It's an odd pair: former Reaganite Alexander M. Haig Jr. and transsexual businesswoman Martine Rothblatt. They want to cut the multibillion-dollar satellite industry off at the knees
It was a sunny day in early April, and General Alexander M. Haig Jr. and his 44-year-old son Alex were on a mission. Not a military mission, but they did expect to come under fire. The two were off to brief officials at the Federal Communications Commission about Sky Station International Inc., a bold plan to build a sky-based communications network that could potentially deflate some high-profile telecom satellite ventures. The elder Haig, 71, is a strategic adviser and part-owner; his son is president and chief operating officer.
A month earlier, Sky Station had laid out its elaborate plan in an inch-thick filing to the FCC. Its goal is to bring high-speed wireless Internet access and phone service to 80 percent of the world's population by 2004. But to hit that lofty target the Chantilly, Virginia-based company would need the federal agency to go to bat for the project. First, by allocating the necessary radio frequencies; then by urging communications ministers from around the globe to do the same when they meet at the World Radio Conference in Geneva next year.
The Haigs were accompanied by businesswoman Martine Rothblatt, 41, their new partner and a successful regulatory attorney in Washington, DC, for more than a decade. Rothblatt gave an impressive demo, describing in detail how Sky Station could revolutionize wireless telecommunications.
Perhaps as interesting as the presentation was the odd juxtaposition of Haig, the starchy secretary of state under Ronald Reagan, and Rothblatt, a well-known transsexual who used to go by the name Martin and is the father of four. Two years ago, Rothblatt made the big gender switch and since then has spoken out extensively about transsexualism, both in a book (1995's The Apartheid of Sex: A Manifesto on the Freedom of Gender) and on talk shows such as Donahue. One senior FCC official who was at the Sky Station presentation said: "It was one of the more unusual meetings I've been to in a long time." __ Fly the crowded skies __
What united the unlikely duo of Haig and Rothblatt? Not money alone. Both are already millionaires. Haig made a bundle off stock options he was granted as an early director of America Online Inc. - the stock has split four times over the last three years. He has also made a fortune putting together international business deals through his company, Worldwide Associates Inc. Rothblatt's money came though several ventures she helped create: Satellite CD Radio Inc., a digital radio service; WorldSpace Inc., a satellite service for Africa, Asia, and Latin America; and Panamsat, a satellite television network for Latin America.
Instead, Haig, Rothblatt, and their partners see Sky Station as a chance to do something big - really big - and make money too, perhaps in an IPO down the road. Rothblatt's journey across the sexes has never clouded that goal. "The fact that I'm transgender has no more relevance than if I were Catholic or Buddhist," says Rothblatt. "It never once came up." The younger Haig concurs, noting that Rothblatt's extensive legal experience is invaluable, regardless of her sexual orientation.
If Sky Station works - and many are skeptical that it will - it could create "the most impressive broadband wireless communications system available in the world," says Haig.
The Sky Station partners are not alone in their enthusiasm about the potential of the wild blue yonder. There is an excitement about space communications unlike anything since the early '60s, when satellites made international phone calls and TV broadcasts commonplace. Huge parts of the globe - from villages in Sri Lanka and South Korea to much of Africa, Australia, and South America - still have no basic telephone service, let alone advanced telecommunications.
Stringing wires on utility poles in the world's far-flung corners would cost a fortune, perhaps tens of billions of dollars. From the sky, however, satellite beams can sweep over swamps and deserts. More than 100 million people are expected to use cellular telephones worldwide by 2000, up from about 40 million today, according to the Washington, DC-based Cellular Telecommunications Industry Association. Communications companies are salivating.
Right now, on the drawing board at least, the empty reaches of the heavens look darn crowded. Motorola Inc., for example, has raised over US$1 billion to build its $3.3 billion Iridium system, a network of 66 satellites designed to provide wireless telephone service anywhere in the world by 1998. Craig McCaw and Bill Gates are backing a $9 billion project called Teledesic, which in the next few years hopes to develop its own global phone network using 840 satellites. In addition, the Loral Space and Communications Ltd. and Qualcomm are working on the Globalstar network, a $2.2 billion satellite-phone system with 48 spacecraft that will go into operation in 1998. Meanwhile, American Mobile Satellite Communications, a consortium owned in part by AT&T's McCaw unit, wants to provide wireless phone links through much of North America. And ICO, the London-based satellite company, is also scrambling to assemble a satellite pocket-phone system.
