Iridium's resurrection

Dan Colussy, former president of Pan American World Airways, and a group of investors recently resurrected Iridium's 66-satellite constellation, and like Globalstar, they now plan to target only those that need to communicate in remote areas.

Originally designed to serve hundreds of thousands of subscribers, the Iridium system attracted just 55,000 customers. Handsets were clunky and pricey, costing more than $3000 each, and calling charges were as high as $9 per minute. The system cost about $5 billion, resulting in debilitating debt. Iridium failed because it targeted the consumer business, and it didn't expect to see terrestrial networks covering the same markets.

Now with a two-year, $72 million contract from the Department of Defense and the weight of heavy debt off its shoulders, Iridium Satellite, the company's new name, intends to begin servicing industrial customers toward the end of 2001.

“Our focus will be on those companies or customers that need service to remote areas,” said Colussy during a conference call with reporters. “Based on our meetings, there is a need for remote communications services.… We don't have to be what Iridium originally wanted to be.”

With its Defense Department contract, Iridium Satellite now must gain 40,000 additional private customers willing to pay about 80¢ per minute for phone service to break even. The company will begin offering data service at 2.4 kb/s and plans eventually to take that to 10 kb/s.

Like Globalstar, the company will work through service providers worldwide. Boeing has agreed to work with the company, and Motorola is expected to provide subscriber equipment.

“It will be interesting to see Iridium's impact on the market this time,” said Greg Caressi, research manager of Frost & Sullivan's telecom services and satellite groups. “The pricing is [so low] that it could change the market, but they still will have the same difficulties in trying to roll out a service worldwide and get out their marketing message. They need to convince people that this is a suitable and reliable technology.”

At issue is whether Iridium Satellite's constellation is in good shape. One satellite recently fell to Earth over the Arctic Ocean. More could fail at any time. Iridium Satellite plans to launch seven more satellites in about a year, giving the constellation at least two spares in each orbit, Colussy said.