PARIS — I CO Global Communications, whose two-way mobile communications satellite is scheduled for launch over the United States late this year, has revamped its business model to focus on delivering interactive television and navigation to automobiles and will begin field trials of the service in two cities next spring, ICO officials said.
ICO expects to spend up to $40 million on the field trials. This first business application would provide up to 15 video channels to automobiles equipped with video-input slots, charging users $15 to $25 per month. It will allow ICO to roll out an early revenue-generating business even as it prepares future niches including broadband wireless services.
“We’ve got a half-a-billion-dollar satellite that will be launched in November,” ICO Chief Executive Tim Bryant told an investor conference May 2. “We’ve got to use that asset.”
The company expects to sign a contract this year for construction of a second satellite — an investment required by U.S. regulations if ICO is to provide the full range of two-way communications using its satellite and a network of ground-based signal boosters. ICO estimates that this second satellite will cost around $200 million to build.
Reston, Va.-based ICO, which raised $650 million in a debt offering in mid -2005 and completed an initial public offering of stock on the U.S. Nasdaq exchange in September, said it will need further investment to be able to fund its second satellite.
In presentations to investors May 2, ICO Global officials highlighted the following points:
ICO is more confident than ever in its lawsuit with Boeing, which is set for trial starting Sept. 4 in Los Angeles County Superior Court. ICO Chief Counsel John Flynn said ICO is alleging “a whole range of claims, including fraud and breach of contract” in its lawsuit.
Boeing was under contract to ICO to build a fleet of 12 medium-Earth-orbit two-way telecommunications satellites in a $2 billion deal that was terminated under conditions that are one of the subjects of dispute in the litigation.
Flynn declined to say whether Boeing and ICO are negotiating a settlement, but noted that as the trial date approaches, the incentive to reach a settlement increases. Flynn said trial preparations have permitted ICO to secure documents and testimony from Boeing that “will be very helpful to us” at trial.
ICO officials declined to be specific about the amount they are seeking from Boeing, but said investors should view the stakes involved at anywhere from several hundred-million dollars, and as high as the $2 billion covered by the Boeing satellite construction contract.
Boeing has repeatedly denied ICO’s claims. Boeing spokeswoman Diana Ball said the company would not comment on the ongoing litigation.
The ICO G1 satellite under construction by Space Systems/Loral in Palo Alto, Calif., whose schedule delays forced ICO to secure a milestone extension from U.S. regulators, is on track for a launch aboard a Lockheed Martin Atlas 5 rocket in November or December, according to Bob Day, ICO’s senior vice president for space segment.
The satellite and the launch are fully funded, and ICO expects to have to pay $40 million to $60 million to insure the launch and the ground-based beam-forming system that determines the contours of the satellite’s multiple spot beams.
ICO, which is using the 2-gigahertz S-band portion of the radio spectrum in which to operate, is one of several S- and L-band satellite operators that propose to use the same frequencies to operate a network of ground signal boosters. These towers, called Ancillary Terrestrial Components (ATCs), will enable the service to function in mountainous areas, cities and other locales that are not in line-of-sight view of the satellite.
Deploying this network will be expensive. TMF Associates, a Menlo Park, Calif., consultancy, has estimated that each ICO ATC could cost as much as $100,000. To cover 74 percent of the U.S. population, ICO estimates it will need up to 2,530 of them, bringing the capital investment to some $250 million.
Under U.S. Federal Communications Commission rules on ATC licenses of this type, ICO will need to have a second satellite built within one year of offering ATC commercially. The company’s current schedule is to start ATC service in September 2008 in some markets, meaning it would need to have a spare satellite available on the ground by September 2009.
Day said this schedule requires that ICO order a second satellite by this summer.
ICO has selected the DVB-SH mobile multimedia technical standard for its service and announced May 2 that it has hired Alcatel-Lucent of Paris to oversee the early 2008 field trials. ICO and Alcatel-Lucent are in final negotiations on a contract that would make Alcatel-Lucent the lead network integrator of the ICO system.
Alcatel-Lucent also is working with satellite-fleet operators Eutelsat Communications of Paris and SES Global of Luxembourg on a similar S-band system to be deployed over Europe in 2009. ICO has selected Hughes Network Systems of Germantown, Md., to provide the ICO air interface, which will will be an advanced version of what Hughes Network Systems developed for the Thuraya satellite-telephone system in the Middle East.
