War Boosts Popularity Of Satellite Telephones


Mar 11, 2001
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By Christopher Stern, Washington Post Staff Writer.

Tuesday, November 20, 2001

Ismael Khan, a Northern Alliance commander who heads an army of 4,000, was preparing to dislodge a group of Taliban fighters from the strategically important city of Herat last week when his satellite phone rang. It was a journalist calling, wanting to confirm a rumor that Kahn was about to enter the city.

Three minutes later, the Reuters reporter posted his scoop that Kahn, also known as "the Lion of Herat," was set to retake his hometown.

Andrew Marshall, a Reuters staff writer who roams some of the world's most remote regions for the wire service, said a new generation of relatively small, lightweight satellite phones have allowed him to report stories in ways that would have been too cumbersome to manage just five years ago.

"In the days before [handheld] satellite phones, Afghanistan would have been a black hole for news," Marshall said.

Stories of such successes are drawing new interest to an industry better known for its bankruptcies than its technological successes. Long considered an expensive, bulky alternative to land-based wireless service, satellite phones are enjoying something of a renaissance since the terrorist attacks on Sept. 11 and amid the war that followed.

Satellite phone retailers report a sharp uptick in business from journalists and humanitarian groups preparing to travel to Afghanistan. They also are hearing from local governments that want to establish a backup to local wired and wireless networks, after seeing those systems get damaged or clogged with calls during and immediately after the attacks. The military was already one of the satellite phone industry's biggest customers.

But analysts say it is far too early to tell whether the new demand for satellite phones will rescue an industry buffeted by financial troubles.

Just last week, Globalstar LP, one of the two main providers of handheld satellite phones, announced it would be filing for bankruptcy protection after struggling for months to restructure debt related to its $3.3 billion start-up costs. Its main rival, Iridium Satellite LLC, had to shut down commercial service for a year. It emerged from bankruptcy last year after a group of investors acquired assets once valued at $5.5 billion for just $25 million.

Hershel Shosteck, a Wheaton-based industry analyst, said the financial difficulties suffered by Iridium and other companies was caused by a classic case of "tech-tosterone," a term he uses for investors and engineers who allow their new technology to get ahead of their business models.

Early backers, including established players such as Motorola Inc., failed a decade ago to anticipate how popular cellular phones would become by the end of the 20th century, according to Shosteck. Widespread deployment of less expensive and more reliable mobile phone service to all but the most remote and undeveloped areas of the world has left companies such as Iridium and Globalstar with a core customer base of only about 80,000 people, Shosteck estimated.

Gino Picasso, Iridium's chief executive, said the Arlington-based company needs at least 60,000 customers to break even; the previous owners once predicted they would sign up 500,000 subscribers in their first year. Picasso declined to disclose how many customers Iridium had lined up so far, but said there should be more than enough demand for the service.

"I can hardly believe we can't find 60,000 people on a worldwide basis," Picasso said.

Competition for those customers will grow more heated in 2003 when ICO Global Communications, another handheld-satellite-phone company, launches its service.

Satellite phones are not priced to compete directly with regular mobile phones. Individual units, which are slightly smaller than a World War II-era walkie-talkies, are priced at more than $1,000 and airtime can cost as much as $1.49 per minute. Monthly bills can add up to several thousand dollars. For advanced services, which include the transmission of video and sound, fees are often more than $7 a minute, generating monthly charges of up to $40,000.

Despite the costs, the technology is alluring to certain global travelers and others who work in isolated areas beyond the reach of traditional telephone networks.

The satellite phone first gained popularity during the Persian Gulf War in 1991, when some broadcasters stationed in Kuwait used them to send words and pictures home. Since then, satellite kits capable of sending text, sound and video have shrank from the size of a steamer trunk to the dimensions of a laptop computer.

Currently, Globalstar and Iridium are offering handsets that are even smaller. A third company, Thuraya Satellite Telecommunications Co., based in the United Arab Emirates, also provides service throughout the Middle East and Asia.

One of the reasons Iridium and Globalstar can offer smaller handsets is that the phones need only get calls to and from satellites that are much closer to Earth than previous satellite systems. The two companies maintain constellations of dozens of satellites orbiting the planet several times a day at an altitude of less than a 1,000 miles.

The original satellite phones had to be larger because they needed to send calls to satellites 22,000 miles above the planet. With the old system, there was also a longer delay between when a call was sent and when it was received, because of the greater distance the data must travel.

An Inmarsat phone is about the size of a laptop computer, but it is capable of transmiting a higher volume of data — even moving video images — making it a more desireable option for television broadcasters and others.

For some world travelers, the low-orbit system of Iridium and Globalstar has proved to be problematic.

J. Michael Fay carried an Iridium phone during his 1,200-mile trek across central Africa for the National Geographic Society. It turned out the phone had difficulty picking up a signal through thick forest canopy. Iridium's service, like others, depends on a line-of-sight connection between the phone and the satellite, making any obstructions a potential hazard. Indoor conversations would be difficult enough but Fay found that the satellites would pass by small holes in the foliage so quickly that even outdoors he was limited to conversations of just a few minutes — or none at all.

Fortunately for Fay, his porters carried a more powerful Inmarsat system as a backup. Fay's sleek Iridium phone is now on display at the National Geographic Society's exhibition hall with an accompanying explanation that it stopped working part way through the trek.

In addition to land-based subscribers, both Iridium and Globalstar plan to branch out into the nautical market dominated by Inmarsat. Globalstar recently announced a contract to put a phone on each ship in the Italian navy and Iridium is unveiled a new device that can provide service on airplanes.

Shosteck and other analysts say the companies have about seven years to build a money-making business before it is time to launch a second generation of satellites.

But business is going to have to improve quite a bit for satellite phone retailers such as Jim McKinley, the owner of Nashville-based Outfitters Satellite Inc.

Until Sept. 11, most of McKinley's customers were bush pilots, missionaries and a few wealthy executives heading out on exotic fishing trips or safaris. But since the terrorist attacks in the United States, McKinley has been signing up about 100 new customers a month — almost a 75 percent increase in business.

McKinley is pleased with the business, but he has his doubts about satellite phones becoming widely accepted, largely because of their higher operating expense compared with regular cellular phones.

"You would not be using one if you have any choice," McKinley said.

GlobaStar http://www.globalstar.com/





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