A communications satellite is a man-made device placed into orbit around the earth for the purpose of relaying telecommunications signals. These may be broadcast communications, such as television or radio, or they may be point-to-point communications such as telephone, internet or direct microwave links.
The first proposal to use a geostationary orbit to place a communications relay satellite is attributed to the science fiction author Arthur C. Clarke. He published an article in the October, 1945 issue of the magazine Wireless World which noted that a geostationary satellite would be ideally placed to relay radio communications. Since its position with respect to the earth would not vary, it would easy to train earth-bound antennae onto it for both transmission and reception.
The first functioning communications satellite was Telstar, which launched on July 10, 1962. It was placed into an elliptical orbit, not geostationary. Syncom 3, launched August 19, 1964, was the first functioning geostationary communications satellite. It was used to relay television signals.
There are several factors to consider when it comes to determining what orbit a communications satellite is to use. Although geostationary orbits are the most convenient for consistent relaying, it is extremely expensive to site satellites there. For one thing, the great distance (~35,000 km) means that a large booster is required to place the satellite, and also means that more powerful signals are required to communicate with the satellite (which in turn raises its mass and power budget). Satellites in low earth orbit, as low as 400 km above the earth, can be quite small and cheap to launch. However, they are only visible for a short radius from their ground point as they are quickly eclipsed by the horizon. In addition, they move rapidly around the planet (a 400 km orbit produces an orbital period of approximately 90 minutes) so they will only be in view from any particular point on the ground for a short while. Thus, if you want to cover large portions of the globe with LEO satellites, you'll need to use a lot of them - and have a system smart enough to switch your traffic among them.
Modern telecom satellite constellations have indeed pursued more numerous, smaller birds. Iridium and Globalstar maintain dozens of satellites at low to medium altitudes, which maintain switching networks amongst themselves.
The number of 'slots' available in the geosynchronous ring is diminishing. The size of an orbital 'slot' is determined by the precision of the signaling equipment used to communicate with the satellite as well as the control systems of the booster and transfer vehicles used to place it there. Despite advances in both technologies, the geosynch space has become increasingly crowded.
Iron Noder 2010