Old words for old (and new) problems

It’s good to see a modern maritime journal digging out the language of (almost) another age to describe the current one. This works fine except when the sub-editors are younger than you and therefore baffled by your use of antique terms.

When Safety at Sea described owners as ‘hidebound’ for not investing in more technology onboard ship it was enough to make me reach for my Webster’s, fill a pipe or two and settle by a roaring fire, except that it’s June and I don’t smoke a pipe.

What SASI meant – though the point was that of Inmarsat Maritime president Frank Coles – was that owners are hindering the greater use of high technology applications onboard ship through reluctance to put their hands in their pockets.

Noting that the shipping industry is ‘a fairly conservative place’ is not exactly new though Coles is closer to the point when he says that there is a dearth (there we go again) of talent working for shipowners who ‘grew up in the IT explosion’.

Shipowners he continued were ‘not ready to embrace IT and few shipowning companies ‘have extensive IT environments’. Again only partially true. The clients I work for are as connected as they come – on the landside at least. And when I asked one recently if he could ask the master of a ship something for me, he replied back advising that I could ask the master myself, copying him in. A response was back within hours.

I suspect that the reason why shipping companies have resisted IT onboard ship is partly generational. This is not just that the people that run ships distrust computers as flaky inventions of long haired college drop-outs, but that some owners think these same people should concentrate on running the ship rather than fiddling with computers.

Such computerphobia is far from unique but there are practical reasons too – ships are also places of heavy industry, where chunky bits of equipment hold sway and anything fragile or temperamental could be a risk rather than a benefit.

The other issue is of course, cost. Satcoms equipment – above and below decks – is expensive but then so is launching satellite constellations and providing a service that aims a beam at a target that is moving in multiple directions.

But given that you buy your satcoms with your newbuilding and that you might expect to upgrade perhaps twice in the life of the vessel, the cost is hardly prohibitive. It is more accurate to say that owners think satellite communications are expensive in practice, whereas in fact the price has fallen for a decade and continues to fall.

Coles points out that a service that costs ‘less than 1% of daily running costs’ is hardly prohibitive. Unfortunately for service providers and not just Inmarsat, the recession in shipping provides a perfect excuse for owners to delay investment in new systems and services because they are being massacred by bunker costs and unable to prise better freight rates out of charterers.

The recent ending by Inmarsat of volume discounts and the price rise on pay-as-you-go FleetBroadband may not help his case with his sternest critics, but the central point is true enough – there is no excuse these days for poor ship-shore-ship communications.

The tide is certainly turning. A recent conversation with a Northern European owner found him reporting that there was ‘no way’ he could go without providing email and even internet access to his crews if he wanted to retain them. Operating specialist high end ships made this an easier call, but the this how the trickle down began on Vsat and that shows no sign of stopping, helped by more innovative software and applications provided by independents.

In the same week, Inmarsat announced its long awaited multi-voice service, otherwise known as the Vocality Box, for Fleetbroadband, allowing up to nine simultaneous telephone calls to be made through a single terminal.

Thrane & Thrane has already announced that multi-voice will be available across its SAILOR FleetBroadband range with upgrades available for existing terminals. The primary advantage is that with multiple handsets integrated to a single terminal, dedicated voice lines can be made available anywhere on board, ‘from the engine room or canteen on a merchant vessel and the public areas on a passenger vessel, to the saloon and staterooms aboard a luxury vessel,’ said T&T’s Casper Jensen.

The extra phone lines will be charged by Inmarsat at the same per-minute tariff for both pre-paid and post-paid calls and will support the free-of-charge ‘505’ emergency calling capability that connects the vessel immediately to a Maritime Rescue Centre.

Ever the combatant, Coles went further than merely welcoming the launch. He claimed the service was ‘superior to internet calling solutions and more cost-effective than accessing multiple voice calls on a standard VSAT,’ something his competitors are bound to throw fire at, Greek fire if they have their act together by Posidonia.

Frank Coles interview Part 3 – Inmarsat will compete to survive

So far Inmarsat Maritime president Frank Coles has put up a robust defence of the company’s strategy and an informed one too. His time served at SP GlobeWireless, where he sold Inmarsat and its alternatives, gave him enough of an insight into how the company worked to make his move there to run the maritime business a natural one.

I was keen to know whether Inmarsat would completely take the gloves off against its competition. After all, they have used every trick in the book against him and in the sound and thunder stakes they are certainly getting the column inches. Volume is not always a good indicator of quality, however, so just what is the strategy?