Most of the proposed satellite systems - including those of Motorola, Loral, and Teledesic - are "low Earth orbit" (LEO) systems that use small spacecraft orbiting a few hundred miles up. The Sky Station approach is radically different. Rather than launch a fleet of pricey satellites - which can cost anywhere from $50 million to $200 million each - the company wants to float 250 comparatively inexpensive "platforms" in the stratosphere about 20 miles above terra firma. The 17-ton platforms, which would cost only a few million dollars apiece, will float in the area between jet cruising altitude and where satellites orbit. Each will be suspended from two airships that look like miniature versions of the *Hindenburg *dirigible.
The Sky Station approach offers several advantages over rival satellite systems. LEO satellites move from pole to pole. As one satellite heads over the horizon, another takes its place, providing continuous coverage. That means the entire network must be in place before investors see a dime in return - an expensive proposition.
By contrast, the Sky Station platforms - which are 300 feet long and 120 feet wide - do not orbit the Earth. They are geostationary, meaning they stay in place relative to the rotation of the Earth. The key is a nonpolluting corona ion engine. The device takes the ions that occur naturally in the air and converts them into thrust, which is then used to hold the platform stationary in the 15-knot winds occurring at that altitude.
The payoff could be quick. Unlike LEOs, there's no need to build the entire network to get one part working. Pop a Sky Station over New York and you can immediately offer service. The 250 Sky Stations will be placed aloft over a five-year period, at the rate of 50 a year. "Every time we deploy a Sky Station we have a revenue-generating service," Rothblatt says.
The platforms are closer to the Earth than satellites, so radio signals don't travel as far. That means smaller receivers, since they don't require as much battery power. Because the platforms are held up by airships, there's no need to spend big bucks on pricey rockets.
The price tag for the whole shebang is only $800 million, as opposed to the billions rivals like Teledesic and others are talking about. Finally, the Sky Station platforms, unlike satellites, can be positioned to cover only populated areas - instead of, say, oceans - making them more cost-effective. Rothblatt says the company hopes to generate $5 billion in annual revenue by 2004. __ Vacuum cleaners in orbit__
Sky Station wasn't hatched as a telecommunications network, though. It began as an environmental project in the mid-1980s, when UCLA physics professor Alfred Wong dreamt of developing a giant, floating vacuum cleaner that would suck up and zap the chlorine molecules that help destroy the ozone layer. Such a device would have to remain aloft for long periods and be able to navigate. So Wong created the corona ion engine.
In late 1988, Wong contacted Harry "Skip" Darlington IV, chair of the Ozone Society, an environmental group in Middleburg, Virginia. It was Darlington, with a balloon pilot's license and extensive flying experience, who introduced the idea of using airships to keep the platforms afloat. Wong liked the proposal, and Darlington signed on as a partner.
But the ambitious plan still needed financing. After several years of development work, Wong and Darlington enlisted R. Moses Thompson, founder and president of Chantilly, Virginia-based Team Technologies Inc., a consulting firm that works with development banks. Moses and his partner, Edward Silansky, were skeptical. Silansky suggested that Wong and Darlington patent the corona ion engine and form a business, never believing they would.
But in 1994, Wong applied for the patents, and Earth Sciences Technologies International was formed. Silansky joined as CEO; Darlington became chair. Sensing a larger opportunity, the two rejiggered the focus of Sky Station and the idea of a sky-based telecommunications network was born. "There wasn't anyone in the original team who saw the full extent of the telecom potential," says Silansky. "They had been thinking about this solely as an environmental project."
The environmental half of the project is still very much alive, however. Each Sky Station platform is planned to serve a dual purpose - provide telecom services and clean the ozone. The structure of the company reflects these shared values. The holding company is Earth Sciences Technologies International, which handles the environmental side. The Sky Station International subsidiary concentrates on telecom. Wong and Darlington see the duality as compatible and, perhaps more importantly, necessary to make their environmental dream come true.
