Insiders Insight By Roger Rusch

Lessons Learned From Iridium, ICO, and Globalstar — Part 1

One of the great controversies of the past decade has been the use of non-geostationary satellites for communications. The low-Earth-orbit (LEO) salesmen argued that constellations of satellites would be cheap because production line economies would reduce cost. They maintained that LEO constellations would provide better service for lower cost. The zeal of the LEO advocates fascinated many observers, including investors.

LEO constellations are a wonderful idea for satellite manufacturers because global constellations provide the opportunity to build many satellites. Unfortunately, the sales presentation was a fantasy. The individual satellites are relatively smaller, but every satellite must replicate all of the housekeeping functions.

Each LEO satellite needs onboard propulsion, power management, thermal control, telemetry, and command. Many sophisticated components, like phased-array antennas or intersatellite links (ISL), also are required. An alternative to ISL is to build 100 or 200 costly ground stations. The economies of building many satellites did not approach the high cost of small satellites relative to large satellites.

Not only are the LEO systems expensive to build, but operating costs are much more costly as well. The flow of traffic through LEO satellites compounds the challenge of mobile communications because both the satellites and users are moving. Lately we are cognizant that record keeping is difficult. Globalstar L.P. [GSTRF] said that it did not know how many calls are being processed because it has no immediate global record of the traffic flow.

…A Question Of Quality

Non-geostationary satellites tend to reduce the quality of service by introducing satellite motion. Since the satellites are closer to the Earth the satellites usually operate close to the horizon. Consequently there is a higher risk of transmission blockage and call disconnects.

The defenders of geostationary (GEO) satellites said the choice was clear 40 years ago. GEO satellites are less expensive to build and simpler to operate. It was established at the beginning of the space age that LEO systems are very expensive. This is still the case today.

Now that three constellations have been launched we can see the consequences of the LEO misjudgment. The LEO infrastructure is several times more expensive than originally planned. Furthermore, the revenue-producing capacity is much less than estimated. We no longer have to listen to experts argue these points because the service cost comparison is public knowledge.

Iridium and Globalstar voice services cost $1 to $3 per minute, whereas the ACeS Garuda GEO service will cost 35 cents to 55 cents per minute for local calls. Terrestrial cellular services are now averaging less than 20 cents per minute. The service price for LEOs is not affordable and few subscribers are signing up.

The dominant providers of mobile communications are terrestrial services not other satellite systems. Space-based solutions always will be more expensive than land-based systems. We must keep our objectives focused on the real competition.

LESSON TWO: IT IS DIFFICULT FOR GEO SATELLITE SOLUTIONS TO OFFER AFFORDABLE SERVICE RATES. WITH LEO CONSTELLATIONS IT IS IMPOSSIBLE.