Posted on: Tuesday, December 17, 2002

New global satellite phone plan in works

By Paul Davidson
USA Today

A controversial plan to resuscitate the global satellite phone industry — by supplementing the offerings with land-based cellular service — is expected to win the approval of federal regulators, despite protests from cellular carriers.

The proposal would pave the way for mobile phone services that work virtually anywhere, from the Gobi Desert to New York City. It also could bring fast Internet services to remote areas.

The Federal Communications Commission's staff is recommending approval of the plan, with conditions to ensure that satellite firms don't abuse it as a back-door way to provide land-only services, people close to the situation say.

In the 1990s, companies including Iridium and Globalstar offered satellite phones that erased the need to build costly cell towers in the hinterlands. But both companies failed as cellular companies marched farther than expected. Also, their brick-heavy $3,000 phones cost as much as $7 a minute to use and didn't work in cities because of interference from tall buildings.

But satellite players didn't give up. Three firms — New ICO, backed by wireless phone pioneer Craig McCaw, Globalstar and Mobile Satellite Ventures (MSV) — plan to shrink the phones to cell phone size by putting the antenna in a separate unit.

They also hope to shrink the bill to as low as 30 percent above cell phone prices, in part by expanding their market by providing service that works in cities, too.

To do that, the companies plan to erect cell towers in urban areas to fill in spotty satellite coverage. But they need FCC approval to use satellite air waves, which are free for cell phone services.

Current cellular players note that they paid billions for their land-based spectrum and fear the upstarts could forgo the costly satellite service and just offer a discount cellular service in large cities.

"They're pulling a bait and switch," says Travis Larson of the Cellular Telecommunications and Internet Association.

The satellite companies say they only are aiming for a niche market that needs both remote and urban coverage, such as the military, mining companies and some rural residents. Globalstar and MSV now offer limited rural service.

Under the proposed conditions, the companies would have to offer service nationally, not just in urban markets. They could not provide land-based service until all their satellites were up. Some of their spectrum is expected to be auctioned to cellular companies for wireless broadband services.