Tens of thousands of feet beneath the ocean and 22,300 miles above the earth, two technologies - fiber-optic cable and satellites - are locked in battle for telecommunications supremacy. This month, the first fiber-optic transatlantic cable is being lowered gingerly onto the continental shelf just off the coast of New Jersey. Scientists and hard-nosed businessmen are equally agog at the possibilities once it is strung over 3,000 miles to reach England and France.
Fiber-optic cable, the new darling of the communications industry, uses ultra-pure glass fibers to channel laser beams pulsing with tens of thousands of conversations and encyclopedic quantities of business data at the speed of light.
Not surprisingly, the US satellite communications industry is worried about a decline in phone calls and data bouncing off their orbiting ``birds'' and back to earth stations. The industry is not concerned about television transmission, which it can transmit more cost-effectively. But voice service, the most vulnerable portion of satellite services, has been declining in the United States.
``Satellites are taking some beating, and they will continue to take a beating in the future,'' says Bruno Miglio, a laboratory scientist with Hughes Space & Communications Group, manufacturer of the new generation Intelsat VI satellite.
As communications giants like AT&T, MCI, GTE-Sprint, and others shift voice and data traffic from satellite to fiber cable, Mr. Miglio believes the satellite share of North Atlantic communications traffic will decline from 50 percent in 1986 to 29 percent by 1995, possibly dipping even lower after that.
The Federal Communications Commission currently mandates that international telephone companies carry 50 percent of their international traffic via satellite. Pressured by the phone companies, the FCC may modify that regulation.
``Fiber optics is new and fashionable,'' Miglio says. ``But satellites will come back. They will have a hard time for a few years because of fiber optics, but satellites will hang in there. We are already observing signs of a comeback.''
Stung by the competition, the satellite industry has begun to reshape itself, emphasizing its strengths in distributing television signals, reaching remote areas of the world and providing flexible communications packages.
The industry has also embarked on a spurt of research spending to overcome the annoying ``echo,'' or time lag, people hear when they speak long distances, and the electronic interference that sometimes mars satellite transmissions. Fiber cable is expected to have little distortion and is appealing to high-speed data users who don't like garbles and glitches.
``What fiber optics is doing is forcing satellite carriers to redefine the nature of their business,'' says Kenneth Donow, a senior analyst with Satellite Systems Engineering, a Bethesda, Md. consulting firm.
Despite a competitive disadvantage in heavily populated markets, Mr. Donow still estimates that 41 new US communications satellites will be launched to replace spent satellites by 1996. Revenues from building and launching satellites will total $5.2 billion by 1996, he says. Shipments of satellites, and launching and tracking equipment will fall to an estimated $1.8 billion this year from $2.2 billion in 1985, says a US Department of Commerce spokesman.
But satellite businesses like Communications Satellite Company (COMSAT) are moving strongly to cut costs and jobs, market their services more innovatively, and at least right now, offer lower-cost long-term leases for satellite transponders - the relay units on the spacecraft.
Communications satellites are shot into geosynchronous orbit to an altitude of 22,300 miles. At that distance, the satellite travels at the same speed as the earth's rotation, which keeps it in a stationary position over a particular spot on earth.
Satellites can reach distant areas that will never be economical for a fiber cable. Yet, glass fibers have just a fraction of the weight of the former generation of transatlantic cable, which had 1,200 strands of copper wire in each. They have leapfrogged satellite technology in efficiently reaching dense population centers.
``These satellite carriers cannot compete on `thick route' traffic. They cannot compete between New York and Chicago,'' Donow says.
Responding but unruffled by that fact, Jack Hannon, deputy director of the world systems division of COMSAT, says: ``We view this as a fairly natural progression in technological competition. When the satellite came on the scene it had the analog [copper] cable on the run. They've produced a significant breakthrough on their side of the equation.''
Satellites are still cheaper to build and launch than major fiber-optic cable installations. But fiber-optic cable remains more competitive on short hauls between large population centers like Chicago and New York, or New York and Washington.
Cost, of course, is crucial. The transatlantic cable will cost about $335 million, have a capacity of 37,800 voice channels, and an expected life of about 25 years. The new generation satellite equivalent of this cable would cost $230 million and provide 40,625 voice channels, according to Miglio at Hughes.
With that slight cost edge, satellites still will have trouble competing because of regulatory and political factors. COMSAT, for example, was given a charter to manage US interests in the 112-nation International Telecommunications Satellite Organization (Intelsat).
COMSAT owns 24 percent of the 15-satellite Intelsat system. It has spent heavily to build satellites, and consequently gets 24 percent of the circuits to conduct international communication from the United States. It then leases circuits to AT&T, MCI, and RCA.
