New Satellite Service Rises From Ashes

Commercial satellites may be more than just pies in the sky

Commercial satellites may be more than just pies in the sky. A year after Iridium LLC shut down its satellite phone service because operating costs outweighed customer interest, a reincarnation, Iridium Satellite LLC, is giving it another shot.

The Tempe, Ariz., company last week began commercial phone service using the network of satellites it acquired from its predecessor in December. The company plans to launch wireless data services in June.

Iridium Satellite got a great deal, paying $25 million in December for the original Iridiums assets; the original had cost Motorola Inc. and other investors about $5 billion to launch in 1997. Also in December, the U.S. Department of Defense gave Iridium Satellite a $72 million, two-year contract. This enabled the company to keep the satellites aloft while it prepared for commercial service, and it also put the company immediately in the black.

As such, saddled with no debt, Iridium Satellite can afford to charge less for service than its predecessor. Air-time rates will cost customers about $1.50 per minute, as opposed to the $7 some of them paid under the original owners.

As before, Motorola will provide the handsets for the service. One available now costs $950, and one with more data capabilities will be available this summer for $1,495.

Iridium competitor Globalstar, a wholly owned subsidiary of Vodafone Group plc., has been reducing its prices lately in anticipation of the new Iridium. The San Jose, Calif., company now charges as low as 89 cents per minute for high-volume subscribers but still faces debt problems.

Iridium Satellite still will have to deal with the fact that there are few necessary applications for satellite phone service. Thats because so much of the world has access to inexpensive service through the myriad service providers that use radio towers.

"I guess petroleum exploration guys need it," said Warren Wilson, an analyst at Summit Strategies Inc., in Boston, noting one viable application for the service.

Indeed, Iridium plans to focus on vertical markets with its service. Its Web site courts customers in the fields of oil and gas, aviation, maritime, and mining—in other words, people who work in the middle of nowhere. The previous owners tried to court the consumer market—cruise ship passengers, for example—and that didnt work.

While the marketing may be smarter, the product may not be good enough for corporate data applications, since connection speeds are expected to be about 10K bps when the data service launches in June.

Meanwhile, satellite communications company Ellipso Inc. has made a deal with ICO-Teledesic Global Ltd. to collaborate on a mobile satellite system. Officials at Teledesic, of Bellevue, Wash., said that the agreement will likely result in a merger with Ellipso. They would not give a launch date for the new service.