“Perception is reality to some extent and I’ve been very specific; we are not going to go direct to customers, but we are going to go after Iridium and KVH and competing VSAT offers,” he says.

The upshot is that if its channel partners are selling those products too, it might receive less favourable treatment from Inmarsat – though the airtime rates it receives are common to all DPs.

“Inmarsat has to grow its business and though some people want Inmarsat to sink quietly, we are a public company with customers, employees, a board and shareholders and we have a responsibility to each of those,” he adds.

Though the channel partners ‘are free to sell whatever they want,’ in reality that means that the Coles business plan is to churn KVH and Iridium. He has tasked the Inmarsat sales force to go after that business; channel partners will receive a competitive hardware and airtime offer to bring new customers to Inmarsat, but he reserves the right to target the same customers using other channel partners too if they don’t play ball.

“That is competition. Iridium is doing the same thing in giving away their hardware free any chance they get. KVH’s entire marketing plan is anti-Inmarsat not pro-KVH. Are we supposed to continue to be stately old chap who stands there and gets kicked? If you want to compete with the big boys then you have fight like them.”

His trump card is that Inmarsat unlike its main competitors, is financially stable and its networks fully-funded, giving it a reliable sustainable service but he is clearly frustrated that some partisan reporting and PR spin dressed up as industry opinion has made those competitors look like a serious alternative.

Coles is aware of the risks of being over-aggressive against its detractors but he says that even the Inmarsat channel partners are growing tired of reading claims by rivals of services that can never be realised.

“We’re seeing that more and more. The people that understand the market understand what we are doing and that we can be relied upon to deliver. Our track record speaks to that and our future commitment is just the same.”

Frank Coles Interview Part 2 – the move into VSAT in context

Perhaps because it is a company that made its reputation in provision of L-Band services, Inmarsat appeared slow to spot the move towards maritime VSAT. It was not alone – I remember maritime consultants of various stripes telling me that broadband on merchant vessels would never happen, especially not the high-end VSAT services then used on cruise ships.

But move in it did – though not for reasons that are clearly recognised. The prime movers were the high-value end of the market and often regional rather than global traders.

But VSAT started to make its mark in maritime because land-focussed DPs needed to find new markets. The simplest way to do this was by offering a service that could compete with FleetBroadband, even accounting for the hardware lease costs and a contended network. These services had in some cases a slower data throughput than FB but owners were attracted by the potential of an all-you-can-eat data plan.

“That’s what allowed VSAT to gain traction and the desire for data and a fixed price service has become insatiable,” says Coles. “We took a path into this market first by buying ShipEquip with a view to developing our own bespoke VSAT network. ShipEquip gives us a ready-made base to move into VSAT.”

ShipEquip is already marketing Xpress Link, a VSAT offering with FB backup, which Coles says sets the stage for the next transition, to Global Xpress, which he claims will be ‘a game-changer,’ with throughput speeds of up to 50MB a second. The obvious question is whether Inmarsat will price GX more aggressively than its competitors?

“We will provide a value for money price because we will charge the same as the competition but provide double the throughput. The rest of market is not able to provides the speeds we can for same cost. Those owners who want significantly higher speeds and better quality will come to Global Xpress,” he says.

So much for the hype, but will he find enough takers for the service? After all the AMMITEC affair clearly demonstrated that some owners think Inmarsat-C telex is perfectly suitable for their communications needs.

“It will remain a niche product – there are a vast number of owners who are quite happy at lower end of the market and small data requirements a month,” he agrees. “There are 60-70,000 potential ships and 15-20,000 could be prepared to try VSAT”.

He says GX service will have “a smaller antenna and new technology to overcome rain fade” but there will be “a symbiotic relationship between Ka and FB. I think FB will be core maritime communications pipe for some years to come”.

His main rival here – in the PR war at least – is KVH, but he says the disadvantage of such ‘mini-VSAT’ offerings is that users rarely get level of service they are promised. As more ships are added to the network, the worse the service becomes, meaning the provider has to secure more bandwidth, pushing up their internal costs.

The first GX satellite goes up in July 2013, the second at the end of 2013 and the third,  completing the global service, in the middle of 2014, at a cool $1.5bn but Coles says even this expenditure doesn’t mean that it will start charging for GMDSS, as has been wrongly suggested elsewhere.

“We’re putting GX into the market but we are still required to provide GMDSS free of charge and there will be no charge in future. And we’ll be here tomorrow and next year and the next, which not all of our competitors can claim with any certainty.”

