TerreStar Networks has already developed a Windows Mobile smartphone with QWERTY keyboard and touchscreen capabilities for its new hybrid service. The handset will automatically switch from AT&T's terrestrial cellular network to a satellite link at any location within the 50 U.S. states where AT&T's local coverage is unavailable.

"We believe there are tremendous opportunities ahead -- in both the commercial and government sectors," said TerreStar President Jeff Epstein. "And we remain focused on our promise to help solve the critical communications and business-continuity challenges faced by government, emergency responders, enterprises and rural communities."

Creating a New Paradigm

The new TerreStar-1 satellite is equipped with an 18-meter reflector capable of sending and receiving signals via about 500 spot beams, each of which will function as a cellular tower in the sky for a specific localized area. Moreover, each individual spot beam can be custom controlled to increase the available capacity for emergency personnel responding to a natural disaster like Hurricane Katrina, which decimated a large part of southern Louisiana's communications infrastructure .

"TerreStar-1 has the capability to increase both power and capacity dynamically across spot beams with advanced ground-based beam-forming technology," a company spokesperson said. "This feature will be especially important to emergency responders and other critical users."

TerreStar's $300 million satellite also has the potential to fulfill one of the priority objectives of the national broadband plan currently under development at the FCC. Later this year, the fledgling network operator intends to begin providing core voice, data and video services to rural businesses and consumers in areas where cellular coverage is spotty or even nonexistent.

"We are creating a new paradigm in mobile broadband network services and devices that will leverage our integrated satellite and terrestrial communications components to enable true ubiquity and reliability -- anywhere in the United States and Canada," said TerreStar CTO Dennis Matheson.

Software-Defined Radio

Last year, TerreStar completed an agreement with Qualcomm under which the chipmaker agreed to provide manufacturers with integrated satellite-cellular communications devices that can be incorporated into their handset designs, beginning next year. What's more, TerreStar announced an agreement with Infineon Technologies in April under which the European chipmaker will provide software-defined radio (SDR) technology for TerreStar's handsets, which will feature both quad-band GSM and tri-band WCDMA/HSPA radios.

"The programmable nature of SDR technology allows for feature upgrades via software and shortest-ever turnaround times for next-generation products," Matheson said.

Infineon's SDR mobile chipset, which consists of a single baseband device and one RF transceiver, reportedly contains all the technology necessary to enable a complete range of GSM and WCDMA cellular communication capabilities into a mobile device with small form factors. The new chipset will begin sampling to handset OEMs in the third quarter.

Still, previous-generation mobile satellite services such as GlobalStar and Iridium have failed to gain significant traction largely because of their high per-minute costs. For TerreStar to succeed during tough economic times it won't be enough to offer a flashy handset; it will also have to deliver services at a significantly lower cost.

"TerreStar is a carriers' carrier, so the prices charged to end users will be up to our partners," a company spokesperson said. "Our pricing to our partners is confidential, but we expect it to be extremely competitive and game-changing with respect to today's mobile satellite offerings."