Globalstar presses on with satellite telephone network

Last September, a Ukrainian Zenith rocket with a $120 million (#112 million) payload of communications satellites took off, developed computer problems 280 seconds later, and crash landed in Siberia. In what must have been one of the bitterest lessons in not putting too many eggs in one basket, San Jose-based Globalstar lost 12 of the 48 satellites needed to operate its planned global telephone network.

But undaunted, that network will be switched on from next September, says Mr Peter Bacon, Globalstar's regional marketing director for Europe, Middle East and Asia. The lost satellites were insured, he adds, but the ensuing delay taught the company a lesson: with 16 satellites now in orbit it is launching new ones four at a time, every 30 days.

Globalstar's will be the second of three satellite phone networks going into service these days. The first, run by Motorola-backed Iridium, started service last November but so far has had disappointing revenues.

Last week the banks to which it owed $800 million agreed to extend by 60 days the deadline by which the company must meet certain sales and subscriber targets.

Any relief at not defaulting this debt was short-lived as its chief financial officer, Mr Roy Grant, announced his resignation the same day, for personal reasons. The share price has dropped from a high of $72 last May to around the $20 mark. However, despite the problems, Motorola's president and chief operating officer, Mr Bob Growney, pledged continued financial support, saying two weeks ago "there was no question of Iridium going under".

A third satellite network, run by ICO, a partnership of more than 60 telephone companies, is also planned. But the first ICO satellites will not be launched until later this year, and the 10-satellite network is not expected to be operational until next year.

The first satellite networks operate via agreements with cellular network operators. Under these agreements, the specially adapted phones use the local cellular networks where possible, but communicate directly via the nearest overhead satellite where there is no cellular coverage.

When Globalstar's network starts going live next September the company, formed originally by Loral Space and Communications, but now comprising an alliance including Vodafone, France Telecom, Alcatel, AirTouch and Qualcomm, will have spent around $3.9 billion. Its network will comprise 48 low-earth-orbit satellites plus eight spares, with a network of ground stations around the world. Naturally it hopes to avoid Iridium's experience.

Mr Bacon says there will be a phased launch: in North America and some of South America in September; in the GSM markets of Europe, Russia, China and South Africa in October, in the Middle East and Australia in February 2000, and in the rest of the world by mid-2000.

The company won't reveal customer projections, but hopes to overtake Iridium. Analysts put Iridium's subscriber base at 3,000 at the end of 1998, projecting in excess of 100,000 by the end of 1999.

Both are aiming at similar markets: military, maritime and transportation, as well as cellular extension (providing mobile telephony in areas of poor or no cellular coverage, such as in Brazil or China). But Globalstar's call prices should be cheaper than Iridium's. Mr Bacon says some of the company's partners, such as AirTouch, have indicated they intend to charge $1 to $1.50 per minute for calls.

Iridium has blamed the slow take-up of its service on poor initial availability of handsets and poorly-trained service providers and sales personnel. But industry insiders say the company is disappointed that the service providers it has partnered with have not marketed the service more strongly.

Calls made via Iridium's satellites are routed towards their destination via its 66-satellite network, bypassing local operators. But this bypassing of local operators could be significant factor in why the providers are not marketing the service, as they do not share the revenue from calls made directly to the satellites.

Globalstar, on the other hand, uses its satellites as simple reflectors, or what Mr Bacon describes as "bent pipes in the sky", bouncing calls back to earth stations, from where they use local operators' lines to reach their destination. Thus, if the nearest earth station is nearby, calls do not bypass local telephone companies. Mr Bacon decribes this as a "regional national approach rather than a global-competitor approach".

This may explain why he is optimistic the Globalstar service will be enthusiastically marketed by its operator partners. He said Globalstar and the operators had what he called "agreements to get a level of commitment to joint market" the service, and added that this model meant less regulatory hurdles had to be dealt with.

But as anyone following telecoms trends knows, voice is a limited market and the future is data. Globalstar's initial data rates are slow by the standards of new technology. The first data/fax handsets will only become available in early 2000, and the data rates will be the same 9,600 bits per second supported by current GSM phones. Faster data speeds are more than a year away.

The handsets will also be bigger than GSM. Mr Bacon described the latest ones as being similar sized to the Nokia 2110.

In coming years, more satellite networks are planned, notably by Teledesic, backed by Microsoft's Mr Bill Gates, and SkyBridge, a consortium including Alcatel, Loral Space Communications, Toshiba, Mitsubishi and Sharp. But these will not compete with the mobile satellite networks, offering broadband connections to existing operators rather than to end-users.

SkyBridge says its service will commence in 2001, while Teledesic is aiming for 2003.

Though careful not to discount Iridium altogether, Mr Bacon has his sights on ICO. "That's going to be our toughest competition," he predicts. Perhaps it is no surprise that he should talk up the company which as yet has no satellites launched, rather than Iridium which is up and running, even with financial problems. Eoin Licken can be reached at elicken@irish-times.ie