Inmarsat’s Frank Coles on value, competition and fiery pitchforks

To say that Inmarsat is in the spotlight at present is an understatement. Successive waves of vested commercial interest, personal opinions and a dose of righteous Greek indignation have been washing around its feet after the communications giant announced a wave of price rises effective May 1.

I took the opportunity to talk to president of Inmarsat Maritime, Frank Coles at the recent CMA Shipping 2012 event to get a clearer picture of the changes and the results will appear here in three parts. The first discusses his theme at the conference – value versus cost, while subsequent pieces will look at VSAT strategy and the taking the fight to the competition.

In fact the prices rises – like the indignation, rabble-rousing and fiery pitchforks – are not quite what they seem. The changes stem in part from a reorganisation in January this year which saw new business units formed to focus on increasing the company’s sales and marketing efforts and in targeting its competitors’ business.

Coles says the big picture is to get closer to its customers, though channel marketing, through DPs and their SPs will remain the source of the majority of revenues.

“I realise that when partners see Inmarsat calling on a customer they get nervous but over 80% of our business is still indirect and in maritime we have no desire to change that. The channel has the relationship and the regional knowledge that we don’t have,” he says.

Coles says he wants to make a break with the past by focussing not on churn (where customers hopped between DPs and SPs chasing lower rates) but on growth. And though he accepts the market timing could be better, he says Inmarsat will be able to take back customers with a better proposition by persuading them to think more about value than simply cost.

“Owners are focussing on the wrong thing when they talk just about cutting costs. At $30 a day with Inmarsat you can send 3-400MB of data and for $50 a day you can send 2-3GB. For $100 a day you get unlimited amounts of data, whether you use that data for weather routeing or fuel optimisation of virtual arrival and save yourself multiple tonnes of bunkers which cost you $750 a tonne.”

It’s a well-worn adage that cutting costs by itself doesn’t save a business money and he says the majority of Inmarsat customers are at the point where they should be realising a return on their investment in satcoms system rather than seeing it as an obstacle to profitability.

“New FleetBroadband customers are spending around $30-50 a day – more than that if you include voice and crew calling so it’s not hard to account for that in reasonable usage. Utilising the umbilical cord between ship and shore and the right tools to save money, means you can get back the investment in the communications in one day.”

Supporting his case is the evidence that the industry has followed a natural bandwidth migration path, from B to Fleet to FB, a journey that will ultimately lead to Inmarsat Ka-band VSAT. Arguments about the value of its services, versus its public service GMDSS remit and the fact that it must also operate at a profit, have been around for years but he says there are Fleet customers spending thousands of dollars a month who could save straight away by moving to FB.

If that is the case I wonder then why has he hiked the price of Fleetbroadband? Like every other punter and interested party I have read one wave after another of supposed outrage at the price increases on FBB. Turns out they are right in one sense only.

“There is no price hike. We have increased the price on pay as you go because it offers no value to anyone including ourselves. We have reduced the price of every bundle of every package of data up to 15 gigabytes. It’s a much more efficient model for us and it puts us in tune with the market.”

Prices have risen for Existing and Evolved services, (Inmarsat-B & Fleet) because of the smaller numbers of people using them despite the infrastructure that must be maintained to support them, but he says the changes here and to FB were discussed with channel partners for some time.

“The net result is that it shouldn’t be any more expensive for shipowners who are using our services day to day. Lots of customers are sitting on FB and only using it as a backup but I believe you should pay for convenience.”

Inmarsat finally gets a right to reply…

Interesting to read Frank Coles, president of Inmarsat Maritime making a strong riposte to the AMMITEC letter in the latest issue of DigitalShip (http://www.thedigitalship.com/conferences/2006/news.aspl), which along with MaritimeInsight has at least provided some balance to the more numerous but far more partisan forums elsewhere.

It’s been a sobering process to watch Inmarsat’s competitors and their paid consultants thrashing away at Inmarsat as if it was some kind of maritime Aunt Sally for whom no criticism is low enough. In running AMMITEC’s complaint and Coles’ answer DigitalShip has done what no one else has so far bothered to do – set out the argument and let users make up their minds.

In fact as Coles points out, the real change in this debate is that Inmarsat has never really talked about price to this degree. As a wholesaler it traditionally left end-user pricing to its channel partners and their service providers.

That changed to some extent with the acquisition of Stratos and subsequently ShipEquip but this battle was always coming down the pipe. One of my regular questions to Inmarsat when writing on Lloyd’s List a decade ago was when they would renegotiate the LESO agreement and get in the game of selling direct.

