Look to the Skies

A story popped up this week about one of the occasional attempts to bring satellite phones to the mass market, and I thought it might be interesting to review the life, death and rebirth of the Iridium system. If you’ve heard this story before you may want to stay with us anyway, because there appear to be a few new wrinkles coming – and the story is still a good one, if one likes cautionary tales about good technology and unproven business models…

The Iridium system was launched during the late 1990s and went online November 1, 1998. It was less hype than a constellation of satellites in geostationary orbits that could send and receive microwave telephone systems, much like a set of cell towers orbiting the Earth at 23,800 miles up. The handsets needed to use this network were heavier and more expensive than the mobile phones of the time, but Iridium offered the unique advantage of being able to make and receive telephone calls to or from literally anywhere on the planet. Unfortunately, the company hadn’t worked out the issues with its sales, customer service or support units; it was also charging significantly more each month for a service that would allow you to call your mom from the North Pole, but would not allow you to make a call from one floor of your office building to another. Despite its obvious potential, Iridium failed in a truly spectacular fashion just 9 months after its founding, with a group of private investors buying up the company’s assets (estimated at $6 billion US in equipment alone) for roughly $25 million US…

At one point it was reported that the Iridium constellation would have to be de-orbited for safety reasons, but the new owners were able to keep it up and operational; today the company has about 300,000 subscribers and was profitable as recently as 2008 (the last year for which I have figures available). It’s available to anyone willing to pay the price, but the general public is largely unaware of it; most of the users are marine shipping firms, aviation companies, oil and other survey/exploration outfits, field scientists, and the U.S. Department of Defense. Still, there’s nothing stopping you from getting an Iridium phone and service contract and being reachable anywhere under the open sky, assuming that you would want to. But now AT&T is introducing a new wrinkle that has the potential to change everything – or leave another big smoking crater…

According to an article on the CNET News service this week, AT&T is introducing a dual-mode phone, called the “TerreStar Genus” which operates as a conventional cell phone when there’s a carrier for it to connect with, but switches to satellite reception when there are no cell towers available. The handset is still expensive, at $800 or so, and the satellite feature is an extra $25 per month plus 65 cents per minute of voice calls or $5 per megabyte of data – above and beyond the usual AT&T cell phone service contracts, which I can tell you aren’t all that cheap to begin with. But with the appearance of cell phones costing $10,000 plus just for the handset, and iPhone and iPad units that are nearly that expensive to begin with, it’s hard to imagine that AT&T won’t get any users; the real question is whether they will be able to sell enough units to make up the costs involved in offering such a service in the first place…

The simple fact is, not that many people really need to be able to make telephone calls from the middle of a national park, the top of an ice floe, or the deck of a ship in the middle of the ocean. Satellite telephone service is a niche industry at the best of times (as Iridium found out in 1998), and the relatively small number of customers who occupy that niche are already being served by the existing provider. Unless AT&T can identify a new market segment for the phone and the service, or just convince enough technophiles that this is the must-have gadget of 2010, they are not likely to see any significant number of sales…

But, on the other hand, if they can expand the market enough to lower the price on both the hardware and the service contracts, they could finally introduce satellite communications to a mass market. For the first time, you might be able to call anyone on Earth from anywhere at all times…

The real question then becomes, is this a good thing, or a bad thing?