Space Systems/Loral (SS/L) notified TerreStar Networks Inc. that delivery of the TerreStar-1 satellite has been delayed by 10 months, with a new delivery date scheduled for August 2008, TerreStar announced.

SS/L subcontractors and internal product development for the delay involving S-band low noise amplifiers, oscillators and the S-band feed array were cited for the delay.

"The only way to avoid a significant change in the scheduled delivery date would be to reduce satellite testing that we think could put optimum satellite performance at risk," SS/L CEO Patrick DeWitt told TerreStar in a May 29 letter.

TerreStar, a subsidiary of Motient Corp., remains on schedule to meet its operational milestone of November 2008, the company said. The company intends to build, own and operate North America’s first fourth-generation integrated mobile satellite and terrestrial communications network, to provide universal access and tailored applications over conventional wireless devices throughout North America.

DeWitt stated in his company’s notice letter to TerreStar that "we had hoped that the mitigation efforts that [TerreStar and SS/L] had put in place could be successful. Recent reviews, however, indicate that these efforts have not been fully successful in all cases…. We, as your overall contractor, hold ourselves responsible for the management of our subcontractors and for any internal product development, and realize that schedule delays such as these are frustrating as they are completely outside TerreStar’s control. We firmly believe that the quality of the product we deliver is of supreme importance. Please be assured that we will not make any compromise on the quality of the satellite in the interest of schedule. We are fully committed to the above delivery date [August 2008] for the TerreStar-1 satellite."

"We believe SS/L’s new schedule is prudent given the 15-year life expectancy of the satellite and our requirement for stringent quality," Dennis Matheson, TerreStar’s chief technology officer, said in a statement.

"We believe this new schedule will help provide TerreStar with the unprecedented scope and scale in satellite services key to TerreStar’s unique seamless integrated mobile communication network."

Arianespace, the commercial launch service for TerreStar-1, was notified of the new delivery date and has moved the launch period as per TerreStar’s contract for launch on demand. Arianespace’s updated launch window will allow TerreStar to launch in September 2008.

"When events such as this occur, we believe a measured approach is in the best interest of TerreStar’s customers and shareholders, while ensuring the satellite is of the highest quality and meets the requirements of our business plan. Our ability to remain on schedule for in-service operations validates TerreStar’s strategy of ‘de-risking’ our business roll-out," Robert H. Brumley, TerreStar’s president and CEO, said in a statement.

"Our team was able to incorporate solutions into our internal schedule and can bring online North America’s first integrated mobile satellite and terrestrial communications network on time."

Final authorization of the updated launch date milestone is subject to FCC approval.

Brumley added that TerreStar is continuing with its "smart build" plan, including development of three test markets for its service and equipment. "To date all equipment for satellite service are under contract and we continue to make great strides with our handsets and chipset technology with our vendors and manufacturers."

TerreStar still intends to file its application for ATC approval in the second quarter of 2007, and said it has made "considerable progress" with the ancillary terrestrial component (ATC) of its network.

TMF Associates analyst Tim Farrar said the launch delay seemed inevitable. "I think it had been obvious to most people in the industry that TerreStar-1 would be delayed once ICO’s was delayed. I guess they hadn’t known how much to be delayed, but the problems were very similar to ICO’s delays. The component issue was what they cited six months ago, and TerreStar’s is a bigger satellite. If it was taking longer for them, it stood to reason it would delay them, too. It’s a longer delay than I’d expected."

While Farrar expected the FCC to grant an extension of its deadline for launch, he was concerned about how the end product would be affected.

"I think the worry is in the testing," he said. "They said they’d only need 30 days of testing, but this doesn’t give them the time to test with end customers and doing some subscriber trials before trying to start generating revenue. If you don’t do testing and subscriber trials before you launch service, it will be slow to ramp up. The ability to do some subscriber testing is now completely circumscribed."