*ICO cancellation - Iridium as toast* "...London-based ICO is creating a $4.6 billion system scheduled to begin service in August 2000. The phone will cost $700 and the per-minute charges run from 50 cents to $3 a minute..."
If ICO is putting $5bn in space, that must represent a LOT of minutes. Iridium already has their minutes up there so all they can do is sell them at what the market will bear. Globalstar has the inside track with the best system at the lowest minute cost with the best quality calls so they can go ahead and launch with impunity.
Though the three of them like to go on about how they serve different markets and all that nonsense, most of the minutes and markets are fungible so the similarities are greater than the differences.
Since all the minutes will have to be sold and the price to move those minutes is directly related in a non-linear way to the price of those minutes, the price of minutes will go down with each addition of minutes to be sold, [over a short period anyway - over a longer period, at lower prices, billions and trillions more minutes can be added with no price drops].
If ICO goes ahead and launches, which they seem grimly determined to do, much like Scott was grimly determined to get to the South Pole, which he did, never to return, then the price of minutes will fall. They will fall so much that both Iridium and ICO will be unprofitable and will be instantly obsolete. Once their life is depleted, they'll be abandoned to the sky. Globalstar can afford to reduce their price to whatever it takes to sell their minutes. Iridium and ICO can't.
ICO has the competitive disadvantages of a high orbit and no CDMA, meaning poor quality service [latency, battery drain and big handset as well as poor quality voice and a less robust connection] so it isn't that they can get customers from Globalstar by offering some benefits. Iridium used to be touted as the 'Premium' service, but apart from coverage, I don't know what else is premiere about it, other than the price. Even the coverage will be a short term benefit.
There are some niche Iridium advantages such as the military having their own gateway but this is not really much of a big deal since the USA military will only buy a small portion of the service.
The USA military might prefer the pretty good privacy of Qualcomm's system as they can use some hot stuff Condor encryption by Qualcomm for their Globalstar links. That will give them a cheaper and better system than Iridium's. With GPS thrown in. With the money saved, they'll be able to order 5 times as many handsets as they can with Iridium.
I own Globalstar shares, because despite the fretting, there should be plenty of advantage and profit for shareholders even if Iridium slashes their prices and sells every minute and ICO launches and slashes their prices to sell every minute, and Globalstar does a poor marketing job with high fixed prices per minute and a very gradual buildup in handset production and a very gradual sale of the minutes that are already hurtling around the sky.
Certainly it would be better if ICO cancelled, Iridium continues with their high minute price strategy and Globalstar sold handsets at market rates instead of messing around with the marketing strategy 'send us a deposit of $200 and we'll put you on a list so that you might or might not get a handset in August.'
Handsets should be sold from the end of the production line to the highest bidder. Minutes should be given away for free for 6 months. That would get things moving, then prices could move from there depending on demand. If handset prices are $5,000 that will give Q! Ericy and Telital incentive to stop frigging around [MIT technical term for being sluggish] and get production lines glowing red hot, day and night, with backup staff behind each production line worker so that if one gets tired, the next takes over without missing a beat.
Okay, a bit strained, but understandably when there is a lot that can go wrong in a short time.
Maurice
PS: My guess is that below 50c per minute retail, demand for Globalstar will be high.
5c per minute would cause VERY high handset demand and the buyers would be BIG users of minutes with the handset running most hours of the day. Handsets would trade second hand at $10,000. Bids at the production line would run at $12,000. Any self-respecting high roller would not be seen dead without one! |
