A request by ICO Global Communications to delay construction of its geostationary satellite means the company’s plans to launch a hybrid satellite-terrestrial communications system will be pushed back even further, and could indicate that development of its system remains up in the air, according to one industry analyst.

On Nov. 9, ICO filed a request to the U.S. Federal Communications Commission (FCC) asking to extend four milestone dates spelled out in the company’s authorization for construction and launch of the satellite portion of its hybrid mobile satellite services system. ICO is among the companies developing an system under an FCC license that will use satellites and ancillary terrestrial components (ATC) to provide communications services.

Reasons cited by ICO included manufacturing and delivery issues encountered by subcontractors for satellite manufacturer Space Systems/Loral (SS/L). Reston, Va.-based ICO asked that the deadline for the launch of its satellite be extended from July 1, 2007, to Nov. 30, 2007, and that operational certification of the mobile satellite services (MSS) system be extended from July 17, 2007, to Dec. 31, 2007. ICO also asked that the project’s milestone testing dates be accordingly pushed back.

Industry analyst and consultant Roger Rusch, president of Telastra Inc. of Palos Verdes, Calif., wonders whether the delays were anticipated from the start. "When the first contract was written, it was obvious they could never meet that schedule," Rusch said. "ICO took a while to sign the contract, then did so probably assuming they could probably get an extension. I think they knew themselves all along, and that the FCC would be hard-pressed to cancel the schedule," which would be tantamount to cancellng ICO’s license.

While Rusch expects the FCC to approve the request by the spring, it is "under active consideration," said Rod Porter, deputy bureau chief of the FCC’s International Bureau, who otherwise declined to discuss any details of the request or offer a timeframe for a decision.

Assuming it is granted, Rusch wonders how a delay will affect SS/L. "[It] has been bidding these (contracts) with very small profits," he said. "The question is whether the delays will cost them to fall into the past and hit [cost] overruns and lose money."

He noted "Loral’s average delivery time is longer, but I think that’s because they take on some ambitious programs.

"I wonder if these are indications that they’re having financial conditions, despite their reports to the SEC that everything’s going just great," he said. While "there are instances they’ve delivered on time, too," Rusch warned "if you base a financial plan on a short schedule, you have to have some margin in there."

SS/L spokeswoman Wendy Lewis referred only to ICO’s FCC filing on the matter and declined to comment further. Repeated attempts to contact ICO were unreturned.

Segment Concerns

Rusch wonders what SS/L’s example means to the industry as a whole.

The FCC’s decision to permit MSS companies to use spectrum for an ATC-based network has since given way to hardware development.

Beyond ICO’s contract with SS/L, six other major players have formulated business plans, with infrastructure in the works. ICO North America in May 2005 raised $650 million and told investors that ATC rights could be valued as much as $9.8 billion.

Likewise, Terrestar raised $200 million in a private placement in mid-2005, has a spacecraft under construction at SS/L and is seeking its launch by 2008. Mobile Satellite Ventures (MSV) remains on track to complete a $500 million deal with Boeing for two North American spacecraft.

Despite all, however, "I’m suspicious that there is no ATC," Rusch warns. "[It] is supposed to be the basis of the business model. But what we’ve already seen (in the late 1990s) is that they’ve lost money and eventually gone bankrupt. I don’t think that there are enough [customers] interested."

ATC can enhance availability, efficiency and economic viability of MSS by reusing at least some of the frequency bands allocated to cellular systems. Without ATC, MSS operators will be hard-pressed to reliably serve urban areas, as the satellite’s signal can be blocked by city structures. Executives thus seek systems which use ATC retransmissions to solve the problem.

Throughout the last five years, the FCC has permitted use of MSS spectrum for integrated satellite-terrestrial services, largely on the premise that newer, more advanced satellites would allow customers to use small, low-cost handsets for mobile services.

Rusch said he’s yet to see proof that, even if ground-based infrastructure is built, enough customers will come.

"The more telling thing about [ICO’s delay] is there is no indication that the ground segment is underway," he said. "Granted, it doesn’t take as long to build a ground segment as it does a satellite," but "considering now, in the case of ICO, they’re supposedly a year away. If you’re going to build a ground segment, it takes more than a year," he said.

Starry-eyed investors beware, Rusch concluded. "I guess it’s the glamour of space, but given that we’ve had these bankruptcies in the past, you’d think that’d be doubly suspicious of investing in the future," he said. "There’s a belief in ATC, but it’s almost a religious belief. There’s no evidence that the customers are coming. I don’t think that any of these are expecting to build out the ground segment themselves."

Whether ICO’s situation proves instructive, "I think the thought process today is that once the satellite is up, then the terrestrial people will come forward. But it’s certainly a risky proposition."