By Brett Rekas
Iridium Communications LLC’s sixty-six-satellite network is now operational and the Iridium consortium, consisting of Motorola Inc and 19 multinational partners, has begun advertising the global mobile phone service. Unfortunately Iridium is a product desperately in search of customers. Iridium is one of those wouldn’t it be cool projects dreamed up by engineers with too much time on their hands which escaped from the lab without anyone asking who will use this product? and how much will it cost? Iridium promises to deliver a dial tone to the most remote, desolate and isolated locations in the world. The promise is the problem. The target market for the Iridium service is inherently limited because remote, isolated and desolate locations are, by definition, not heavily populated or frequently visited. There are not enough nomads wandering the globe, scientists searching for artifacts and antiquities and adrenaline addicted adventurers exploring exotic locales to support Iridium. Consider the $3000 price of an Iridium phone and airtime charges measured in dollars per minute and the already meager number of target customers who may be interested in Iridium contracts. Even red-eye flying, road warrior executives who can afford Iridium don’t really need the ability to regularly make a call from the Sahara desert. For the acquisition cost of an Iridium phone a globetrotting executive could subscribe to a year of service with AT&T’s Corp’s nationwide Digital One Rate plan and still have $1800 dollars remaining to establish an account with a GSM cellular service which could be used throughout Europe and Asia. Finally, executives are unlikely to be willing to exchange an unobtrusive Motorola Star-Taco for an unwieldy Iridium handset just so they can make calls from the middle of nowhere. Despite the apparently limited potential market, Iridium will not be the only venture attempting to attract subscribers for global telephony. GlobalStar Telecommunications Ltd and a handful of other outfits are preparing to launch global satellite telephony service in 1999, while Teledesic LLC and others are preparing to launch more ambitious satellite services early next century. There appear to be more people interested in providing global satellite telephony service than subscribing to it. The flawed logic of Iridium doesn’t seem to have deterred Wall Street from issuing favorable opinions. Perhaps the fees which Iridium’s appetite for capital could generate are influencing the analyses but ultimately the global satellite telephony stocks are likely to fall like the ill-fated Skylab.
This story originally appeared in the 12.18.98 issue of BitStream, a weekly email report, published by Bret Rekas.
