Congratulations Mr Moreorless, your posts now meet with my approval so please continue along these lines. Keep in mind there are no first, second or third amendments here = no right of free speech. No right to bear arms for self defence [self-defence always looks strange when carried out in the USA = the Trenchcoat self defence for example]. I can always get you put in Jill Jail.
Valueman has pointed out that Iridium cannot cut their price. Not until they have gone bankrupt anyway. Sure, they could try a loss-leader at 15c per minute, if they can find anyone stupid enough to pour money into the company for operations for a year or two. I bet they can't because what will Iridium do after those two years of gaining customers? They could raise the price to maybe $1 or at a pinch $1.50, but that won't cover their costs and I think the customers would change to Globalstar in droves.
After they have gone bust, Motorola can buy the assets for $3,141,592, which is pretty good! They will then have a multibillion dollar asset at near zero cost. They will then start selling the minutes at 15c per minute and that will enable them to sell millions of handsets at a nice, yummy, high price. Motorola will make a fortune on the handset sales. They have already made a fortune on the system design and construction.
Motorola will also sell 1.5bn minutes at 15c or maybe 20c per minute to make it easier to calculate, and will get $300m income per year on their $3m asset. That's good!
But they won't be launching a second system.
Some people worry that Globalstar will suffer. No it won't. Iridium only has 1.5bn minutes to sell [or maybe a bit less] and Globalstar has, moreorless, 12bn minutes to sell. So Iridium is trivial as competition.
ICO is more interesting because they will have a LOT of minutes to lose money on and they are cheaper minutes, so they could well go ahead and launch on schedule if they the demise of Iridium doesn't put the frighteners on investors.
Globalstar is sitting pretty. They will have 12 bn minutes which cost about 8c per minute to produce for the first constellation. The second constellation will be half that. So Globalstar can sell at really cheap prices and STILL make money.
They have great difficulty understanding markets though. I suppose they haven't been out in pig country, spending their days in Palo Alto, academia or living in luxury in the USA military parallel universe.
Out here, I met a guy on the golf course the other day, during which I have to boast on the second half I was heading for a par half but blew up with tremulous excitement on the last hole . Anyway, this guy was in his gumboots waiting for a load of cows to arrive by road transport [in this case in a vehicle whereas you often have the herd of animals actually running down the road to the new grazing but these were coming from 200 km away]. We invited him in for a beer [to celebrate a great half and Q! nearly reaching $200] and he was telling us how he had been hunting in the bush, and was 'sticking' a pig, which is not like USA surgical strikes with laser guided bombs - this is a messy, noisy and violent effort, conducted in ferns, dirt, dead leaves, pongas, ti tree [manuka], blood and fear. Sticking a pig involves making appropriate holes in it with a nice while you wrestle it. You have dogs to help in getting hold of it. They run it down and bale it up while you go running through the bush and straight into the mayhem.
Anyway, one of his pig dogs, which are really vicious animals which a lot of people think should be banned as a breed, got overexcited and got hold of his ribcage, presumably thinking he looked a bit like a pig too. Fortunately he had what you call a Swandri on with a shirt underneath, but he nevertheless had a handsized bruise with a row of puncture marks.
Sorry this is a long story.
Anyway, out here, we grow tomatoes. The farmer buys land, builds glasshouses and generally incurs significant costs to get them into production. Then he picks them and takes them to market which is where a crowd of prospective produce buyers gather to bid on the cases of produce they want. The high price gets the product.
So, away they go and usually, the prices are high enough to give the farmer a decent return on his investment. Sometimes though, there is a big glut of tomatoes because too many farmers have got too excited about the returns from tomatoes in recent seasons and they switch from other crops to tomatoes. When there is a big glut, the prices bid are lower, sometimes VERY, VERY low because to sell them all, retailers know they have to cut the prices to encourage their customers to buy LOTS of tomatoes instead of something else.
Suppose the top bid is only $1 per case. The farmer is losing his shirt but you know what? He accepts the dollar. He accepts the dollar because if he doesn't, he goes home with no dollar and a case of tomatoes which tomorrow will be rotten. He will have nothing.
Selling Globalstar minutes is like that. There are now 5 billion minutes per year up there [20 satellites]. In the past minute, 9,513 minutes have gone to waste. They have gone as rotten as the unsold tomatoes. At 10c per minute Globalstar would have got $953 instead of nothing. In September, we will have about 20,000 minutes per minute rotting in space, never to be used again.
Big piles of rotting tomatoes are NOT good. We need to sell these minutes at whatever the market will bear. When enough people are on the system and they are starting to compete for minutes in short supply, we can raise prices, just as the tomatoe farmer can do. When we have got the price high enough so that we are making huge trucksful of money and shareholders are buying Gulfstreams, we can launch another constellation. If the second constellation is the same size as the first, the whole system will instantly be at 50% loading and prices will hold fairly well. Maybe we would run a 'Constellation2 Celebration Special' for a year or so at a big discount to boost demand a bit.
It all seems pretty simple to we Bush Pigs.
Maurice
PS: A Swandri is a thick shirt made of wool which is worn hanging down to midthigh. It is warm, tough and dog teeth can't get through it very well. They slip it on over their heads and there are a couple of buttons at the top. Sort of like a heavy dress, but one would not tell the wearer that for fear they would think you were calling them effeminate. They are not. |
