Charting A New Course
By Sam Silverstein
Nearly three decades after the mobile satellite business took to the skies with Inmarsat’s pioneering emergency communications network for ships at sea, officials across the industry are preparing for a new era they hope will redefine go-anywhere satellite services as an integral, essential part of modern telecommunications.
The new Iridium and Globalstar companies that emerged following the dissolution of those firms’ bankrupt predecessors are enjoying increased demand for their voice and data services now that prices have fallen to a fraction of their original levels. Companies like Thuraya Satellite Telecommunications Co., Abu Dhabi, United Arab Emirates, and Inmarsat Ltd. of London, which remained financially healthy even as their competitors struggled, are expanding their operations to meet the needs of growing customer bases.
"Instead of being seen as a premium communications service, we believe we have a real opportunity to augment mainstream mobile enterprise solutions," says Michael Butler, chief operating officer of Inmarsat. "We’re not just the communications [provider] of last resort."
Indeed, Mobile Satellite Services (MSS) companies are positioning themselves to ride a wave of demand for ubiquitous connectivity that is being driven by the furious rise of cellular telephony and other wireless capabilities on the ground. The MSS industry is being further aided by the world’s rapidly expanding hunger for these kinds of communications services regardless of location, distance, topography or other obstacles.
"Developments on the terrestrial side are driving interest by customers for advanced services even in remote areas," says Anders Kallerud, vice president of channel sales for Telenor Satellite Services AS, Oslo, Norway. "People are getting really hooked up to their e-mails. We certainly have a very interesting opportunity to make this possible." Telenor has built a robust business providing Internet service via satellite to cruise lines, making Web surfing on the high seas as second nature to vacationers as a midnight buffet. More than 300 vessels use Telenor’s satellite-based Internet connections. "There’s an expectation for remote communications when you’re not connected," he says.
Officials at Inmarsat are striving to take advantage of the world’s thirst for bandwidth with a new, eagerly anticipated service known as the Broadband Global Area Network (BGAN), which will offer transmission speeds of 512 megabits per second – comparable to ground-based data networks. BGAN, due for introduction to land-based users in October, will use Inmarsat’s new series of Inmarsat-4 satellites, the first of which was launched in March. Airborne users will gain access to BGAN in 2006, followed by maritime subscribers in 2007, because technology to provide services to aircraft and ships is still in development, says Butler. Beyond offering faster data speeds than earlier Inmarsat satellites, the Inmarsat-4 satellites are the company’s first spacecraft capable of supporting handheld telephones. Inmarsat officials are studying the idea of adding handheld service to their mix of offerings but have yet to decide whether to proceed, Butler says.
When the second Inmarsat-4 satellite, scheduled to be launched before the end of 2005, is placed into service, Inmarsat’s BGAN service will reach virtually all of the world’s population. Inmarsat says it remains dedicated to its maritime customers but recognizes that land-based users represent the greatest opportunity for selling satellite broadband. At any given time, "there’s a half million people in the air, 2 million people at sea, and 6 billion people" everywhere else, Butler says.
Inmarsat’s BGAN service also is exciting to news organizations, who already depend on mobile satellite services to transmit stories and video from remote locations. The higher speeds attainable using the Inmarsat-4 fleet are expected to permit broadcasters to send live, high-quality video signals using mobile satellite equipment, which is considerably lighter and more compact than traditional portable systems based on fixed satellite systems. "The line between mobile and fixed satellite services is becoming increasingly blurred," says Butler.
Broadcasters also can take advantage of technology that allows video-handling capabilities to be squeezed into a laptop computer and permits video segments to be sent back to the studio as digital files. These systems can work equally well with satellite or terrestrial transmission facilities and do not require specialized training to operate, says David Justin, senior vice president of marketing and product development at Globecast in Paris.
As mobile satellite providers try to position themselves as natural, even seamless extensions of traditional communications services, they face the continuing perception that their services are costly and hard to use in built-up areas. The widespread sense that using a satellite phone is an expensive, unreliable and last-resort means of staying in touch has contributed to the industry’s image problems – and many observers remain unconvinced that the industry will ever be successful on a large scale. "The mobile satellite business faces the same questions I raised 15 years ago," when the original Iridium and Globalstar companies were still in the formative stages, says Herschel Shosteck, a wireless communications analyst who is chairman of the Shosteck Group of Silver Spring, Md. "The industry’s services will not make sense until they can bring down their costs to cellular levels and have enough users to support the capital investments."
Shosteck also doubts mobile satellite providers, aside from Inmarsat, will be able to raise enough money to pay for new satellites when their existing fleets of spacecraft need replacement. Long-time MSS customers such as the U.S. military likely will remain key revenue generators for mobile satellite providers, Shosteck says, but he questions where else the industry will be able to find dependable sources of demand.
Plenty of people in the mobile satellite business would like nothing better than to prove skeptics like Shosteck wrong. Engineers and executives at Mobile Satellite Ventures LP (MSV) are working on a hybrid satellite and ground-based system designed to improve satellite signal availability across the United States. This concept, known as ATC (ancillary terrestrial component), has MSV officials so upbeat that they cannot imagine running a mobile satellite network without it.
"I’m not particularly bullish on MSS without something like ATC," says Alexander Good, vice chairman and chief executive officer of MSV. The company, with bases in Ottawa and Reston, Va., hopes demand for its new system will generate strong interest from companies and individuals who prize a truly ubiquitous communications system, he says. MSV – which has roots in the former American Mobile Satellite Corp. and Canada’s MSAT – has raised about $600 million in recent months to build a pair of geostationary satellites and ground systems for its new system. The satellites will each be able to handle about 12,000 individual transmissions at a time, and MSV projects that it will be able to profitably fill all those circuits. "We think the satellites will [generate] higher margins, and even the capacity of the biggest satellites we can buy is small" relative to the demand MSV expects, he says.
