The Incredible Shrinking Satellite Market

Satellite-delivered mobile voice: Is there really a market for this service?

In light of Iridium's well-publicized problems, some nay saying is to be expected.

"(Iridium) got too wrapped up in what they were doing to look at what was happening around them over a 10-year period," said Ray Jodoin, Cahners InStat Group telecommunications analyst. "The market that was out there 10 years ago is not there today to the extent they thought it was."

Andrew Cole, Renaissance Worldwide telecommunications analyst, agreed in part. Because of the build-out of terrestrial wireless, the market for satellite voice has gotten smaller, he said.

But Cole believes Iridium will survive, although he's not sure about competing carriers.

"Is the market big enough?" questioned Betsy Kulick, associate with Leslie Taylor Associates, which serves the satellite industry. "The short answer is no."

She said there are three batches of satellite providers: those that will provide voice such as Iridium; some offering data only such as Orbcomm; and a group of some 40 companies planning to provide broadband, multimedia, high-speed digital services.

"There won't be room for 60 companies," Kulick said. "But there is certainly enough of a market on a global basis for some certain number of companies."

Satellites are very good at providing ubiquitous service at odd remote locations that are difficult to reach by terrestrial means, Kulick said.

"Its simply not cost-effective to install landline networks or build cellular towers in low-population density areas or geographically rugged or inaccessible areas," said Joe Tedino, ICO director of corporate communications.

This also is the market that Globalstar plans to serve, according to Jeanette Clonan, vice president of communications and investor relations for Loral Space and Communications, Globalstar founding partner.

"(Globalstar) is perceived as a phone system for users with no alternative -- no cellular or no wireline," she said.

According to Clonan's numbers, there should be more than enough customers for Globalstar, Iridium and ICO. She said half the people in the world -- about 3 billion -- don't have telephones. Of course not all of these people can afford phones.

"We don't expect people in thatched huts walking around with 1,000 handsets and paying 1.50 a minute," Clonan said.

But she thinks it's reasonable to assume that 1% of the people without phones -- or 300 million people -- would be able to afford a satellite phone and service.

"Of those, Globalstar can only serve 7 or 8 million subscribers. I think ICO could serve 4 to 5 million and Iridium 2 to 3 million. That's only about 15 million customers total, and I completely believe there will be more than 15 million willing to buy our service," she concluded.