Satellite Firms Return After Failure to Launch

In the 1990s, a bevy of local companies promised a new era of satellite-based services, providing cheap mobile calls, high-speed Internet connectivity, streaming video and more. Companies such as Bethesda-based Iridium and Reston-based American Mobile Satellite spent billions launching satellites but lost out to traditional cellular networks and land-based Internet providers that offered cheaper and more reliable service.

The satellite companies have spent the past few years retooling, though, and now are prepared once again to make big investments. The companies envision live television on mobile devices and on TVs in the backs of cars; satellite phones the size of slim cellphones; and advanced systems to keep track of trucks, cars and goods.

They risk repeating the mistakes of the '90s: Several companies are going deep into the red trying to realize their visions.

"They've been going through a cleansing period," shedding old debt and refocusing their strategies, said Chris Baugh, an industry analyst with Northern Sky Research. "They're now able to ask questions like, 'How do we enable new applications like broadband and mobile video?' "

The latest sign of activity came late last month when Harbinger Capital Partners Funds, a $26 billion investment firm in New York, announced it would loan $500 million to SkyTerra of Reston to launch two new satellites.

SkyTerra became profitable over the past few years by targeting governments -- in particular, public-safety agencies -- and industries such as oil and mining, where workers often cannot get cellphone coverage. It'll go into negative territory to fund the new satellites, though.

SkyTerra said the 217-foot-long satellites, expected to launch next year or in early 2010, will be among the most powerful commercial satellites in existence. They also will allow SkyTerra to move forward in building a high-speed, land-based network -- like wireless companies have -- that would allow seamless coverage in cities. Then, in remote areas, or in case of a disaster when cellular coverage is disrupted, service would come via satellite.

"We're going to take the economy and scale and form factor that you're used to in a cellphone, iPhone, BlackBerry, and allow that to communicate to a satellite," said Scott Macleod, SkyTerra's chief financial officer.

SkyTerra also said last month that it is seeking to buy Inmarsat, a British satellite company, to gain spectrum, more satellites and coverage in places where SkyTerra doesn't have any, such as Afghanistan. Buying the company requires moving through a protracted regulatory process in Britain.

"I think the market is expecting more consolidation," Macleod said.

Back in the 1990s, Iridium was one of the largest flame-outs, going into bankruptcy protection just about a year after debuting a satellite handset service, wasting some $6 billion in investments. Today, the company is contrite about its mistakes and proud of the way it has turned around.

"Iridium is quite famous for putting up a technical marvel but not having a good business model," said Matt Desch, who joined Iridium in 2006 as chief executive. "It was aimed at the wrong market -- the consumer market -- that had already developed to small phones at low prices."