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After chaos, changes in calling?

Damage from Katrina spurs demand for satellite phones. The disaster zone may also become a proving ground for wireless technologies like WiMax.
/ Source: BusinessWeek Online

John Dark, senior marketing manager for satellite-calling provider Globalstar, says his company is overrun with orders for phones in the wake of Hurricane Katrina. Globalstar has signed up 5,000 new customers over the past three days, about 20 times normal volume.

"We've seen an absolutely astronomical demand," Dark says, highlighting an unintended consequences of what's likely to end up as one of the costliest natural disasters in U.S. history.

'Total write-off'
After Katrina's storms left hundreds of thousands of residents without phone service and other communications, survivors and emergency responders were forced to stay in touch by any means possible. And there wasn't much.

Vast areas of the Gulf Coast, from Louisiana to Florida, had no regular telephone or wireless service. Thousands of the switches and cell towers that form the region's telecommunications network were inaccessible or left without power -- if not demolished.

According to a memo from the Homeland Security Dept., the telecommunications "infrastructure in New Orleans, Biloxi, and Gulfport is considered to be total write-off." BellSouth (BLS), the biggest local phone company in the Southeast, estimates that 750,000 of its customers hail from areas most heavily affected by the hurricane.

Prioritizing safety
Albert Tobin, managing director of property syndication for Aon Risk Services, a division of specialty insurance underwriter Aon (AOC), says it may take as long as a month to restore 80% of phone services, once the flooding subsides and affected areas become accessible. "Given the scope of the damage, the entire restoration effort in the hardest-hit areas will take more time than BellSouth would normally expect," according to a company statement.

In the New Orleans area, "we're not restoring anything. We're just making sure our [13,000] employees [who work in the affected areas] are safe," says Joe Chandler, a BellSouth spokesperson.

Little surprise, then, that survivors, police, and other emergency-service providers are relying on satellite phones. The devices communicate via signals beamed to and from satellites in the sky, rather than earthbound lines or wireless infrastructure -- and so remain operable in cases where a natural disaster has devastated networks on the ground.

Altering the balance?
The American Red Cross, in the midst of the largest-ever response to a natural disaster, is shipping in satellite phones, while Globalstar donated more than 100 phones to the governors' offices in Louisiana and Mississippi.

In the wake of Katrina, parts of the Southeast may also turn into a proving ground for other wireless communications, such as WiMax, the technology that provides high-speed Internet access to large areas from a single transmission point. For starters, New Orleans might become more reliant on wireless vs. traditional phone connections.

"This may permanently alter the balance in New Orleans for the usage of cellular vs. traditional wire-line phone service," says Roger Kay, president of technology consultancy Endpoint Technologies Associates. Later, the city could become the test bed for new technologies such as WiMax, where a single antenna could blanket a town or part of a larger city that would otherwise require a number of cell towers, he says.

WiMax is just getting off the ground, and Katrina may speed up adoption of the largely untested technology.

Awaiting reentry
Even if they won't implement WiMax for some months, local wireless carriers will likely replace their damaged cell sites with the latest gear available, allowing for the fastest data transmission and the most capacity, says Craig Mathias, founder of wireless consultancy Farpoint Group. "When they replace the equipment, they're going to put in newer equipment. I guarantee it'll be 3G equipment."

In the meantime, mobile-phone carriers, including Cingular Wireless, are rebuilding where they can. On Sept. 1, Atlanta-based Cingular, the largest U.S. cellular provider, said it had almost completely restored service in Mobile, Ala., and Baton Rouge, La.

Disruptions continued in parts of Mississippi, including Jackson, Biloxi, Pascagoula, Bay St. Louis, Hattiesburg, Gulfport, and Brookhaven, said BellSouth, which dispatched helicopters to conduct aerial surveys. More than 100 Cingular crews are working with 500 power generators and 240,000 gallons of fuel to restore communication.

Further rebuilding will hinge in part on getting the go-ahead from federal and state authorities to reenter key areas. "We just have to wait and see how commercial power restoration and flooding go," says Cingular spokesman Clay Owens. "We want to get in there and start restoring the service, but we're limited in what we can do."

More storms to come?
A spokesman for Verizon Wireless, the No. 2 carrier, says "service is improving in surrounding areas near New Orleans." There are still disruptions in Mississippi and around New Orleans. The company has rolled out cells on wheels, used to temporarily restore service. It has also brought in technicians from around the country to do surveys and repairs in the disaster areas.

As BellSouth surveys Katrina's physical damage, it's also tabulating the financial cost. While the outfit hasn't yet released its own figure, CIBC World Markets estimates Katrina will cost BellSouth about $300 million in restoration services and equipment, plus $150 million in forgone revenue.

Verizon Communications, the largest U.S. local-telephone company, says it's poised to lend a hand to BellSouth's efforts. The companies have been involved in informal talks. As soon as Verizon receives a formal request, probably some time next week, it will jump in. "We'll be doing what we can," says a Verizon spokesperson. "We're standing at the ready."

And as Katrina marks only the beginning of what the National Hurricane Center says may grow into a worse-than-normal hurricane season, so is the rest of the region.