IP: The Reality of Iridium

[Dave Farber <farber () cis upenn edu>]

> From: "the terminal of Geoff Goodfellow" <geoff () iconia com>
> To: "Dave e-mail pamphleteer Farber" <farber () cis upenn edu>
>
>
> The WSJ had an excellent article today on Iridium:
>
>         Motorola Outlines Grim Options
>         For Struggling Iridium Venture
>         By G. CHRISTIAN HILL and DAVID P. HAMILTON
>         Staff Reporters of THE WALL STREET JOURNAL
>         available at http://interactive.wsj.com/articles/SB931970006421292775.htm
>
>
> Some additional background IP readers might find instructional on the Iridium
> situation and LEO's in general: the resulting financial mayhem and that more of
> which will come is not surprising if you look at the history of two other
> satellite networks that offer "like-services", the length of time they have
> been in operation and their service prices.
>
> Inmarsat (http://www.inmarsat.org) and its 86 members who are generally Big
> Telcos and communications providers around the world started offering its "spot
> beam" Mini-M sub-notebook sized mobile satellite service in 4Q96 on the
> Inmarsat-3 GEO's. As of Jan '99 Mini-M had around ~40K subs worldwide and is
> being marketed by 185 service providers around the world
> (http://www.via-inmarsat.org). A little history: the first provider of Mini-M
> service was Comsat (CQ:NYSE) with its Planet-1 terminal. The Mini-M terminals
> generally retail for around 3K USD via the web sites (or $1.7K USD according to
> the WSJ 04/27/1999 article "Glitches Surface as Iridium Phones Go to War in
> Kosovo) and service costs around $1.6-3/min USD (with a monthly subscription
> fee of $0-75 USD) for fully terminated calls (irregardless of where you are
> calling FROM to where you are calling TO). You can see more detail on this
> service from a number of Mini-M web sites such as http://www.glocall.com
> (Glocall), http://www.mobiq.com (BT and Telenor), http://www.station12.com (NL
> Telecom), http://www.comsat.com (Comsat) or equipment dealers such as the folks
> at http://www.satphone.net (Satellite Warehouse).
>
> The other satellite provider to offer like-services would be American Mobile
> Satellite Corp (AMSC) http://www.ammobile.com (SKYC:NASDAQ) with a service area
> covering most of North America (CA, US, MX, et al + surrounding coast lines).
> As of their FY98 results announced on March 4
> (http://biz.yahoo.com/bw/990304/va_america_1.html) they have signed up a total
> of 13K subs since they initiated their SkyCell service a number of years ago (i
> don't have the exact one, but i think its around 3). AMSC SkyCell service costs
> around $1-2.50/min USD (with a monthly subscription fee of $0-175 USD with
> between 0 and 175 minutes included). You can check out the details from
> http://www.satphone.net.
>
> With this history, and the fact that the Inmarsat Planet-One/Mini-M service
> costs $1.6-3 USD a minute i suspect Iridium will be *lucky*, very very lucky to
> sign up maybe 50K (fifty-thousand) subs this year. What i predict happening is
> that Iridium's advertising will raise the awareness level, but i predict drive
> sales of the cheaper Inmarsat Planet-One/Mini-M service.
>
> You should also check out the Bosch Worldphone and Ericsson I888 available for
> $200-$300 USD from GSM operators like Omnipoint in the US
> (http://www.omnipoint.com) or the two GSM network operators here in Prague
> (http://www.paegas.cz & http://www.eurotel.cz) that will allow you to roam
> worldwide on the US GSM networks at 1900 Mhz and "everywhere else" (except
> Japan) at 900 Mhz frequencies.  You can also see a list of countries where GSM
> is operating by visiting the offical GSM assoication web site at
> http://www.gsmworld.com. So, as you can see I have a lot of trouble
> understanding why someone is going to buy a bulky and costly Iridium phone and
> even then spent yet more for the various cellular cassettes (each of which
> alone costs 2 to 3 times of a standlone cellular phone itself). Instead, you
> can get one of nifty multi-frequency band handhelds from Bosch, Ericsson or
> Motorola which are the same size of today's cellular phones with much cheaper
> usage prices.  These GSM phones also don't burden your callers with a phone #
> in country code 8816 or 8817 that costs people $6.50 per min USD to call you
> (yes, did you know it costs that much to recieve a call on an Iridium phone --
> paid for by whomever is calling you??)?  A real world example of this would be
> in June i was on the phone with my Palo Alto California based stock broker was
> coming to Europe for a 2 week vacation.  He is currently a Cellular One
> customer and wanted to "stay intouch" during his vacation, so his office could
> still reach him while he was over here.  What i ended up recommending to him
> (which was the same solution i used when i visited over here in '97) was to
> signup for Cellular One's TransGlobal service
> (http://www.cellone-sf.com/content/html/transglobal_fact_sheet.html) that will
> allow you to use an existing Cellular One Phone number anywhere in the world on
> a GSM network!  When people call you, they will pay nothing more than if you
> are still in the Bay Area, and it will cost you $2.50/min to receive the call.
> You get a GSM chip for $50/yr and rent a GSM phone for $70 for the two weeks.
> Alternatively, you can take your GSM TransGlobal SIM chip with you and rent a
> phone at your destination, such as here at Prague's airport there are two
> companies which will rent your phones.  Or, you can get a phone and a local
> phone # on a pre-paid SIM chip account with airtime that costs from 8 to 40
> cents USD per minute to use them -- check out their web sites for details
> (http://www.eurotel.cz & http://www.paegas.cz). To me, this is the real


{note the AT&T Sim card offering does the same as Cell One and for $40 per year djf]

> competition for Iridium -- the existing and ever expanding terrestrial cellular
> networks and their ability to do things like this TransGlobal offering that
> Cellular One or pre-paid SIM chips.  Things of course will get even easier as
> GSM spreads more through out the US and people can then use the new MOT
> tri-band Leap L7089 phone, the Bosch/Ericcsson Worldphones, etc.
>
> There is also a question of how ICO and Globalstar (ICOGF, GSTRF) will be any
> more successfull?  They will tout marketing or targeting other segments of
> users, such as the WSJ profiled in the 06/25/99 article "It Takes a Cell
> Phone--Nokia Phone Transforms A Village in Bangladesh", but the real question
> IMHO is the real DEMAND and DEMOGRAPHICS of these services.  Given the history
> of AMSC and Inmarsat, as you might imagine at this point, i'm a little bit
> dubious of the business case in spite of my passion for the grand vision and
> technology aspects.
>
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