But it was obvious that such a venture would require big bucks. Darlington eventually hooked up with Haig, a well-known international businessman who was instrumental in setting up a joint venture between the Chinese government and McDonnell Douglas to manufacture planes in China. Haig and his son, Alex, met with the group in July 1995. The Haigs were impressed and came aboard. __ Battling bureaucrats__
From the beginning, it was clear that the regulatory issues surrounding Sky Station would be as great a challenge as raising the cash necessary to float the project. The Haigs knew they would need a regulatory expert to negotiate this thicket of red tape. Rothblatt's name quickly popped up. In her previous gender, she earned a reputation as a savvy regulatory lawyer who could nimbly slalom through the governmental obstacle course. She had the right mixture of business toughness and personal finesse. Several years ago, for example, Rothblatt represented a telecommunications company seeking the FCC's permission to operate off the East Coast of the US. So Rothblatt dubbed the company the Far Eastern Regional Network, or FERN. The acronym was no accident: it was the surname of one of the FCC commissioners.
Rothblatt says she was bowled over by Sky Station. "I thought this was a fundamental breakthrough - akin to electricity. I really did."
She has spent long hours bouncing from one federal office building to another, selling to government regulators who are rarely enthusiastic about radical ideas. For starters, the Defense Department must give its blessing, since it might be possible to put a surveillance camera on a Sky Station platform and spy on military facilities. Rothblatt must also help convince Federal Aviation Administration officials that Sky Station won't fall out of the sky, as Motorola officials suggest. At least when satellites tumble from orbit, Motorola argues, they usually burn up when re-entering the atmosphere. The low-flying Sky Station platforms wouldn't have a chance to incinerate.
Sky Station's giant dirigibles are also reminiscent of the Hindenburg, an unfortunate analogy that recalls the dramatic old film clip of the giant zeppelin crashing to the ground in flames while a radio announcer wails about "the humanity."
The FAA must grapple with the preeminent safety issue: will these things fall out of the sky? Sky Station officials say no. The airships holding the platforms up have multiple shells. If the outer shell bursts, several backup shells keep it aloft. The chance of an explosion is minimized because they use nonflammable helium to levitate; the Hindenburg was filled with highly volatile hydrogen. And if the helium somehow seeps out, each platform has parachutes to slow its descent.
Even Sky Station's competitors say Motorola's safety concerns are exaggerated. Russell Daggatt, president of Teledesic, says his company "explored some of these dirigible concepts" but went with the more conventional satellite approach.
To convince the FAA, Sky Station is working with retired three-star General James Abrahamson, who ran the Strategic Defense Initiative, or Star Wars, for the Pentagon and was director of development for the space shuttle program.
The FCC must also decide if the Sky Station platforms are located in space, which is open to anyone, or airspace, which is controlled by each country. If foreign regulators decide they are in their stratosphere, then every country in the world would have to sign off on having a platform in its airspace - a daunting prospect to be sure. Ultimately, the decision may be left to an international body such as the United Nations-backed International Telecommunication Union.
Rothblatt must also press the FCC to clear out a high-frequency radio spot on the airwaves and persuade the agency to ask other countries to do the same. Again, Motorola has stood in the way, arguing that the FCC should not denigrate its reputation on such a silly idea.
Motorola, of course, has more than the public's safety and FCC's reputation in mind. "If Sky Station solves the safety and regulatory problems, it could devastate the satellite industry," says one senior FCC official.
Sky Station's real competition may ultimately come not from Iridium or Loral, but the rapid construction of land-based networks - hardwired telephone networks as well as cellular telephone systems. China, for example, plans to install 40 to 80 million telephone lines by 2000. According to a report by the US Department of Commerce, almost every country in Asia, Africa, Latin America, and Eastern Europe plans to build cellular telephone systems.
Nonetheless, Sky Station is moving forward. In July, the company began testing a miniature 40-foot version of the platform in an altitude test chamber at NASA's Lewis Research Center in Plum Brook, Ohio. In early 1997, it will launch a 100-foot prototype up 15,000 feet. If that goes well, the company hopes to launch a full-size version into the stratosphere late next year. "We're selling a dream," Haig says. "It's an exciting period, but one where you don't get a chance to put your feet up for long."
