Can ATC Companies Live Up To Their Own Hype?

The mobile satellite industry, brimming with optimism, gathered in late May in Baltimore, the first time in five years that the industry had met under the umbrella of the Mobile Satellite Users Association.

A large share of this optimism is being generated by the companies that have received approval from the U.S. government to launch businesses using hybrid satellite-terrestrial networks. The U.S. Federal Communications Commission has approved several companies to use mobile satellite spectrum for these ancillary terrestrial component (ATC) networks, which will allow operators to provide service in urban areas and inside buildings which satellite signals are too weak to penetrate. The more powerful satellites also will allow customers to use small, low-cost handsets that are closer in size to cell phones.

The executives of the ATC companies — ICO, Mobile Satellite Ventures (MSV) and TerreStar — are confident about their prospects, with John Mattingly, president of satellite services for MSV, already comparing the potential impact of ATC on society to that of some of the technological giants of today. “The fact is that we’re going through a technological change,” he says. “Google had vision. Microsoft had vision. Not all of them worked, but some of them did.”

Mattingly believes ATC will work and says he was lured out of semi-retirement for the chance “to develop the greatest satellite system in the world.” MSV has “the biggest, baddest-a** satellites in the world,” and he predicts confidently that beginning in January 2010, “we will outperform anything in the marketplace.”

Robert Brumley, president and CEO of TerreStar, also sees ATC as the key to mobile satellite industry growth. “We have to move as an industry from just connecting a phone call,” suggesting that the ability to provide new data systems “is going to stretch the legs of this business.”

History shows that timing is a key factor to success, and the ATC operators can look no further than potential rivals Globalstar and Iridium to see firsthand how difficult rolling out mobile satellite services can be. The two satellite telephone operators envisioned similar success in their early days and then suffered infamous collapses.

Cell phone advancements were part of the reason Globalstar and Iridium failed in their first incarnations, and long-time industry analyst Armand Musey warns that it could happen again to the ATC companies. “That is something they may need to worry about again. By the time ATC rolls out, cell phone technology may leapfrog again.”

ICO and TerreStar already have announced construction delays for their satellites. TerreStar vows that it will meet its operational milestone of November 2008, but any further delays could begin to threaten that date.

And these expensive and highly complex satellites may not even be the biggest obstacle to operations for the companies. The development of the terrestrial networks will cost billions of dollars and most likely require funding help from larger companies, some executives acknowledge.

Mattingly remains undeterred. “It’s the new generation of satellites and ATC that will determine how to implement these networks over the next five or 10 years. While we can’t say exactly, the inevitable is the inevitable. Any one who wants to stand in front of that train is welcome to try. … If it sounds like ’95, the difference is that we have the goods.”