New Satellite Phones To Get off the Ground

Today's scheduled launch of a Delta II rocket from California's Vandenberg Air Force Base will push three satellites into orbit and pull people on the planet below a little closer together.

It will take 20 months and many more satellite launches to make the system fully operational. When it is, the orbiting network known as Iridium will usher in a new era of telecommunications. Consumers will have the first global hand-held telephone, usable in downtown Manhattan as well as on top of Mt. Everest.

The initial Iridium phones will not be affordable for most people. Half the globe's population has never used even a traditional telephone, by some estimates. But as other companies follow Iridium's path, prices may fall. First-generation Iridium phones will cost between $2,000 and $3,000 apiece. Calls will run $3 a minute plus any local or long-distance fees on the other end. That's nearly 10 times the cost of an average cellular telephone call in the United States.

Critics wonder if there are enough globetrotters willing to pay that kind of money to make Iridium profitable. "The cost of it is just outrageous," says Jane Zweig of Herschel Shosteck Associates, a consulting firm in Wheaton, Md. And "the need for satellites is questionable." The cellular industry has made so much progress in extending its global reach that ground-based wireless telephones will probably meet the needs of most globetrotting businesspeople, she adds.

But Iridium is undaunted. "I don't think it's outrageous at all," says Robert Kinzie, chairman of Iridium LLC. "We're talking about the global traveler and the person who can't be without communications." If Iridium can attract 1 million customers, about 1 percent of the world's mobile-phone users, it will be quite profitable, he adds.

Other satellite systems currently provide near-global coverage, but they are parked in high-earth orbits that limit their usefulness. For one thing, the satellites are so far away it takes phones the size of a briefcase to make contact with them. For another, the signal has to travel so far that it delays transmissions.

Iridium, by contrast, is a low-earth-orbit system with little if any delay. Its phones are comfortably held in one hand. The drawback: It takes many more low-earth satellites - 66 in Iridium's case - to cover the globe. That makes the project costly. In all, Iridium's investors will spend $4.8 billion to launch the network.

Competitors are coming. Globalstar is a $2.2 billion 48-satellite voice and messaging system backed by Loral, Qualcomm, Alcatel, and others. Microsoft chairman Bill Gates and cellular mogul Craig McCaw have proposed Teledesic, an 840-satellite system that could carry data as well as voice and cost an estimated $10 billion. "We believe the market is large enough and that there is room for the other ... operators," Mr. Kinzie says. "Competition will only make us better."

Cellular systems are working to expand their networks beyond the largest population centers. One problem with today's cellular phones is incompatible standards. A European's phone won't work in the US and vice versa. Ms. Zweig says the standards will probably be harmonized in the next few years; users would have to make minor modifications when they travel abroad.

Interestingly, Iridium will likely beat the cellular industry to this dual-mode capability. When a user is within range of a local cellular network, the phone will automatically switch to that system. This not only ensures a clearer signal than the direct satellite link provides, it will also be cheaper than $3 a minute, says an Iridium spokesman. Users will also be able to switch components so the phone will conform to a nation's cellular standards.

Quite apart from the technical challenges of operating its network, Iridium faces financial and regulatory challenges. Its 17 investors, which include Motorola and Sprint, still must raise $2.1 billion. The system must get approvals from some 200 nations it plans to operate in. So far only six - the US, Afghanistan, Micronesia, Pakistan, Thailand, and Venezuela - have signed up.