Satellites revolutionize airborne communications.

Satellites revolutionize airborne communications

$1 billion market lures Southland company into consortium

A revolution in the skies will take place later this year as a Culver City company introduces satellite-aided communication on airplanes allowing two-way communication with anyone across the globe by phone, FAX or computer.

The IDB Aeronautical Communications Inc., subsidiary of IDB Communications Group Inc., will join Teleglobe International Inc., of Montreal, Canada, to provide aeronautical satellite communications services for international flights beginning Nov. 1.

"Initial service will include passenger communications, such as advanced in-flight telephone, computer and facsimile services, as well as airline operations and cockpit data communications," said Jeffrey Sudikoff, IDB chairman and chief executive officer. IDB, founded in 1983, provides satellite transmission services for radio, television and corporate markets.

IDB and Teleglobe, a subsidiary of Montreal-based Memotec Data Inc., are part of consortium which also includes telecommunications carriers in Europe and the Pacific as well as a Paris-based nonprofit cooperative organization of over 350 commercial airlines, the Societe Internationale de Telecommunications Aeronautiques. Five airlines have committed to install the new technology through SITA: Swissair, Finnair, Qantas, Cathay Pacific and China Air.

"We think we are one of the leading carriers in the world and that is why we should make the investment," said Karl Laasner, Telematics project manager of Swissair. "Passengers will not only want good service, but will expect certain telecommunications capabilities."

Swissair will equip at least 16 of its long haul airplanes with the equipment by late 1991 or early 1992, Laasner said.

Ironically, no satellite communications services may be available on domestic flights. An August 1989 ruling by the Federal Communications Commission would bar the IDB coalition and others from providing the service due to an FCC relationship another company which plans to launch its own satellite in five years. The FCC is currently reconsidering its decision, said IDB President Edward Cheramy.

Existing passenger telecommunications services suffer from numerous limitations. Radio-based, they are inoperable over large ocean stretches and don't allow calling from ground to air. Computer and facsimile applications are also impossible, as they require digital, and not radio communications.

"Satellite service is something we see as a competitor, but also as a use we might have in the future," said Kevin Petschow, a spokesperson for GTE Airfone Inc., based in Oakbrook, Ill. GTE Airfone is the giant in airline consumer phone transmissions, with phones installed in 1,280 aircraft flying over the United States, its territories and southern Canada.

Cheramy said that he thinks satellite communications will deal GTE Airfone a body blow: "We think people will drop GTE."

Petschow said that the transmission quality of GTE Airfone is expected to improve as more airlines offer phones installed in seats instead of remote cordless phones.

The new satellite technology, made possible by the development of new radio antennas for aircraft, will lead to annual potential revenues of $1 billion for the IDB consortium by 2000, Cheramy said. IDB, with $60 million in estimated sales for fiscal 1989, hopes to receive a sizable chunk of that -- $50 to $100 million a year by 2000, Cheramy said.

The company and its consortium will be vying with two other similar consortiums to control the world satellite-assisted aeronautical telecommunications world market. Another consortium dubbed Skyphone includes British Telecom International, Norwegian Telecommunications Administration and Singapore Telecom. The third consortium consists of Communications Satellite Corp., of Washington, D.C., and Kokufai Denshin Denwa of Japan.

Competition is expected to be intense. "When everyone's up and running it will be very competitive," said Elizabeth Young, a vice president of COMSAT Aeronautical Services, a subsidiary of Communications Satellite Corp.

Cheramy said the IDB consortium will offer several advantages over the COMSAT consortium.

"IDB-France-Telecom's advantage is that we have a common worldwide consortium with backups: two earth stations for each satellite," Cheramy said. "In the event something happens to the earth station we still have coverage."

Earth stations receive and transmit signals to satellites and link transmissions to ground carriers.

Young, however, denied that extra earth stations will provide an advantage. "In reality, if something went wrong the software would take you to the next station," Young said. "You can program the software to have the satellite reroute the message."

Cheramy also cited the participation of SITA, the largest airline telecommunications group in the world, as a large advantage. The organization already has an extensive data communications network in 184 countries.

The COMSAT-KDD consortium includes Airline, an domestic airlines telecommunications association. At a recent meeting with SITA airline members and other consortium members, Cheramy said that he was surprised to discover that cockpit communications, and not commercial passenger applications, were the satellite-aided communications benefit which interested airlines most.

"It surprised me to find out how many flights are out of communication with anywhere for four hours out of 12," he said. "As a result of satellite technology communications will be uninterrupted and airplanes can receive a constant flow of critical information such as weather reports."

Ground computers could interface with airplane computers to the point that ground computers "could conceivably steer the plane using this."

Such communications will "absolutely" increase safety in the skies, Laasner said.

As for commercial services, such as passenger telephone, FAX and computer service, the price will start off exorbitant but, predicts Cheramy, "it eventually may be passed through at cost."

The initial cost for the service will be $8 to $10 per minute for conversations or data. By contrast, GTE Airfone charges $2 per minute in addition to a $2 setup charge for calls to the United States and Canada, and twice that to other locations.

Cheramy said that the company later plans to add entertainment services, such as live news, sports and drama broadcasts.

Another application of the technology, air traffic control, may take several years to develop, he said.

"Right now, due to blackout periods, airlines are split up by miles and miles, much more than they would need to be if they were in communication," IDB's president said. "If you were in constant and instantaneous communication, they can stack them up more closely." The savings in fuel and time could be tremendous, he noted.

IDB was approached by Teleglobe with the idea for the satellite venture, Cheramy said. The two entered into an arrangement cemented by the purchase of 20 percent of IDB's stock by Teleglobe in January.

Two analysts of IDB stock were pleased by the move.

"Once every decade or so something extraordinary happens in the application of technology and it normally has dramatic applications," said Joseph T. Arsenio, II, an analyst at San Francisco-based Hambrecht & Quist. "I would expect all the participants in this to enjoy enthusiastic response."

Allen N. Strand, an analyst with Los Angeles-based Bateman Eichler, Hill Richards Inc. said, "I think it's one of the best things that's ever happened to IDB. A lot of their growth has come from acquisitions. One of the perceptions is that IDB gets its growth by acquisitions and the other growth the company has received has often been difficult for an outsider to understand. This is something investers can relate to."

Satellite-assisted communications have been available to ships since 1976, when Communications Satellite Corp. introduced its MARISAT satellite system. Young said that industry revenues for maritime satellite services average about $130 million per year.

Such transmissions have been unavailable to aircraft due to their rapid movement. New technology which broke through the telecommunications barrier includes a miniaturized antenna which fits on aircraft and is steered electronically to receive and send out satellite transmissions, and ground equipment which controls the frequency at which transmissions are broadcasted and bills the airlines.