These days the DPs have consolidated to the point where users get small variances in cost and flavour of services. SPs are probably the more agile in terms of seeking tailored packages to fit end users. Talk to them as I have recently in Singapore, Stamford and Japan and they are concerned about the effect on margins; but there is no suggestion that they think the howling inaccuracies and misleading marketing of the opposition present a viable alternative.

As already pointed out on the blog, Coles reminds readers that GMDSS is a free service, which is not the same as saying Inmarsat-C traffic is free. He also takes a dig at competitor constellations as being unable to provide the kind of uptime and service reliability demanded by IMO to support GMDSS. Rumours last week that one Inmarsat competitor was recalling a bad batch of handsets does little to erase such doubts.

Coles goes on that the price increases on E&E services are an understandable adjustment to an evolving market situation. Some owners and managers clearly think 10 year-old data speeds and service levels are OK, but would they accept the same on land? If so, we’d all still be on dial-up, but in any event, he says there are no plans, as AMMITEC claims, to retire Fleet.

Coles is pretty upfront too about the changes to FleetBroadband pricing – not just that the package prices have stayed the same or come down – and he mines a theme he’s been scraping away at since before CMA.

Inmarsat is keen to move the debate away from the negative implications of cost and towards the sunlit uplands of value. Coles argues FleetBroadband used as a back-up should cost more because the customer requires on-demand flexibility when the VSAT crashes.

“We have asked users for a $3 a day commitment” he says, an “annual fee of $1,095 equivalent to one and half tonnes of bunker fuel,” which he thinks could be claimed back many times over by better use of satcomms to power smarter shipping operations and the use of techniques such as virtual arrival and weather routeing.

There is no doubt that increasing the price of FBB as a back-up to competing VSAT systems will be unpopular among customers who are using it for just this purpose, but it hardly seems a stretch to suggest that users should pay a premium for convenience, especially when Inmarsat is offering its own VSAT stepping stone Xpress Link with FBB back-up ahead of the full Global Xpress service in due course.

He says that small customers concerned about price rises will be given the option to use a ‘small boat package’ to which they can transition and it’s probably fair to say that there will be low cost operators out there for whom the minimum required satcoms connectivity will be just about enough.

This underscores the point that has struck me repeatedly over the last couple of weeks. As Inmarsat’s detractors have lined up to take a kick, I have never once had the feeling that they had the user’s interests at heart. Instead it seemed to me they were using a sense of moral outrage as a smokescreen to sell alternative solutions.

Inmarsat may be combative in its style and certainly far from perfect, but it appears to have less to hide than its competitors, despite having a considerable amount of skin in this game. For that at least, it deserves the fair crack of the whip that DigitalShip has given it.

Imtech signs up as first Global Xpress VAR

Systems integrator Imtech has signed up as the first GX re-seller, marking the start of Inmarsat’s delivery plans for its ambitious global Ka-band VSAT service. More on this to come, but just to note an early lead in the satcoms bingo stakes to Frank Coles for use of ‘game-changing’.

See full release below:

IMTECH MARINE SIGNS M.O.U. WITH INMARSAT TO BECOME GLOBAL XPRESS™ RESELLER

March 30, 2012 – Inmarsat (LSE:ISAT.L), the leading provider of global mobile satellite communications services, announced today that it has signed a Memorandum of Understanding with Imtech Marine to become the first Value Added Reseller of Global Xpress™.

Global Xpress will be the first global Ka-band network, offering the shipping industry true broadband speeds and reliability: up to 50Mbps through a 60-100cm antenna. Inmarsat will make XpressLink available to Imtech Marine to offer a bridge to GX with a bundled package of Ku-band VSAT and L-band FleetBroadband.

“Global Xpress will be a world-first in maritime communications, and we are delighted that Imtech will be a frontrunner in offering this solution to the maritime market,” said Eric van den Adel, Managing Director of Imtech Marine. “We already enjoy a strong working relationship with Inmarsat, and this MOU is a significant step in bringing our two companies closer. The combination of Inmarsat Ka- and L-band with Imtech Marine’s remote monitoring solutions and our extensive network of 88 offices in 25 countries will deliver real benefits to our customers.”

“The combination of game-changing solutions with the global distribution and support capability of Imtech Marine delivers a compelling proposition for customers,” said Frank Coles, President, Inmarsat Maritime. “Imtech Marine is one of the industry’s leading installation and support groups. We look forward to welcoming them as the first Value-Added Reseller for Global Xpress.”

Imtech Marine is a leading systems integrator and full-service provider of maritime technical solutions. The company, in particular through its Radio Holland brand, has extensive experience of Inmarsat FleetBroadband, VSAT and integrated maritime services.