While Globalstar and Iridium have managed to re-emerge from previous high-profile bankruptcies and build successful niche market-focused business, the Mobile Satellite Services (MSS) sector may be on the verge of experiencing a significant revival of sorts thanks to the Federal Communications Commission‘s reaffirming of its approval of the use of ancillary terrestrial components (ATC) to augment the satellite coverage.

An early benefactor of this revival has been Space Systems/Loral (SS/L), which announced two contracts in two weeks for the construction of new satellites that will serve the MSS marketplace. But those satellite contracts reveal a fundamental shift in how entrants into this market are approaching the MSS industry compared to those that established their businesses in the late 1990s.

Those early systems, namely networks from Globalstar and Iridium, used mobile lowearth orbit (LEO) satellite that offered global coverage. Building and launching those satellites came at considerable expense to those companies and ultimately contributed to their respective financial troubles.

In contrast, the latest contracts in the MSS arena are for geostationary satellites that will cover North America. The first contract for two satellites, announced by SS/L in March, went to a new player in the market, TerreStar Networks Inc. SS/L unveiled the second contract April 26 for one satellite and options of additional spacecraft with a company that has roots in the MSS marketplace–ICO Satellite Management LLC. Both contracts call for SS/L to build satellites based on its 1300 platform, and SS/L completed the design reviews for the TerreStar satellite, TerreStar-1, which is now in the construction phase.

Patrick DeWitt, president and COO of SS/L, said cost is the main driver behind the shift from LEO constellations to geostationary satellites, suggesting that geostationary satellites are more cost-effective because they will require fewer satellites to cover the regions they serve. .

“I think they are much more cost effective because there are fewer satellites than both Iridium and Globalstar,” DeWitt told Satellite News. “… In addition to that, they rely on terrestrial systems as well to provide the overall business case, so it is a complementary approach to the ground capability, which also makes it more cost effective.”

DeWitt compared this path to that taken by satellite radio providers XM Satellite Radio and Sirius Satellite Radio. “They are satellite-based systems but they have a ground infrastructure as well that makes the two complimentary to each other.”

SS/L is working with both TerreStar and ICO on their respective ground segment, DeWitt said. “It is very possible that we would have a role of managing the overall ground infrastructure,” he said.

And while these companies and the ATC ruling have put the spotlight back on the MSS market for the moment, DeWitt is not expecting more entrants to flood the MSS market in the coming years.

“It all depends on whether [the FCC makes] available more spectrum,” DeWitt said. “Both ICO and TerreStar have 2 GHz licenses. If more spectrum is made available, then you will see more opportunities for other companies similar to ICO or TerreStar. We don’t foresee that, but it is possible.”

The Consumer Market

The other change that has appeared since the FCC made its ATC reaffirmation is a shift in the MSS market from a niche enterprise-oriented approach to a service more targeted toward consumers.

When the LEO systems were conceived the consumer market was considered a target primarily because the terrestrial wireless markets were not as far reaching as they are today. But between conception and MSS network deployment, the wireless industry boomed, leaving a limited market for the MSS operators to address. Now, with the ATC component, these original visions of providing a truly ubiquitous service have the opportunity to be realized.

TerreStar clearly is moving in this direction. In a previous interview with Satellite News, TerreStar President and CEO Wharton “Zie” Rivers said the company is looking to offer consumer-based services at prices competitive to terrestrial wireless services with handsets smaller handsets than the bulky ones currently used to access the LEO-based MSS services (SN, April 18).

It is not known whether ICO will be going after the consumer segment, as a representative from the company did not return our phone call. However, Mobile Satellite Ventures, a current player in the MSS market, does see the consumer play coming back.

“What [ATC technology] is going to allow us to do is address more niche markets,” Linda Gustus, manager of marketing and communications for Mobile Satellite Ventures told Satellite News. “We were traditionally a niche market player. [The use of ATC] is going to allow us to address a broader scope [of users] across our regular business markets, but it is also going to open up opportunities for us in the consumer marketplace, which then allows us to gain and take advantage of the economies of scale when virtually every handset would be capable of utilizing ATC technology.”

The importance of ATC to MSV’s business plan was evident in last week’s announcement that the company acquired the patent portfolio of Celsat Inc., which includes 13 granted and two pending patents covering a hybrid terrestrial/satellite system concept.

Gustus noted that consumers primarily in rural areas would be prime targets for a hybrid satellite/terrestrial service. “Rural markets should benefit greatly from the implementation of ATC because now it is not always cost effective for the cell carriers to deploy in rural areas,” she said. “By allowing us to reuse our frequency on the ground, [MSS providers are] going to be able to deliver services to rural customers that they have never had before. They are going to have the same cell phone-type activity and coverage that they would if they were in a larger metropolitan area.”

The biggest challenge however, may be funding the ground segment rollout. From conversations with TerreStar and Mobile Satellite Ventures, terrestrial wireless service providers are the logical targets for partnership.

But Gustus noted that others outside of the terrestrial wireless companies are looking at the hybrid terrestrial/satellite MSS services. Specifically, she said that MSV has been talking to cable and broadband companies on the possibilities of partnerships. With the concept of “triple play”–a bundled offering of voice, high-speed data connectivity and multi-channel video services–cable companies in particular “are looking for an advantage,” Gustus said.

Will Consumers Use MSS?

One of the biggest questions hanging over this re-emerging market is whether the MSS operators with ATC in tow are too late to really make an impact in the consumer markets, especially considering how widespread terrestrial wireless coverage is today.

“The FCC’s finding in favor of ATC permits various substantive market players in the MSS arena to proceed with their business plans and ultimately the provision of satellite-based mobile services to a larger audience,” an informed industry source said. “The ability of ATC-enhanced systems to penetrate and provide anywhere/anytime services in urban areas enhances that service offering. Whether it will be widely adopted by consumer end users remains to be seen.”

But even if the consumer markets do not come to fruition the way companies such as TerreStar are hoping for, the niche markets that MSS operators serve stand to gain from the introduction of ATC.

“The enhanced communications capability afforded by ATC should drive additional and new sales to end user communities that are not contingent on cost, such as emergency response, local government and military, transportation and other sectors,” the source said.

–Gregory Twachtman (John McCarthy, SS/L, 212/338-5345; Linda Gustus, MSV, 613/742-4168)