A Washington company is set to announce today a $100 million order aimed at bringing to reality a long-delayed new generation of mobile telephones that would work anywhere in the United States by linking directly to satellites.
American Mobile Satellite Corp. (AMSC) hopes to build a national business putting the phones in trucks, airplanes, private cars and remote homes, but it could face stiff competition as conventional cellular telephones expand into rural areas and from other satellite systems.
The phones would be too large to be carried by hand.
AMSC's $100 million contract is for construction of a satellite it plans to launch in the mid-1990s. The company confirmed yesterday that the job will go to Hughes Aircraft Co., with major subcontracting to be conducted by Spar Aerospace Ltd. of Montreal.
The phones would represent a new leap in "mobile communications," a field that experienced explosive growth in the 1980s with cellular telephones and paging devices. More than 4.4 million cellular phones are now in use in the United States.
Cellular phones rely on transmitters on the ground, limiting their use for now at least to metropolitan areas. AMSC hopes to prosper by offering phones that would work anywhere in the country, carrying conversations as well as fax and data transmissions.
"It will change the way that people live and work in remote and rural areas," predicted George Tellmann, AMSC's chief executive officer.
Drivers of trucks crossing the continent might use it to talk to dispatchers. Pilots might confer with controllers, or airline passengers might check for electronic mail using laptop computers. The system could serve homes in areas too remote to reach with wires or to relay readings from unattended earthquake or pipeline sensors.
Tellmann said the service would cost users $1 to $2 per minute. Basic equipment for the system would cost between $1,500 and $3,000, but prices would come down with growth.
AMSC plans to offer limited data service early next year, using capacity rented on another company's satellite, before launching its own in about 3 1/2 years.
Headquartered on Connecticut Avenue, AMSC is a consortium formed in 1988 by eight groups that had been competing for rights to run such a system. They came together after the Federal Communications Commission ruled that there was sufficient radio spectrum space for only one system. Hughes is a 12.8 percent owner of the firm, as is cellular giant McCaw Communications Inc. and Mobile Telecommunications Technologies Corp.
Hughes's selection as the builder was widely expected, due to its expertise and ownership stake (only one other company, TRW Inc., put in a bid). Spar's inclusion also was no surprise in view of a cooperative agreement AMSC signed last April with Telesat Mobile Inc. of Canada, which is also ordering a $100 million Hughes satellite and plans to run a similar system in Canada.
Currently, AMSC has $40 million in capital. Several of its owners will announce new equity contributions today to bring the capital up to $140 million to finance the first satellite's construction and launch.
AMSC's technology is based on high-powered satellites and small ground antennae that do not need to be pointed directly at the satellite. AMSC enjoys government backing in the form of an agreement to give federal agencies about 15 percent of its capacity for two years in exchange for a subsidized launch by the National Aeronautics and Space Administration. Another advantage: It has a monopoly license for U.S. domestic service of its technology.
Tellmann played down the possibility, but many analysts say serious competition could come from other technologies, notably cellular technology, which may be well established in some rural areas by the mid-1990s. Other business could be taken by existing satellite systems that transmit data only, by proposed ones that would handle voice as well, or by radio-based telephone systems for airlines.