For more than six months the mobile satellite industry has been trying to polish its image after the well-publicized failure of Iridium L.L.C. tarnished the reputation of all those involved in the industry.
While Iridium shuffled in and out of bankruptcy court and deliberated with throngs of suitors wanting to purchase its 66 low-earth-orbit satellites, other operators such as Globalstar Telecommunications L.P. and Gilat Satellite Networks Ltd. moved forward with plans to provide narrowband and broadband services to the consumer market.
“Iridium may have caused more speculation than not. … The failure of Iridium, the problems ICO (Global Communications) had, all go into investors’ minds,” said Larry Swasey, senior vice president of communications research at Allied Business Intelligence Inc., Oyster Bay, N.Y.
With emphatic encouragement from Motorola Inc., Iridium’s majority investor, a de-orbiting schedule now is in place and the Iridium nightmare looks to be over soon. Mobile satellite operators-especially those offering data services-can expect decent growth in the long term as equipment and demand spreads throughout the world.
“The satellite industry is still in the early stages of its life cycle, and it is too early to call this market a failure when in fact, we are just beginning to see robust services offered,” said Anna Karampahtsis, an analyst with ABI.
Broadband satellite revenues worldwide are expected to reach $4.1 billion by 2004, compared with $45 million for this year, according to ABI’s report, “Bandwidth on Demand Satellite Systems.” Voice-over-satellite revenues are expected to reach $7.5 billion by 2004, the report said.
“The broadband satellite market could be more lucrative overall, but it just has a later start date. It will probably have a large amount of momentum one or two years after it gets out there for public consumption,” Swasey said.
ICO-Teledesic Global Ltd., formed by Craig McCaw when he rescued New ICO from bankruptcy in May, said it will be ready to launch broadband data services in 2004, about the time when it will become apparent where other technologies such as local multipoint distribution service and multichannel multipoint distribution service have failed to fill in the gaps.
Just last month, Gilat Satellite Networks established Gilat-to-Home Inc., a company that intends to offer during the fourth quarter two-way high-speed wireless Internet service via satellite. Hughes Network Systems also announced it will offer a similar service-an upgrade to its dial-up DirecPC service-around the same time.
Gilat-to-Home and HNS use geostationary, or high-earth-orbit satellites, to transmit data at speeds comparable to digital subscriber line or cable modems, for about the same cost. HNS’ service supports bursts up to 400 kilobits per second and Gilat-to-Home said it can handle data burst speeds up to 500 kbps.
Using satellites for data transmission is not a new concept. It is, however, a new concept to the consumer market where up until now, the price points hovered at unrealistic levels for the average person.
“Fifteen years ago satellite was used for corporatewide data applications,” said Sam Baumel, senior director of marketing for HNS. “We’ve transitioned those applications from enterprise to consumer services.”
Fueling the growth of narrowband services, among other things, is a satellite’s ability to provide ubiquitous coverage and cover a vast area as soon as the satellite is activated, as well as more advanced technology that reuses the spectrum, much like a terrestrial-based cellular base station.
“The new satellites are spot beam satellites. You get frequency reuse. … The ability to reuse that frequency allocation inherently increases the capacity of a satellite,” Baumel said.
The voice-over-satellite market, still reeling from the Iridium backlash, will not be as strong as initially thought, but will benefit from the price reductions and subscriber acquisitions only time can bring, ABI said.
Swasey noted that voice-over-satellite services are experiencing a slow start because a person using a satellite phone-most likely in a remote region of the world-first and foremost needs someone to call. On oil rigs and pipeline operations there is an inherent need and adequate financial resources to support outside communication, but people living day-to-day in remote towns and villages often don’t need to call anyone beyond their immediate area.
“They have to find a reason to use it, they have to have a person to call, a destination,” Swasey said.
In the beginning, satellite phones were mostly purchased and used by the wealthy and big business, people accustomed to advanced telecommunication technology. Now though, “any time you have telephony introduced into an area that doesn’t use it habitually, it’s going to take some time to catch on,” said Swasey.
Speculation has swirled about Globalstar’s fate, particularly after the company failed to repay loans under a $250 million line of credit in July. On Sept. 25 however, Globalstar announced it retained $68 million in additional financing, and the company continues to launch new service areas throughout the world.
