Iridium tests its wings: Prospects exceed available phones

Iridium has high hopes for the initial launch of its satellite telephony service, scheduled to launch Nov. 1. Originally planned for Sept. 23, the commercial introduction was delayed because of system problems.

"Day by day, week by week, the bugs have been driven out of the system," said Ed Staiano, vice chairman and CEO of Iridium.

The company's recent global advertising campaign identified 100,000 qualified leads, defined as potential users that received information on the service and continued to express interest, Staiano said. Although it is difficult for Iridium to track solid intent to sign up because some distribution outlets are reluctant to share information, the South American and Japanese gateways combined report 50,000 ready to sign on at launch, Staiano said.

About 80% of those qualified leads are from vertical markets. "That's as we expected," he said. Iridium anticipates that the business traveler will eventually become a significant part of its market. "But that will ramp more slowly," he said.

Although the system could handle a large initial onslaught of customers, Iridium won't have the handsets to accommodate them. Motorola planned to ship 5000 handsets last week and 75,000 by the end of the year. But the cassettes that allow roaming onto cellular networks won't be available until mid-November. Kyocera, which also manufactures phones for the system, is slightly behind Motorola in delivery.

"We will be in a supply-constrained situation through the end of the year," Staiano said. Nonetheless, 40,000 customers on-line by the end of the year is a reasonable projection, he said.

Currently, where Iridium can closely control the gateway, the system is achieving about a 10% dropped call rate-a number Staiano hopes to lower to 5% or less. "It's better than first generation cellular," noted Jeff Maul, director of satellite and wireless services practice for Arthur D. Little.

The high level of dropped calls likely won't scare off customers, most analysts say. "What you're competing against isn't cellular," said John Bensche, senior vice president and wireless analyst at Lehmann Bros. "You're competing against not communicating at all."

Still, some analysts believe a positive reception won't last, especially in the business community. According to a study from analyst firm Ovum, the opportunity for satellite telephony services will shrink in the future, mainly because of developments in terrestrial-based technologies. As a complement to cellular systems, satellite systems won't compare on factors such as in data capabilities, in-building use, cost and terminal appearance, the study said.

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