July 22, 2002 12:45 PM PDT

Satellite phones getting taste of cellular

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Satellite phone companies are starting to merge their own telephone systems floating in the heavens with the cellular networks on earth.

Globalstar Telecommunications believes it's the furthest along, having begun demonstrating a "satphone" that can also use a cellular telephone network. But cellular industry entrepreneur Craig McCaw's ICO Global Communications is also said to be working on a similar set of devices. Competitive pressure could force others, like Iridium Satellite, to do the same thing.

The development--which is supposed to improve a satellite phone's reception in dense urban areas--will likely get satellite phone companies even more attention than they've been getting since the Sept. 11 collapses of the World Trade Center towers. The attacks destroyed vital infrastructure of more traditional landline phone carriers like Verizon Communications and quieted millions of phones along the eastern seaboard.

But satellite phones cost hundreds of dollars more than regular cell phones, plus the calls cost between $2 to $5 a minute, while some cellular telephone calls are free. They are also bigger phones, harkening back to the early days of brick-sized cellular phones. The new hybrid phones are not expected to be any smaller or less expensive than the current satellite phones. Whether mainstream consumers are ready for the higher priced calls plus the bulky and expensive phones remains to be seen.

"(The satellite industry has) always over-promised and under-delivered," said Rob Enderle of market research and consulting firm Giga Information Group. "There will be an awful lot of tire kicking given the history of satellite providers and their failure to meet expectations."

Satellite phone companies have created the new hybrid phones to fill gaps in their supposedly global coverage from scores of satellites floating in orbit around Earth. But the tiny beams of energy that a telephone call or Internet session becomes in this kind of network were usually blocked by the big city canyons of brick, steel and concrete. Augmenting it with a cellular network on the ground was the answer.

The main problem, though, has been that the two telephone networks operate in different frequencies, meaning phones would need to house two different radios. But now scientists have created a way for cellular calls to operate in the same radio frequencies as the satellite networks. So only one radio is needed inside the phone and the switching between networks is automatically done.

"All this used to be on paper, but not anymore," Globalstar spokesman Mac Jefferies said. "Now you're truly available to anyone with a phone."

Sales of older generations of satellite phones have been on a steady rise since the terrorist attacks in New York. But despite the uptick in sales, there's still "no consumer market," for the phones, Jupiter wireless analyst Joe Laszlo said.

A relatively small handful of industries has its workers "in the middle of nowhere," like those in the petroleum industry, which is among the earliest users.

Laszlo thinks the new hybrid phones won't crack the consumer divide, but could become an interesting high-end service that the likes of Sprint or AT&T Wireless could offer to emergency service workers, who travel widely, or others "willing to throw a slightly heavier device in their backpacks."

Indeed, satellite phone companies are shooting for targets other than the 140 million American cell phone owners. Their main source of revenue is from the global traveler that would like to use just one phone and one phone number. A globetrotter now needs several different phones to match the various different cellular telephone networks they encounter.

Jefferies said Globalstar's hybrid phones will likely first land into the hands of emergency service workers, who need guaranteed wireless access to communicate. The equipment is still in development and won't likely hit the market for several months.

 

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