Competition for Satellite Mobile Data Services Heats Up

by

U.S. and Canadian regulators have paved the way for the start of a four-company race to provide mobile data and voice communication services in North America using satellites linked with ground-based wireless transmitters.

Many industry officials are skeptical about whether all four companies will survive as they confront the high capital cost of building and launching sophisticated satellites and the networks of ground-based signal transmitters that are the key to the systems’ business prospects.

But for now, Inmarsat Ltd. of London; Mobile Satellite Ventures (MSV) of Reston, Va., and its Canadian sister company, MSV Canada; TerreStar Networks of McLean, Va.; and ICO Satellite Management LLC of Kirkland, Washington, have the licenses they need to develop their systems.

Inmarsat and TerreStar had previously won approval. MSV and ICO received theirs the week of May 23.

The U.S. Federal Communications Commission (FCC) also ruled May 23 that MSV could build its proposed large L-band satellite, to be located at 101 degrees west longitude. MSV had sought approval of the new satellite by arguing that it will be a successor to the company’s current operational spacecraft, only more powerful, and should be approved on those grounds.

The FCC does not normally impose bond payments and construction milestones for replacement satellites because the credibility of the systems has already been established. In MSV’s case, the FCC said the second-generation system has a wider coverage area and had sought a broader frequency allocation as well, making it more than a simple replacement.

That means MSV must pay a $3 million bond to secure its license within a month. A contract for construction of the satellite must be signed by May 26, 2006, and the spacecraft must launched and operational by May 2010.

Canada’s regulatory agency, Industry Canada, approved MSV Canada’s L-band satellite in early April, and ordered the company to sign satellite construction and launch contracts by March 15, 2007, according to Jennifer Warren, MSV’s vice president for regulatory affairs. The Canadian satellite, to be operated from 107.3 degrees west longitude, must be in operation by March 2011, Warren said.

MSV Chief Financial Officer Eric Swank said the company will now move to secure strategic or financial investors, select a technical air-interface standard and select a satellite builder. “The satellites are bent-pipe spacecraft, so the terrestrial technology we choose is really the critical decision for us,” Swank said.

MSV raised $230 million in November, but part of that sum went to reduce debt. To build and launch the Canadian- and U.S.-registered satellites will probably cost around $700 million, Swank said. Installing the network of terrestrial signal boosters in areas where it is difficult to pick up a satellite signal will add substantially to those costs but installation of those repeaters — devices known in the industry as ancillary terrestrial components — does not need to be done all at once, he said.

To save fuel, MSV asked the FCC for more-lenient rules on the satellite’s movement once in orbit. A satellite’s on-board fuel supply is used to maintain a spacecraft stably in its designated orbital position. Only minimal east-west migration — 0.05 degrees — is allowed.

It is common for satellite operators to allow aging satellites to move more freely on their north-south axis in so-called inclined orbit toward the end of their lives to save fuel, to the extent that this does not require users to purchase new hardware to track the satellite.

MSV will operate its satellite in inclined orbit right from the start, and had wanted to permit east-west maneuvering beyond the regulatory limit. The FCC approved the inclined-orbit proposal, but rejected the east-west drift scenario following objections from other satellite operators with spacecraft nearby. DirecTV Group of El Segundo, Calif., operates four satellites around the 101-degree west position and expressed concerns about satellites colliding if MSV did not operate its spacecraft in a tightly defined space.

On May 24, the FCC permitted the fourth mobile satellite services competitor, ICO, to change its existing license for a 12-satellite constellation in the 2-gigahertz, or S-band, portion of the radio spectrum in favor of a single large satellite in geostationary orbit. The satellite, called ICO-G, will be operated from the 91 degrees west longitude orbital slot.

ICO has already signed a contract with Space Systems/Loral of Palo Alto, Calif., for the satellite and the FCC’s principal concern was whether this contract can credibly meet the new July 1, 2007, launch deadline. ICO’s previous license included a July 2006 launch deadline.

The FCC said the contract schedule with Loral is “extremely ambitious” but not impossible to achieve. It also said it looked closely at the payment terms and determined that the contract was real.

In addition to requiring ICO to pay a $3 million bond by June 24, the FCC ordered the company to report to the U.S. regulator at almost every major stage of the satellite’s construction at Loral. The company also must report back if any of the construction milestones fall more than 14 days behind schedule.