How 'spacecraft' will open up new mobile markets

For Michael Storey, the future of data communications is above us, far beyond the view of the naked eye.

As chief executive and president of Inmarsat Ventures, Mr Storey runs the network of satellites that handle distress calls from ships in peril anywhere in the world. But he is also positioning his satellites as a viable alternative to 3G mobile networks, at least for data.

Subscribers to Inmarsat's Global Area Network, or GAN, already have access to data at 64 kilobits (thousand bits) per second worldwide; the company recently launched versions of the service that work from aircraft and from ships. A 64kbps service is hardly broadband, but as Mr Storey points out there are plenty of places - by no means all in the developing world - where this data rate is beyond the reach of existing, fixed line phone networks.

"If I could get 64kbps in my hotel room, I would be happy," says Mr Storey. "We are never going to compete with the terrestrial networks, we are always going to complement them. But we outperform most phone networks today."

Inmarsat's next generation of satellites - or spacecraft, as Mr Storey prefers to call them - will support data at 432kbps, faster than most of today's ADSL (asymmetric digital subscriber line) or cable modem connections and far faster than current terrestrial mobile services. The new satellites, known as IM4s, will operate from 2004.

The IM4s will be nine times as powerful as the current IM3 network, but Inmarsat is already planning for the generation of satellites beyond that, which will offer even faster data links. "The IT and communications managers we talk to say that more than half a megabyte is a very very satisfactory network when you're not on a fixed line," he says.

The investment in the IM4s is substantial. Mr Storey puts the cost at $1.7bn, but there is an investment in time and expertise that is just as great. Inmarsat Ventures is a small company, with just 500 staff. The process of managing the existing network, launching a new network and developing the future technology all puts demands on a relatively small team.

This means that any new applications "have to be relevant," says Mr Storey, but he is confident that the demand is out there. This is just as well, as Inmarsat works to timescales that most chief executives would classify as "futurology," rather than business planning. It takes 12 to 15 months to find manufacturers for satellites, and 36 months to build them; launching and testing will take a further five months. If a satellite operates for 16 to 17 years, it is 22 years from the drawing board to the end of its commercial life.

"We are now working on satellites two generations away, which is 30 to 35 years," explains Mr Storey. "This is challenging. By then, rather than satellites, they will be spacecraft, on which companies will install different kinds of technologies. The one simple fact is people will want more bandwidth, just as they have terrestrially."

The new satellites, starting with the IM4, will not just offer faster data. The technology on board uses smaller, focussed spot beams. This allows Inmarsat to design smaller terminals. Miniaturisation does have a cost in terms of supported bandwidth, but the smallest terminals will be about the size of an A5 pad.

Smaller, more portable handsets bring the prospect of new markets for Inmarsat. Research by the company suggests that its data service, at about $6 a minute for 64kbps, compares favourably to international roaming with a 2G mobile phone, or even hotel call charges.

The idea of business users carrying a GAN terminal - about the size of a laptop computer, with a satellite antennae that opens up to around three times the size - is probably rather far fetched. But a smaller unit could pose a challenge to the 3G mobile operators, especially among corporate users and in fields such as research and exploration.

Mr Storey points out that the first 3G networks will be in city centres, and that it will take time for them to extend their reach. "The 3G terrestrial networks will only be built in metropolitan and sub-metropolitan areas for a number of years, maybe forever. But even if we are relegated over time to being at the edge of those networks, that still accounts for 80 per cent of the world's surface and 100 per cent of its airspace. That is not a bad place to be," he says.

The idea of operating as an extension to 3G networks is an attractive one, especially if Inmarsat's vendors can provide a form of roaming to allow 3G users to switch to Inmarsat when they move beyond 3G's reach.

Since Inmarsat's services are sold through a number of telecommunications companies around the world, such a service makes practical and commercial sense. But Mr Storey stresses that Inmarsat's investment in the IM4s does not depend on the success of 3G.

"Demand for mobile data will be stimulated by 3G, but our business model does not assume being complementary to 3G. It doesn't assume we will get any revenue from being an extension of the 3G networks. It is all upside," he says.

In fact, Inmarsat claims to have 240,000 "enterprise level users", and Mr Storey suggests that the figure will not need to rise very much to support the cost of the IM4 network.

"The companies and industries in which we operate are increasingly working on a global basis, and are often moving out of the reach of terrestrial fibre and DSL technology," he says. "They will be out of reach of 3G mobile for many years to come. People will require a fairly high level of data connectivity, and we are where the mobile and fixed terrestrial services are not."

The challenge for Inmarsat might lie less in the technology, and more in overcoming the perception that satellite communications are cumbersome, expensive and suited only to very specialist markets.

Inmarsat's profile has certainly risen under Mr Storey. The company still plans to float in New York and London, when market conditions improve. Mr Storey's disappointment at having to delay an IPO that was being planned late last year is palpable. He says the IPO was not designed to raise money, but to enable the company to undertake acquisitions using its paper and, vitally, to raise its profile.

Mr Storey knows that he has to overcome the idea that the business is all about ship-to-shore and emergency communications, important as they are. The IPO would have increased the company's exposure in the media, Mr Storey says, exposure that he needs to reach enterprise-level customers.

An IPO is still planned, but other profile-raising steps include sponsoring the World Rally Championship.

More airtime, though, has probably been achieved by the videophones used by the world's broadcast media reporting from trouble spots, most notably Afghanistan.

The shaky, stilted video from the terminals might not be the best advert for Inmarsat's next generation of services, but it is the sort of specialist, niche application Inmarsat thrives on.

As well as broadcasting, Mr Storey sees growth coming from ship-to-shore communications - as ship owners increase their use of computerised journey and load management - coastal shipping and aviation.

For Michael Storey, the connection is markets that are physically hard to access, and where reliability is critical.

He believes that the fact that Inmarsat runs the maritime distress system is a badge of trust. "The key measure of any telecoms network performance is 99.9 per cent availability. We exceed that.

"It comes down to pure engineering skill in designing the spacecraft and the technical skills in flying them," he says.

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