New try for cell-like satellite phone
The vast, thinly populated expanses of the country that still lack cellphone coverage could be getting an interesting option next year: ordinary-looking cellphones that connect to a satellite when there's no cell tower around. In June, a rocket is scheduled to lift the largest commercial satellite yet into space. In orbit 22,000 miles above the Earth, the satellite will unfurl an umbrella of gold mesh 60 feet across and aim it at the U.S.
That gigantic antenna will let the satellite pick up signals from phones that are not much larger than regular cellphones. That satellite, from TerreStar, is due to be followed by two similar, even larger ones from SkyTerra Communications next year. SkyTerra puts the cost of its satellites at $1.2 billion. On the face of it, these are bold moves, especially considering that the satellite phone business has been troubled. Most famously, two companies with grand projects for worldwide satellite phone coverage, Iridium and Globalstar, filed for bankruptcy at the beginning of the decade, wiping out billions in investor capital. But the background to the new launches is more complicated, and analysts say the business models of TerreStar and SkyTerra ultimately might rely more on the companies becoming acquisition targets for conventional wireless carriers.
There's plenty of competition in satellite phones, even though it's a niche market. Iridium and Globalstar are still in operation, providing last-resort communications for the military, forest wardens and others who can afford to buy dedicated, bulky satellite handsets for $1,000 and up. Inmarsat offers a third alternative. Even so, SkyTerra and TerreStar say their new satellites, combined with advances in chip technology, can take "satphones" into the mainstream — devices you'd buy in an AT&T store. The ability to call via satellite will be marketed as "an insurance policy or peace-of-mind feature," said SkyTerra spokesman Tom Surface. The first handsets for TerreStar's satellite would cost about $700, said TerreStar chief executive Jeff Epstein. At a cellphone trade show earlier this month, the company displayed a prototype built by small Finnish company, Elektrobit. The phone has a typewriter-style keyboard and runs Windows Mobile software, making it similar to many BlackBerry-style, e-mail-oriented phones for corporate use, but a bit thicker. And unlike Iridium and Globalstar phones, there's no protruding antenna. Both companies indicate that calling over a satellite will cost less than $1 per minute, the approximate price of Iridium calls. TerreStar also has a roaming agreement with AT&T for calls that don't go through the satellite, and expects the combined satellite and ground system to be working before the end of this year. One significant limitation, beside the fact that the phones will work in North America only, is that the handsets need to be in clear view of a satellite Given these limitations, and the steady expansion of ground-based networks, is there really a mass demand for satellite phones? Satellite analyst and consultant Tim Farrar at TMF Associates is skeptical. He believes the number of people interested in satellite calling, even if just for emergencies, is small compared to the overall cellphone market. "Last time around, people tried out Iridium phones, and thought 'What use is this to me if I have to go out and stand in the middle of a field to make a call?' " he said.
Given these obstacles, Farrar believes the value of SkyTerra and TerreStar is in their airwave spectrum holdings. The companies have permission from the Federal Communications Commission to use slices of the airwaves for both satellite and ground-based networks, as long as a satellite is in orbit. Eventually, TerreStar and SkyTerra could try to put those airwaves to use with their own cell towers on the ground — or they could use that spectrum to entice a carrier like AT&T or Verizon. The wireless companies would normally have to pay billions for spectrum with nationwide coverage, but they might find that snapping up one of these satellite companies is a cheaper way to get that access, said Armand Musey, a satellite consultant.
