Va. Firm to Offer Pocket-Size Satellite Phone
TerreStar Service Hinges on Launch Of Satellite Today

By Mike Musgrove
Washington Post Staff Writer
Wednesday, July 1, 2009

To look at it, you wouldn't know it's a satellite phone -- and that's the idea.

Reston-based satellite firm TerreStar Networks is gearing up to launch a smartphone and phone service this year that will combine terrestrial wireless service with its upcoming satellite service.

Under a deal the company has with AT&T, TerreStar users will have their calls directed either through that carrier's network or through TerreStar's service. Make a call that's in range of one of AT&T's towers, and AT&T's network will handle it. But if a customer travels outside the AT&T network's range, that call will be routed to TerreStar's new satellite. You'll never get stuck without phone service in a "dead zone" again, goes the pitch.

"It's a terrestrial or cell tower in the sky," TerreStar president Jeffrey Epstein said. "That's the game-changing paradigm we're bringing."

If all goes according to plan, TerreStar will launch the satellite that will host its upcoming service today from French Guiana. The $300 million satellite will sit 22,000 miles above the earth's surface and provide coverage across the United States and Canada, including Puerto Rico and Hawaii. After a few months of testing, TerreStar intends to commence service later this year.

Until now, satellite phones have been bulky devices known for their large antennas. That's because for a satellite phone service to connect properly there needs to be a large antenna on the ground or a large satellite parked in the sky. In an attempt to attract customers with a pocket-sized phone that they could carry anywhere, TerreStar opted for the latter with its upcoming service. With a 65-foot span, TerreStar's new bird will be the largest-ever commercially launched satellite, about twice the size of typical TV service satellites.

TerreStar is hoping to first address a market of federal agencies and emergency first-responders who need to know that they'll always have service, even in the event of a Katrina-like disaster that knocks out cell towers on the ground. If there's an emergency or a major event in one part of the country, TerreStar will be able to adjust its coverage so that, say, an area in Arizona has enough capacity to support increased phone traffic. The company's larger ambition is to build a market for its satellite phone among mainstream consumers, but TerreStar has not yet announced how much it will charge for the service.

Analysts say that TerreStar's success isn't a given. After all, other companies in the past have tried and failed to bring satellite phone service to mainstream consumers.

"I'm a little bit of a skeptic on this," said Edward Jurkevics, principal analyst at Chesapeake Analytics in Arlington, who pointed to early satellite phone industry failures such as Iridium and Globalstar.

Jurkevics questioned the size of the market that might be interested in this product. "It think it's a niche play," he said. "Their revenue prospects are modest. If you're a geologist out in the wilds of nowhere, you still need a connection, but that's not a big a piece of pie."

TerreStar will soon face competition in this space; Reston-based satellite firm SkyTerra plans to launch two satellites next year and a similar service.

SkyTerra's executive vice president of distribution and strategy, Marc Montagner, said that having two players in the market will serve to lower device prices and raise consumer awareness. "It can only be a good thing," he said.

While TerreStar is working on a second smartphone that will also be compatible with the satellite service, the company hopes to build enough customer interest to prompt phone makers to start developing phones for use with the service, said David Marshack, senior vice president of product and device technologies.

The company tried to develop its satellite technology so that it would be easy for phone makers to jump in with their own devices in the future. For example, the chip used in the phone is the same as the one used in Apple's popular iPhone, which means that Apple wouldn't have to start from scratch if, say, the company wanted to make an iPhone compatible with the service.

There's no telling if that will happen, Marshack said, but "that idea was not lost on the people who designed this."

© 2009 The Washington Post Company