But these carriers feel they may be paying too much to run data through a COMSAT satellite system rather than through their own cable network. That's partly COMSAT because Intelsat has averaged the costs of its circuits, effectively subsidizing high-density routes with thin routes serving sparsely populated countries.
Intelsat made a leap ahead last fall, however, when it cut fuel use and lengthened the useful lifetimes of satellites from less than 10 to about 12 years. Though still cheaper for transmissions of more than 500 to 700 miles, satellites may lose their advantage as the capacity of fiber is expanded using data compression techniques.
Despite these bottom line improvements, satellite costs have gone through the roof since the Challenger disaster in January 1986. Several subsequent satellite launch failures have also not inspired much courage among insurance companies, which have quintupled premiums.
Because a decision to put up a satellite must be made three years in advance, the cost and uncertainties of getting into orbit have raised the ante for companies wishing to put a satellite in space.
``Challenger was awful,'' Donow says. ``But the subsequent launch problems have made the entire situation move from awful to catastrophic. The industry will recover from it, but the environment is very shaky right now, it's been shaky for the past year.''
Two bright spots appear on the horizon for the satellite industry. One is the private network business market, the other is television.
Satellites have a natural advantage because they can distribute television signals more economically, at this point. Technology has also decreased the size and cost of earth-based dish antennas and equipment. As a result, multinationals and other large companies have found it easier and cheaper to tie their disparate units together.
The growth of VSAT, or very small aperture terminals (introduced in 1982), is one satellite industry that's in double digit growth. Although companies installing networks were expected to make VSAT grow at 25 percent rate, it has only grown closer to 15 percent. Still, there is optimism here.
In the fast-growing VSAT market, private network specialty companies like Satellite Business Systems and American Satellite Company are helping Fortune 500 companies link their operations.
K-Mart is tying its 2,200 stores together, as are Walmart, Southland (7-11 stores), Schlumberger, Farmers Insurance Group, Haliburton, Reuters, United Press International, the American Stock Exchange, Kodak, and J.C. Penney. Aetna Insurance, based in Hartford, Conn., has both a fiber and a satellite network.
``Uses will multiply as businesses become more global and as this big blue marble shrinks a little bit,'' says Martin Roberts, publisher of Satellite Age, a quarterly newsletter.
Some securities analysts say satellite competitiveness will remain strong in the next few years because of the large investment in satellites and long-term contracts. One analyst says the ``comparative advantage of fiber is moot for several years.''
``You're looking at a drawing board-type situation with fiber optics where the cost projections probably are too rosy,'' says Anthony Pearce-Batten, a securities analyst, with Legg Mason in New York.
Another item in favor of satellites, analysts say, is the reliability factor. If an undersea cable fails, there has to be a leased satellite channel to back it up.
Two years ago, AT&T found that sharks apparently had a sweet-tooth for the newly developed undersea fiber-optic cable. Scientists aren't sure what's causing the attraction, so vulnerable portions of the transatlantic cable will be wrapped with steel tape.
``It's just too important to avoid,'' says Mr. Pearce-Batten. ``Fiber-optic cable may tend to break or get eaten by sharks. The reliability of satellite communications is pretty good unless people start shooting satellites out of the sky.''
More telephones and restful nights in Samoa
To most inhabitants of American Samoa, the struggle in the telecommunications industry between fiber-optic technology and satellites couldn't seem more distant.
A mild breeze rustles the fronds on the palm trees on the main island of Tutuila. And as darkness falls on this flyspeck in the Pacific Ocean, Aleki Sene will leave his office for a quiet evening at home, confident of getting a good night's rest.
But such has not always been the case for Mr. Sene, director of communications for this group of seven islands more than 5,000 miles from the West Coast of the United States.
Suffering through more than a decade of communicating with the outside world using just two high-frequency radio channels, Sene, who lives in the capital city of Pago Pago, became used to bumps in the night and knocks on his door at 4 a.m.
``In the early hours of the morning, circuits could go down for hours without any communication between the islands and the outside world,'' Sene says in a telephone interview between Pago Pago and Boston. ``If you wanted to make an urgent phone call, and the operator said the circuits were down, then you had to wait hours for the connection. That's no longer the case.''
Life for the 37,000 inhabitants of American Samoa has changed as satellites have brought the three major networks, game shows, and sitcoms to their living rooms. Instead of 1,600 telephones just eight years ago, the islands now have 8,000.
And for Sene, the technology of a satellite earth station owned and run by Communications Satellite Corporation (Comsat) has brought blessed relief.
``I can sleep at night now,'' Sene says in a clear voice, with so little static he seems more likely to be in a neighboring state than half a world away.