New Hong Kong's New Hainan Infobahn

An obscure Bethesda, Md. satellite company locks up a contract with unlimited potential -- proving those kinds of deals are still out there

Columbia Communications Corp. has been tapped to engineer a full-blown metropolitan infobahn where no voice, video or data has gone before.

The satellite company was chosen to design, build and operate the entire telecommunications infrastructure for New Hong Kong, a planned city on the island of Hainan in the South China Sea.

A small international firm with the lion's share of its operations in Bethesda, Md., Columbia's mandate includes the development of digital wireline and wireless telephony, interactive video, and satellite services.

"We intend to create the most advanced telecommunications system in the world," said Columbia's chairman and CEO Clifford Laughton of the proposed fiber-to-the-door network, a complete communications infrastructure for the city.

Under the agreement, signed in July, Columbia will also operate New Hong Kong's telecommunications infrastructure for many decades to come.

"We will be the telephone company for New Hong Kong for 64 years, with an option to renew for 70 years beyond that," Laughton said.

While he can't even begin to pinpoint the potential payoff from the operating end of the contract, Laughton said its worth should far exceed that of the installation phase.

To achieve this lofty goal, the company is negotiating with a number of undisclosed major telcos to supply and integrate the necessary components. Columbia, which is creating a blueprint for the new city's information infrastructure, will coordinate the efforts of the larger subcontractors.

New Hong Kong's public network, like the city itself, is being built from ground zero, a significant advantage for all concerned. Installation of the latest and greatest technology will be relatively effortless compared to the headaches Columbia and its partners would face upgrading an existing infrastructure riddled with archaic equipment.

"It's much easier to do from scratch," said Laughton. "We are going with state-of-the-art, blue-chip switches and fiber from the outset," which is how, in a half a dozen years, a city that now exists more on paper than in concrete will boast a telecommunications network rivaling the sophistication of any on earth.

Starting from scratch, however, does tend to create its own imperatives: The first order of business will be the installation of a wireless system and teleport so the contractors can communicate with each other.

Laughton estimated the contract's initial phase, scheduled for completion in the year 2000, to be worth $125 million. "We look at having everything in place - an operating telephone company, a teleport, data, video and wireless services - up and running by the end of the century," he said.

But the payoff from building the city's network is probably chump change compared to the revenues Columbia stands to reap in the 21st century and possibly beyond.And though Columbia is obligated to provide service at regionally comparable rates, much of its business will stem from lucrative long-distance traffic.

"That was the key," he said of the 64-plus-70-year contract: "Billable minutes."

And those billable minutes will originate from a place Chinese officials are betting will attract some very high rollers.

Slightly smaller than Taiwan and with a population of 6.8 million, Hainan is China's largest "special economic zone," i.e., a place where Marx's "Das Kapital" has been supplanted by Adam Smith's "The Wealth of Nations" as required reading.

New Hong Kong's master plan projects a population of 75,000 in six years, with residential and light industrial zones.

But the chips that promise to fuel New Hong Kong's economy won't have anything to do with computers. Said Laughton: "What will drive this is gambling."

Indeed, with more than 20 kilometers of Hawaii-like beachfront, New Hong Kong promises to become a modern-day pleasure dome replete with resorts and casinos. MGM Grand Inc. has committed to build two resorts valued in the hundreds of millions of dollars, and some 300 other construction projects are also underway in the 54 square kilometer city-to-be.

The only potential source of trouble is, of course, the ever-inscrutable Chinese government. "That's the wild card," Laughton said, noting, however, that it hasn't deterred anyone from participating.

While New Hong Kong is no New York in terms of size, the project is nonetheless quite an undertaking for a small, virtually unknown company.

Laughton, a Hawaiian entrepreneur with a background in regulatory law, founded Columbia in 1983. He spent the next nine years wading through a morass of regulatory obstacles to get his satellite company airborne. Along the way, Laughton managed to get the Intelsat treaty reinterpreted in his favor, winning the right for Columbia to construct and launch its own satellite.

But before the company could put its own bird in orbit, Laughton learned NASA was leasing transponder capacity on satellites it uses to communicate with the space shuttles. He outbid Intelsat for control of 24 transponders on a pair of NASA's TDRSS satellites, and on New Year's Day, 1992, Columbia became Intelsat's first competitor over the Pacific, and second over the Atlantic.

Columbia now markets its transponder capacity to commercial and government customers worldwide, providing voice, data and video service to more than two dozen countries in the Europe, Asia and North America. Laughton runs the privately held company from Honolulu, which also maintains operations in Sydney and London. Columbia's main office is in Bethesda, due to its proximity to the FCC and NASA.

But how does a tiny satellite company with only 25 employees land a contract the likes of which it has never been awarded before in its brief history?

Columbia was in the process of transforming itself from a satellite provider to a telecommunications company when it caught the ear of Robert Choy, New Hong Kong's developer.

Choy had already approached several major carriers, none of whom were interested in both building and operating a public network. Columbia, on the other hand, was more than happy to make such a long-term commitment.

Another factor in Columbia's favor is its method of doing business. Despite its small size, he said, the company enjoys the flexibility to satisfy the needs of many different customers, with a little help from some larger friends.

Columbia typically draws on in-house expertise for overall project development, as in the New Hong Kong venture, and then contracts with outside vendors to get the job done. "We are a small company, but we have great partners," he said.

Partners with names like Harris, with whom Columbia provides phone service for Bosnia, and MCI, for which it provides satellite links for US military bases in the Pacific theatre.

Although the New Hong Kong contract is the first of its kind for the company, Laughton said Columbia hopes to use the project to attract other such business opportunities, especially in mainland China, a potentially monstrous market with more then a billion mouths.

"We hope this will be our calling card for similar opportunities in China and elsewhere," he said.


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