Satcom price war brews

Government will pay "the most favorable rates in the world" for phone calls placed over the $5 billion Iridium LLC mobile satellite system (MSS) that starts operation this September, according to the company's top government and industrial marketing manager.

Meanwhile, a top executive of Qualcomm Inc., one of the founding partners of the competing $2.6 billion Globalstar satellite telephone system, predicted that the company could beat Iridium's rates in the government market when Globalstar starts operation of its system in June 1999.

The statements of the two executives foreshadow an old-fashioned price war over a technology that existed only as a concept a few years ago.

Both Iridium and Globalstar have based their satellite telephone offerings on large constellations of low-Earth orbit satellites (LEOs)— 66 for Iridium and 48 for Globalstar— that will allow the use of cellular-like telephones to place and receive calls from the satellites anywhere on Earth. Earth stations needed to access the higher-orbiting geostationary satellites, such as those operated by the International Maritime Satellite Organization and used extensively by the Navy, require much more powerful phones that fall into the "luggable," rather than portable, class.

Both companies declined to detail their pricing plans, but the Iridium executive pointed out that phone rates for calls using the older geostationary systems run from roughly $2.40 to more than $7 per minute, depending on the type of service and the type of user.

Iridium has all its satellites in orbit, but Globalstar will not complete launch of its full constellation until mid-1999.

Both companies view governments worldwide— and the U.S. federal and state governments in particular— as sizable markets that are keys to their early success.

Iridium's business plan pegs the government market at roughly 7 percent of the overall market, said John Rasmussen, manager of government and industrial markets for Iridium.

But Rasmussen, interviewed at last week's TechNet Conference in Washington, which was sponsored by the Armed Forces Communications and Electronics Association, quickly added, "I think it's bigger than that, especially in the early stages" of the global Iridium marketing campaign. Rasmussen said he expected government users to sign on early and potentially in large numbers because many government agencies— as opposed to commercial or individual users— already have extensive experience with satellite communications and view satcom more as a necessity than a luxury.

Iridium is 18 percent owned by Motorola Inc.— which developed the Iridium concept— and dozens of investors around the world, including major foreign telephone companies. It has set up 14 commercial gateways around the world and installed a 15th, in Hawaii, to serve the Defense Department through a contract let and managed by the Defense Information Systems Agency.

Rasmussen said the DISA Hawaii gateway would serve DOD users worldwide, funneling all DOD calls through that gateway directly into the Defense Information Systems Network.

DISA has ordered 2,500 of the Iridium satellite phones for deployment to key DOD users worldwide, and the Navy Space Command has recently concluded a deal for an additional 1,500 phones, Rasmussen said.

To ensure security over a satellite system owned by a global consortium— including participation by companies in Russia and China— DISA plans to add security systems to the Hawaii gateway next year, Rasmussen said. These include an interface for Secure Telephone Unit III phones as well as interfaces for the secure Future Narrow Band Digital Terminal developed by the National Security Agency through a program code-named "Condor." Rasmussen expects Condor to go online at the DOD gateway in August 1999.

The Army and Air Force also have embraced MSS as part of their future global communications requirements. Speaking at TechNet last week, Lt. Gen. William Campbell, Army director of information systems for command, control, communications and computers, said that the Army plans on "leveraging" the capabilities offered by LEO systems in the near future.

Rasmussen said that he has not received any firm orders from either the Army or the Air Force. But, on the nontactical side, he said there is "lots of interest" from the Navy in using Iridium to provide personal satellite pay phone service to crews on deployed ships, particularly smaller ships such as destroyers and frigates.

Battle Brewing

Globalstar has not signed a firm deal with any federal agencies and is concentrating its marketing campaign on selling a gateway to its system to DOD, said Jeff Goecke, vice president, government, for the Technical Applications Division of Qualcomm. But Globalstar, Goecke said, can "deliver a more cost-effective service" to federal users than the competition.

Iridium uses a "switchboard-in-the-sky" architecture, meaning the satellites relay signals to each other before routing them to the destination gateway. Globalstar, co-founded by Loral Space and Communications Inc., relies on "bent pipe" technology, feeding signals from a phone to a satellite then directly into a regional gateway. This approach lends itself to installation of roughly two Globalstar gateways to serve DOD users, Goecke said.

The consortium also is trying to sell DISA on the concept of a "deployable" gateway that, put into a theater, "would have a huge footprint of 1,500 to 2,000 kilometers," or range enough to cover an area as large as the continental United States. Like Iridium, Globalstar also plans to offer DOD and other federal users secure communications through the use of the NSA Condor technology, Goecke said.

Whatever MSS service DOD and other federal users opt for, it makes sense for them to rely on the substantial financial investment and infrastructure development done by these two companies, particularly in an era of declining defense budgets, said Warren H. Suss, a communications analyst who specializes in the federal market.