Hughes Hopes to Launch Space-Based Telecom Services : Technology: Company bucks the trend toward fiber optics in pushing new long-distance and video telephone system.
Hughes Aircraft Co., again exploiting its expertise in satellites to invade commercial markets, said Wednesday that it plans to launch twin satellites that would provide “on demand,” long-distance telecommunications services for consumers and businesses.
The $660-million system, to be launched in 1998, would aim mostly to provide business customers with conferencing and other communications services. But it would also enable individuals to make video telephone calls, gain high-speed access to on-line information by computer or use two-way multimedia services.
Hughes, a Los Angeles-based unit of General Motors Corp., said individuals would have to buy a 26-inch-wide dish, costing about $1,000, to receive the system, and pay a fee for the services.
Meanwhile, businesses can use the system to hold video conferences or transmit financial documents, medical images and technical drawings between cities, Hughes said.
Many of those services are already available via American Telephone & Telegraph Co., MCI Corp. and others that use ground-based fiber optics to connect customers. But Hughes said its system--dubbed “Spaceway”--would enable more people to get the services more quickly and at lower prices.
“This will improve the quality of the service and reduce its cost,” said Steven D. Dorfman, president of Hughes’ telecommunications and space group.
Outsiders are not nearly as sanguine about the system, which needs Federal Communications Commission approval before it can operate.
Herschel Shostek, a New York economist specializing in communications, said the “trend has been away from satellite and toward optical fiber because it is quieter, cheaper and there is no (voice) delay. To make it work, they (Hughes) would have to show a clear cost benefit.”
Richard Liebhaber, MCI’s chief technology and strategy officer, said that while there may be specialized uses for Hughes’ technology, they are too limited to reach the 600,000 subscribers Hughes hopes to get.
“It doesn’t ring my bell,” Liebhaber said. “I like fiber.”
But Dorfman said Spaceway is not primarily meant to compete with AT&T;, MCI and others. Instead, it would augment their services.
For instance, a law firm holding a video conference between its Chicago and Miami offices might have its connection first picked up by MCI, which would then hand the signal off to Spaceway, all in split-second time. This is much the way local telephone companies now take long-distance calls and switch them to MCI and other long-distant carriers.
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Dorfman said Hughes also might try to sign up the long-distance companies as partners on Spaceway, both to help market Spaceway and to defray Hughes’ investment costs in the project. That partnership arrangement is the same tack Hughes is taking with another of its budding commercial projects, DirecTv, a satellite-to-home television service set to begin next year. Hughes’ main partner in that deal is U.S. Satellite Broadcasting, a unit of Hubbard Broadcasting of St. Paul, Minn.
DirecTv will offer up to 150 channels of movies, sports and other programs via two satellites, the first of which is being launched Dec. 17. DirecTv customers will pay about $700 for a small receiving dish and a monthly fee similar to that charged by cable companies.
DirecTv and Spaceway will remain separate, and customers will have to subscribe to each service separately.
Nonetheless, both systems illustrate how Hughes--an aerospace and defense giant that still derives two-thirds of its sales from the U.S. government--is using its vast satellite skills to rapidly move away from the shrinking defense business.
Hughes is already a leading manufacturer and operator of commercial satellites. The Spaceway system would be an outgrowth of a private long-distance system that Hughes provides certain big companies, such as Chevron Corp., so that their various sites can exchange credit card authorizations and other data.
DirecTv and Spaceway are also being targeted to rural areas where fiber optics and cable TV wiring are still absent. Rural medical clinics, for instance, could use Spaceway to transmit X-rays and other medical records, Hughes said.
Spaceway might indeed be attractive in rural areas because of the high cost of laying optical fiber for relatively small populations, said Fritz Ringling, a partner at Network Dynamics Assn., a New York consulting firm.
Other potential clients, Ringling said, are large medical complexes, brokerages and other locations where there are high concentrations of phone users.
