapping the market with the same value proposition. In Afghanistan and in many other parts of the globe, the reduction of satellite bandwidth and infrastructure costs, as well as improvement of voice and data traffic quality, continue to be key challenges that limit mobile operators' expansion into remote and rural areas. SpaceCom tested the iDirect platform against a legacy serial GSM connection and realized bandwidth savings of more than 50 percent, while significantly improving network speed and voice quality.
In NSR's recent market study, Wireless Backhaul via Satellite, 3rd Edition, it was noted the price of backhaul equipment is expected to decrease, making infrastructure investments more agreeable to mobile operators to expand into remote and challenging areas. Moreover, the price of bandwidth (even if satellite space segment costs decline only incrementally) will likewise decrease given the bandwidth-saving features of current and next-generation satellite backhaul systems.
SpaceCom is currently backhauling voice traffic from more than 30 sites in Afghanistan. By the end of 2010, the company plans to expand its service to up to 200 sites and to mobile operators in emerging Asian markets. SpaceCom is planning the roll-out of Ku-Band GSM backhaul within the South Asia region in the first quarter of 2010.
In areas marked by remote and challenging terrain and in the case of Afghanistan, war, the only viable solution is via satellite technology. In the past, the value proposition and the feasibility of satellite solutions have been hampered by infrastructure and operational costs. With the current line of VSATs used for backhaul equipment as well as the prospect of next-generation systems that address cost and quality issues, satellite backhaul equipment and services should increase in deployment not just in challenging and hard-to-reach areas but in other less complicated markets as well.
Mobile technology in Afghanistan has caught the attention of the Taliban. Starting in 2008, attacks on telecommunication towers were conducted. The insurgents have said U.S. and NATO forces track the Taliban through their phone signals and then launch attacks on their hiding places. It was not the first time the Taliban has threatened cell phone companies, which they believe have been cooperating with U.S. and NATO troops. However, the Taliban has not carried out any threats until 2008.
In fighting for the hearts and minds of the Afghan people where mobile phone use is beginning to be part of the effort to help turn the tide, attacks on cell towers may increase. Mobile operators may thus be dissuaded from making further investments as foreign troop levels increase. What is clear though is that mobile use has made a dramatic impact in Afghanistan. It is widely reported that the Taliban itself has and is increasingly using mobile technology and the Internet for its own operations and strategies. As such, it may think twice about attacking cell towers as these attacks may limit their own effectiveness.