Satellite's Time Has Come

By CSMG
Telephony Magazine, January 15, 2007

The much-maligned commercial satellite space is experiencing an awakening with the advent of ATC players that can offer combined terrestrial and satellite services. The market potential of innovative ATC players like TerreStar Networks requires us to press the 'refresh button' on our old assumptions for this new industry.

The history of commercial satellite is not a happy one. Memories of the Iridium debacle and of the grand failure of the original ICO business plan have shaped observer perceptions as a niche, slow-moving industry - an industry best forgotten. Nothing could be further from the truth. Today the industry is experiencing an exciting and resurgent period, driven by both regulatory intervention and the entry of inventive new players like TerreStar Networks.

When the FCC issued its ATC rulings in 2003-2004, it opened new horizons for a number of players in the L- and S-Bands, including TerreStar Networks and MSV, and gave them the opportunity to turbocharge their business plans. In the S-Band alone, 40 MHz of spectrum is available to licensees for combined terrestrial wireless and satellite service use. The ATC ruling not only presents these satellite spectrum holders with the ability to better serve satellite customers but, importantly, allows these providers to use their spectrum more efficiently. It provides the flexibility to offer terrestrial wireless services in areas where the satellites cannot provide the same quality as the cell towers of a Cingular or Verizon Wireless. Many point to the requirement that ATC handsets must speak to the satellite at all times, thus potentially driving larger and non-standard handsets as well as uncompetitive pricing. CSMG's detailed analysis of this market has shown that the ATC requirements do little to prevent ATC players from competing for terrestrial customers. Not only are ATC terrestrial networks competitive, but handsets are expected to offer form factors comparable to today's smart phones. The combination of these factors and satellite capabilities will allow ATC players to enjoy a competitive advantage over existing players - the combined technologies can simply do more. This advantage lies in the ubiquitous coverage of combined terrestrial/satellite network - there literally is nowhere in North America where the user can see the sky, that a call cannot be made. The deployment of new, more powerful satellites and greenfield IP networks secure a further advantage. In addition, ATC capabilities provide powerful emergency capabilities - when all terrestrial networks are down during the next Katrina-scale hurricane, ATC phones will continue to operate. This also makes the ATC space of intense interest to the Government.

The second reason to change the established views is the entry of new players that have emerged to exploit new ATC opportunities. For example, TerreStar is an S-Band ATC player with the right to use 20 MHz of spectrum in the S-Band at 2 GHz and is driving a 'build, own and operate model' combining terrestrial and satellite services. TerreStar's strength comes from its planned advanced 3G, all-IP terrestrial network, its large and powerful Loral satellite and its handset strategy, which leverages the best of new technology and the scale power of global air interface and chipset standards. Its handsets will be competitive in terms of form factor and cost - no large antenna à la Iridium of old. TerreStar will serve a multitude of interested companies and disaster-relief groups that desperately need wireless services. The US Government has also expressed its need to maintain lines of communication in the event of a terrorist attack or natural disaster. To that end, DISA and TerreStar have announced a 'Cooperative Research and Development Agreement' (CRADA) - an unusual public commitment - as a first step to supporting the Government in a substantive way. ATC thus allows the Government to dramatically enhance first response capabilities, and reduces the digital divide in super-rural regions.

TerreStar is a fine example of a new, robust satellite player that has the potential to expand wireless competition and improve first response capabilities. Consolidation within the L- and S-Bands, as well as the ongoing support of global technology vendors, is key to being still more effective. CSMG's analysis points to a new paradigm of growth for satellite and the emergence of dynamic new players that could alter the established wireless terrain. We should all watch with interest.