BUSINESSWEEK ONLINE : AUGUST 30, 1999 ISSUE
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INTERNATIONAL -- EUROPEAN BUSINESS

It's a Mad, Mad Internet Space Race (int'l edition)
SkyBridge's aim: field the first of a new breed of satellite system

Pascale Sourisse is out to steal a march on the titans of the Information Age. As chief executive of SkyBridge, the 37-year-old French engineer plans to offer high-speed data transmission around the globe through a network of 80 satellites. With its first launch set for mid-2002, SkyBridge claims to be about a year ahead of Teledesic Corp., a bigger and better-known satellite venture backed by the likes of Bill Gates and Boeing Co.

If Sourisse can hold to schedule, SkyBridge could be an early winner as the digital revolution moves to a new frontier. Billions of dollars are being poured into a race to craft satellite networks offering everything from phone service to Internet access. Yet big budgets and fancy technology are no guarantee of victory. Indeed, Motorola Inc.'s $5 billion global phone venture, Iridium LLC, is already on the rocks after failing to meet sales projections. Teledesic's cost estimates have jumped from $9 billion to at least $10 billion. SkyBridge, by sticking with relatively simple technology, needs only $4.2 billion to lift off.

MAJOR MARKET. What's fueling this new space race is a rapid growth of voice and data transmission that is swamping ordinary phone lines. Phone companies and cable-TV providers are rushing to connect users to higher-speed lines. But even in heavily-wired Europe and North America, an estimated 20% to 30% of customers are far enough from major population centers that it could be cheaper for them to log on by satellite.

Raising money, however, could be a problem for SkyBridge. After an initial surge, investment in satellite ventures has slowed to a trickle because of Iridium's financial woes and a series of launch failures. But like its competitors, SkyBridge has some corporate heavyweights in its corner. Created in 1997 by France's Alcatel, which still holds a 50% stake, the company has rounded up financing from companies such as Loral Space & Communications Ltd. and Toshiba Corp. Sourisse won't say how much of the $4.2 billion she has raised. But, she says, ''we are on schedule, and we will be very much ahead of the competition.''

While SkyBridge expects to offer attractive pricing, its services still won't be cheap. Business subscribers, whom SkyBridge expects will account for more than two-thirds of its revenues, will probably pay at least $2,000 to install an antenna to connect to SkyBridge, plus a monthly fee of around $50. The company says it hopes to sign up 20 million clients, mostly in North America and Europe. To better position itself in the U.S., SkyBridge, which hopes to go public in 2001, has moved corporate headquarters from Paris to Bethesda, Md.

READY RIVALS. SkyBridge's rivals vow to give it a run for its money. Teledesic, which plans a network of more than 200 satellites, says it has already raised $1.5 billion and expects to beat SkyBridge into space--even though its first launch isn't slated until 2003. Russell Daggatt, Teledesic vice-chairman, predicts SkyBridge will fall behind schedule in launching satellites and obtaining regulatory approval. ''We will be well ahead of them to market,'' he says. Other potential rivals are gearing up, too (table). Hughes Electronics Corp. is spending $1.4 billion on Spaceway, a network of satellites that's due to start operating in North America by 2002.

To hold down costs, SkyBridge is building satellites that will communicate only with the ground, while Teledesic's will be able to pass data back and forth to each other. The setup could complicate SkyBridge's plan to share the frequencies of existing commercial satellites. It also means Teledesic will be better equipped for some services, such as videoconferencing, because SkyBridge will be vulnerable to annoying delays caused by satellite-to-ground switching. But many customers aren't looking for such bells and whistles. ''The key will be to offer service at a reasonable cost,'' says analyst Marco Caceres of Teal Group Corp., a consulting firm based in Fairfax, Va. High prices are seen as a key reason for the Iridium fiasco.

Sourisse continues to search for new partners. ''The investors we talk to understand that we are nothing like Iridium,'' she comments. She recently signed a deal with Telstra Corp., Australia's biggest phone company, which took an undisclosed stake in SkyBridge and agreed to market its services in Australia and Southeast Asia. Such shows of confidence could help Sourisse put SkyBridge into orbit.

By Carol Matlack in Paris, with Janet Rae-Dupree in Silicon Valley and Larry Armstrong in Los Angeles

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It's a Mad, Mad Internet Space Race (int'l edition)

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