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LEO Or GEO? Globalstar Debates Next Generation Of Satellites

By | April 10, 2006

      LEO or GEO? That’s the question being pondered by Globalstar, as its first-generation fleet of 40 low-Earth orbit (LEO) satellites ages. With the fleet designed to last into 2010, "we believe that now is the time to get moving on its replacement," Megan Fitzgerald, Globalstar’s senior vice president, Strategic Initiatives & Space Operations, said.

      In order to move ahead with its next-generation spacecraft constellation, Globalstar signed a study agreement with European satellite manufacturer Alcatel Alenia Space, whose founding companies helped build the original Globalstar constellation in the 1990s. Thanks to this history, "Alcatel Alenia Space is uniquely positioned to provide Globalstar with a cost-effective solution for a second-generation LEO satellite system," Globalstar Chairman and CEO Jay Monroe said in an April 4 statement announcing the contract. "Alcatel’s demonstrated satellite and network telecommunications capabilities combine to offer Globalstar a highly competitive solution for meeting our future service needs."

      But perhaps not competitive enough; given that Globalstar is quite openly considering using three to four geostationary (GEO) satellites to replicate its first generation spacecraft. "Both LEO and GEO are feasible for our business model," Fitzgerald said. "There are different performance advantages to each. The key considerations are cost and schedule."

      That is not all Globalstar is unsure of. Thanks to the bankruptcies that Globalstar and Iridium endured after satellite telephone demand proved to be far less than anticipated, many equipment manufacturers abandoned LEO in favor of building more popular GEO satellites. As a result, "What’s driving this study is our concern that there aren’t many people playing in the LEO market these days," Fitzgerald told Satellite News. Not only does this potentially mean a lack of competitively-priced product for her company to choose from, but it could also mean that LEO technology has not kept up with its GEO cousin.

      This is why the Globalstar study agreement with Alcatel Alenia Space should not be interpreted as a commitment by Globalstar to build more LEOs, nor to have its second- generation fleet built by the satellite manufacturer. In fact, all Globalstar really expects from Alcatel Alenia Space is to have its LEO study done within a few months, so that Globalstar management can review the conclusions and decide its next course of action.

      After that, "we’re looking fresh" at which satellites to procure and from whom, Fitzgerald said. "But we have a considerable amount of experience in the satellite mobile phone space, so we won’t be working with entirely a clean sheet," she said.

      Fitzgerald’s "clean sheet" comment should not be taken to mean that Globalstar is predisposed towards LEOs. What she means is that, having gained six years’ experience in providing satellite communications, "we are very savvy as an operator." In contrast to Globalstar’s original expectations of its potential customer base, "We have a marketplace that we understand."

      This said, Globalstar’s activated satellite and data subscriber base stands at just more than 200,000 customers. That’s not small potatoes, but it is far below what the company’s initial investors had counted on; and indeed below initial expectations for satellite telephony in general. It is this shortfall between reality and those dreams that have bedeviled the satellite mobile-phone industry since its inception and continue to dog it today.

      It is this fact that bothers Stephen Blum, president of Tellus Venture Associates. "Studying options for a next-generation fleet is the kind of thing you have to do if you’re trying to put forward the image that your company is viable and has a future," he said. "However, what hurt the first Globalstar and Iridium incarnations was the huge capital cost of establishing their satellite networks relative to the small size of the market they were trying to address. I don’t see either company launching a second generation of satellites unless they can either significantly increase their revenues or the cost of the satellites concerned comes down by an order of magnitude or more."

      It is this kind of doubt that is motivating Globalstar to consider the GEO route. Mindful of the fact that GEOs can offer more functionality than LEOs — and are much more attractive to potential investors — the company is considering its second generation options very carefully.

      Speaking of investors, the U.S. military would be a natural partner for Globalstar; given its stated need for more commercial bandwidth. However, Globalstar is not counting on government financing to launch its second generation of satellites. "Our plans say that we can make it based on our commercial revenues," Fitzgerald said.

      Despite this assertion, Blum is not sure that Globalstar or Iridium will be able to afford to replace their aging first generation fleets. "You can argue that the market for satellite mobile phone has become worse than before due to the increased number of services that terrestrial cellular networks can now support," he said. "On the other hand, you can also argue that the future looks brighter for satellite mobile phone given governmental needs for satellite carriage and all of the new voice/data applications coming up that were not even thought of five to 10 years ago." As a result, the investment prospects for both companies is uncertain, he said.

      Only time will tell if Globalstar sticks with LEO, moves to GEO, or even gets the chance the replenish its existing fleet. But you cannot win the lottery unless you buy a ticket, and by hiring Alcatel Alenia to look into next-generation LEOs, Globalstar has bought a ticket.

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