Opinion: Iridium: The Flawed Dream
From the June 21, 1999, issue of Wireless Week
By Rikki Lee
Iridium is no longer on top of the world. As it struggles to reach 27,000 subscribers by a June 30 deadline set by its lenders,
the mobile satellite services company this week plans to lower its rates and embark on a new marketing tack. Under the revised
pricing scheme, equipment won't cost quite as much as it does now (a phone for $2,500 and a pager for $600); per-minute
charges might drop from an average of about $4. Instead of luring jetsetting businesspeople and Iditarod sled-dog racers,
Iridium will go after vertical markets such as federal government users.
That's too little, too late. Iridium might succeed in retooling its service but won't remain the same company the proponents
dreamed of and became excited about in the early days.
Wait, those proponents say, Iridium's not dead yet--so far, it has only stumbled. With a little luck, thousands of paying
subscribers and a lot of money on its side, the company could emerge from its financial troubles with more sales savvy and
begin mining untapped markets.
But the signs of Iridium's early doom as a thriving wireless service are as apparent as a wilted bloom in the summer heat.
The company has already lost the confidence of many of its backers and stockholders. Depending on what the lending banks
say, Motorola Inc.--which has provided $5 billion of engineering know-how, satellites, ground-based infrastructure and
handsets--may decide to write off its ownership in the company, about 18 percent. Several law firms have filed class actions
against Iridium on behalf of stockholders, with more suits likely to come.
Iridium's pioneering reputation has plummeted as quickly as its stock, now a fraction of its original price. Whether the company
declares bankruptcy in the next few weeks doesn't matter; the damage is done.
What happened? Simply put, it's a case where hindsight offers more insight than foresight ever did. When Iridium was
conceived in the mid-'80s as a system enabling anywhere, anytime communications, cellular was in its infancy. The Motorola
team working on the Iridium project were apparently too narrowly focused to see the ever-growing footprints of terrestrial
wireless networks, the introduction of personal communications services and the slim niche market served by other satellite
providers such as Inmarsat. Maybe no one asked, "Should we really be providing a service to reach areas of the Earth where
few people ever travel?" And nobody stepped on the brakes while extrapolating what would happen if terrestrial wireless
continued to leap and more carriers entered the marketplace. Or maybe the dream of being the first to offer true global service
propelled Iridium past the skeptics.
The satellites were launched and service began last November--more than 10 years after the idea was hatched to create
Iridium--but the marketing plan did not adjust to meet the changing wireless environment.
So, what can we learn from Iridium's fiery descent? Don't market a service based on outdated technology to those who have
something much better and cheaper. Iridium's satellites may become an orbiting museum or a costly lesson for those whose
dreams didn't match reality. (Advocates of voice paging, are you listening?)
E-mail: rlee@cahners.com
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