In addition to inherited characteristics from software variability, service variability exposes two distinct characteristics that impose certain challenges in variability management. These characteristics are: i) Different types of variability and their inter-relationships; and ii) Dynamic and recursive variability communication among different stakeholders. This paper elaborates these distinct characteristics in detail with a case study. The challenges brought about by these distinct characteristics in managing variability also are highlighted. We present a review of related work in service variability management and briefly propose our ongoing approach to addressing these challenges.