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October 28, 1998
Iridium Set to Launch Call Service
But Performance Concerns Mount
By QUENTIN HARDY
Staff Reporter of THE WALL STREET JOURNAL
Iridium LLC, the long-awaited global satellite-communications system, is
preparing to launch commercial service Sunday, despite concerns the voice
and short-messaging service appears to be operating below desired
performance levels.
Iridium employs a $5 billion system of 66 low-orbit satellites to offer
communications to or from any point on the planet. Just two weeks ago,
according to people familiar with the system's workings, the Washington,
D.C., company grappled with severe quality problems at several of the
system's "gateways," which link the satellite calls into ordinary telephone
networks. The quality of individual calls was good, they said, but some calls
took as many as nine tries to get through.
Engineers are convinced that last-minute software upgrades, along with other
technical adjustments, will sustain an acceptable level of commercial service.
To be on the safe side, Iridium likely will introduce the service slowly,
concentrating sales in parts of the world where the gateways are working well.
That would be in keeping with Iridium's move to limit the number of
subscribers who have been testing the service for most of the past few weeks
at about 500 users, less than the 2,000 originally planned.
Iridium declined to comment.
A Sunday launch likely will encourage the investment community, which
originally expected service to begin Sept. 23. Iridium Chief Executive Edward
Staiano decided to move the start of service to Sunday, however, because of
poor technical performance. Iridium had budgeted more than $180 million to
create global awareness for the product, and the delay hurt what previously
had been an impressive public-relations campaign.
Some analysts worry, however, that continuing pressure to commence service
may compromise quality, a dangerous and common occurrence among new
communications services. Nextel Communications Inc.'s combination mobile
phones and walkie talkies, SkyTel Communications Inc. two-way pagers, and
a type of voice mail pager offered by Pagemart Wireless Inc. were all products
that quickly reached the market, but didn't live up to expectations. In each
case, the companies were distracted for years with image problems that kept
consumers away.
"People can forget that they are operating for their customers, not their
stockholders," said Susan Stein, a Goldman Sachs analyst. "When a product
doesn't meet expectations, it is really hard to get back. I'm not saying Iridium
will absolutely do that, but you have to be careful."
Ms. Stein said she tried an Iridium phone about 10 days ago. She said it
worked well when the phone could connect through the system, "but it was
inconsistent" in successfully completing calls. While the performance appeared
to be improving, she noted, "How much progress can you make in two
weeks?"
Iridium's biggest difficulties, people familiar with the system said, have been in
successfully connecting calls among an Iridium handset, the satellite, and the
gateway.
During the past few days, however, the new software and a series of
repositioned antennas have pushed several gateways to their target
performance levels.
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