To all: a truly outstanding article in todays WSJ.
IRIDIUM GETS U.S. AS FIRST BIG CUSTOMER OF WIRELESS COMMUNICATIONS SYSTEM.
Iridium LLC, the consortium building a risky $5 billion global satellite-communications system, has its first big customer-the U.S. government.
The U.S. military is buying a "gateway," or high-capacity connection, to the Iridium network for about $14.5 million. The deal is a coup for the service provider that is likely to create a significant revenue stream and may spark commitments from other governments in Iridium's mobile-communications services.
The contract is also an endorsement of the technology behind Washington D.C. based Iridium, which plans to offer handheld voice, paging and fax services to any point on the planet from a network of 66 satellites orbiting close to Earth. The 10-year project is due to begin commercial operations in September, but critics still doubt the program's reliability an financial viability.
Col. Robert Weber, program manager for the Defense Information Systems Network, a unit of the Department of Defense, said the military believes Iridium will work. "We spent about two-and-a-half years looking at this," he said. "We are fully confident they will succeed." The decision to use Iridium rather than build the military's own satellite system was based on cost, he added.
"The DOD used to be a leader in satellite communications," he said. "Now everyone has caught on to space... We'll take advantage of [the private sector's] economies of scale." For security purposes, the military will add an extra layer of encryption to its phone network, he said. "This is a tool for our war fighters' needs."
Motorola, Inc., which is managing construction of the Iridium system and is selling the military a ground station that will connect with the satellite network, has already tested voice calls over the network, Col. Weber said.
James Walz, president of Iridium North America, the Chandler, Ariz. - based Iridium-service distributor and investor that will gain the fovernments's service revenue , couldn't quantify how much revenue the government's gateway would bring in.
Besides the $14.5 million "gateway," or ground station, the military will purchase handsets, for about $3,000 each, that enable the user to make a phone call from any point on the planet. Handsets for Iridium, manufactured by Motorola and Kyocera Corp. of Japan are expected to be available as early as March.
The gateway will be able to service as many as 120,000 users, though Col. Weber said the military will initially put about 2,000 people onto the system to test its capabilities, and then increase usage. It will later include other branches of the government, which will pay for the service out of their budgets, he said.
Mr. Walz said the military will limit itself to the system's most expensive satellite-only communications, bypassing the terrestrial phone networks tied into Iridium.
"These are good satellite minutes," he said, expected to cost about 25% more than standard international phone calls. As a large user, the government will probably receive a bulk discount.
Mr. Walz said other governments have expressed interest in using Irdium's services, but none have yet signed up. Besides Iridium North America, Iridium has 16 other regional distributors and investors including Russia and China.
Besides Iridium, Col. Weber said the military is looking at other civilian global satellite-service providers, such as Globalstar Telecommunications Ltd., a proposed 56-satellite system backed by Loral Space & Communications Ltd. and Qualcomm Inc.. Globalstar which hasn't yet signed a contract with the military, is expected to launch its first satellites next month and begin commercial operation in 1999. |