MSV brushes aside critics who claim the company gained free access to radio spectrum even though cellular companies have to pay for their licenses in auctions run by the U.S. Federal Communications Commission (FCC). "The FCC is just allowing us to use the spectrum more efficiently. We are poster children for spectrum efficiency on the ground and in the air," says Good.
Other mobile satellite companies have taken note of MSV’s plans to extend its reach by developing a ground-based component to operate in tandem with its satellites. Iridium Satellite LLC, owner of a constellation of 66 spacecraft launched into low earth orbit by its defunct predecessor, is keeping a close eye on MSV’s plans and may decide to invest in an ATC system of its own.
"We’re closely watching it, and we may be a participant in the ATC field," says Greg Ewert, executive vice president of sales and marketing for Iridium Satellite, based in Bethesda, Md. For now, Iridium Satellite remains focused on building the business it has put together since buying the Iridium system in a 2000 bankruptcy auction for a fraction of its original cost. A key customer for Iridium Satellite since it began operations is the U.S. military, which uses Iridium handsets under a multi-year contract with the company. "I cannot take my eyes off our existing professional and government customer base, but never say never regarding ATC," Ewert says.
Iridium Satellite also has worked hard to develop its business supplying short-burst and other low-bandwidth data-transmission services to users. Iridium Satellite continues to sell handsets to users who want to transmit voice calls over its network, but the company’s business increasingly is driven by data services. Although the Iridium system can carry data at only 2.4 kilobits per second – a snail’s pace by modern standards – Ewert said Iridium is using sophisticated compression techniques to eke out greater throughput from its system. "The government market has created opportunities and provided revenue to MSS operators who were really in bad shape," says Susan Irwin, president of Irwin Communications of Washington. "New life has clearly been infused into the mobile satellite business."
Ewert says Iridium Satellite’s revenue from military and other users is strong enough that the company should have no problem funding the gradual deployment of a replacement satellite system during the next decade solely from its cash flow. "We’ve passed the point where we need to put new capital into the network," he says. Iridium Satellite has yet to decide on the orbital architecture or other technical details of a new satellite system but plans to build a system that is able to move data faster than the existing fleet of spacecraft. The company intends to begin launching new spacecraft no earlier than 2010.
Officials at Iridium Satellite rival Globalstar LLC, Milpitas, Calif., also have begun considering their options for replacing the 40-satellite fleet of low-earth-orbit satellites the company inherited from the first Globalstar organization. The system is operating well and has plenty of remaining transmission capacity, but the company is excited about the new capabilities a follow-on constellation would offer, says Globalstar President Anthony Navarra. Globalstar does not anticipate needing new spacecraft before 2012. More immediately, the company plans to launch its eight existing spare satellites to shore up its operational fleet, he says. Discussions with launch providers are under way.
In a twist, a new Globalstar satellite system also might include geostationary spacecraft, which offer much broader coverage than low-earth orbit satellites, he says. Like other MSS players, Globalstar originally shunned geostationary satellites because of the transmission delay they impose, but technology has evolved to the point that services that were adversely affected by a slight transmission delay now can overcome that obstacle.
Globalstar also is moving ahead with plans to develop new handsets and recently awarded a $140 million contract to Qualcomm Inc. of San Diego. These phones are likely to feature the ability to use ground-based links, based on Globalstar’s expectation that it will receive regulatory permission to develop an ATC system to augment its satellite services, Navarra says.
Beyond selling its existing handsets at a brisk clip, Globalstar also is enjoying success with services that can take advantage of the firm’s data-handling capabilities. Globalstar’s satellites carry individual data transmissions at just 9.6 kilobits per second, but Navarra says today’s advanced compression techniques mean the available speed is enough to provide many services that formerly required higher bandwidth.
Even as mobile satellite companies consider the happy prospect of investing in more capable satellites and work to bring down the cost of user terminals to attract more customers, the industry is continuing to take steps to remake itself in the wake of the financial problems that plagued companies like the first Iridium, ICO Global Communications of London and Globalstar, all of which found their multibillion-dollar satellite systems unable to compete with fast-changing terrestrial wireless technologies.
Mobile satellite firms are mindful that they still can be easily misunderstood, especially by people whose image of the business was tainted by prior difficulties. At Stratos Global Corp. of Bethesda, Md., for example, the emphasis is squarely on solutions, not hardware, company officials say. Stratos resells satellite services provided by operators including Inmarsat and Iridium. The company formerly was an Inmarsat shareholder but ceased being a stockholder following Inmarsat’s privatization and subsequent initial public offering, says Bob Roe, Stratos’ senior vice president of sales. Stratos is particularly excited about Inmarsat’s BGAN service. Despite no longer owning Inmarsat shares, "our relationship with them is closer than ever," Roe says.
In August, Stratos announced its intent to pay $191 million to acquire Xantic B.V., a rival mobile satellite provider based in the Netherlands, from KPN N.V. and Australia’s Telstra Corp. Ltd. Stratos also is considering whether to form partnerships with cellular phone providers in an effort to attract mobile users who want to remain in touch beyond the reach of even the most extensive networks of ground-based transmitters, says Roe.
The key to success in the future, industry officials say, is for mobile satellite providers to keep the emphasis on anticipating their customers’ communications requirements, not on trying to convince buyers to use services they have not shown they need. "We are focusing on user needs and expectations, not on the [satellite] platform," says Kallerud.
Sam Silverstein has been covering the commercial satellite industry since 1995 and is a freelance writer for Via Satellite.