London Independent. Down to earth reasons for Iridium failure [Skybridge mention]
News Analysis: Disappointing technology and poor management contributed to satellite phone fiasco
Source: The Independent - London
IMAGINE BEING in outer Mongolia and having to
phone someone sailing 50 miles off the coast of Fiji.
Imagine, moreover, that money is no object.
Serving such exotic communication needs with no
thought to cost was the fatal rationale behind Iridium,
the pounds 3bn satellite- based mobile phone network,
which filed for US bankruptcy protection on Friday.
Behind the failure lies a salutary tale that shows how a
potentially revolutionary product was hamstrung by
unrealistic planning, insufficient management control,
bungled marketing and, most surprisingly,
technological pigheadedness.
Iridium began as a pet project of [Motorola]
executive Barry Bertinger and some engineers in the
mid-1980s after the former's wife famously complained
of not being able to phone the US while on holiday in
the Caribbean. In Motorola's can-do engineering
culture there was considerable attraction to the
technological challenge involved in setting up Iridium's
constellation of 66 satellites that would ring the world,
allowing, in theory, phone calls to be transmitted and
received from the furthest corners of the earth.
Iridium's first mistake was to build a stand-alone
network in space. A call from an originating handset
accesses the network at the nearest satellite, travels
through space from satellite to satellite before beaming
down to its destination on Earth.
Unsurprisingly, all that technology came at a stiff
price. Iridium handsets cost pounds 1,900 and calls
were as much as pounds 5 per minute. Worse still,
the Iridium handsets were clunky, weighed about 1lb,
and harkened back to Motorola's infamous brick
phones, common a decade ago.
Those shortcomings proved fatal. Indeed, nine months
after its highly publicised launch and a pounds 60m
international marketing campaign, Iridium had
managed to attract less than 20,000 customers
compared with a guarantee of 52,000 specified in
lending covenants with a syndicate of bankers that
includes Barclays and Royal Bank of Scotland.
Though lots of new products fail to match early
expectations, few, it seems, have failed with such an
international bang. Insiders say Iridium's internal
structure proved too cumbersome. Board meetings of
the 28 directors, they say, resembled the UN Security
Council replete with headsets and interpreters working
in five languages.
But the most damning indictment of Iridium, and of
Motorola, its largest shareholder with an 18 per cent
stake, must be the system's patchy technology.
Handsets depend on strict line-of-sight access
between the phone's antennae and the orbiting
satellite. It means, unlike conventional mobile phones,
that Iridium won't work indoors. Worse, dropped calls
are common, completion rates low, while other
network functions perform unevenly.
What is more, in an age of pay-as-you go with
handsets on sale in supermarkets and ready to use in
minutes, the Iridium phone, insiders say, required
users to undergo special training. And one of the
phone's key features, a cartridge allowing users to
switch from satellite to conventional mobile networks
when coverage was available, has been almost
non-existent.
The mounting technical problems and an unrealistic
launch timetable led inevitably to poor execution when
it came to marketing. Partners responsible for
promoting the service outside the US delayed setting
up marketing teams and organising distribution
channels. In the UK, Orange delayed offering services
until April, a full year after the company agreed to
become a service provider. It is understood that
idiosyncrasies with the Iridium service, including
limited functionality and fraud protection, made the
satellite system a difficult sell to corporate mobile
users.
Whether the Iridium fiasco drags down the half dozen
or so other would- be satellite communications
ventures is unclear. Globalstar, backed with pounds
2.2bn by Loral Space of the US, Vodafone Airtouch
and others, is due to launch a mobile voice service in
October. But Globalstar has chosen a different
marketing focus and a different technological
approach. Instead of selling services to international
business travellers, Globalstar will focus on people in
developing countries and remote parts of the US where
land-line or mobile phone networks don't exist. Some
of its initial areas will be Argentina and South Africa.
Also different is Globalstar's use of Earth-based
telecoms networks. Its "bent-pipe" satellites function
as simple relays between end-users and ground
stations. Call processing and switching are carried out
by gateways on the ground. Once a call from a
Globalstar user has bounced off a satellite to the
nearest local gateway, it is relayed to its final
destination via existing telecoms networks.
Hopes for the industry may hinge on the success of
Globalstar's launch. Analysts believe the market could
reach pounds 10bn by 2005 with 30 million customers.
But forecasts aside, if a sustainable market truly
exists, Globalstar needs to prove it. As one analyst
said: "If Globalstar doesn't go, no one will."
But even if Globalstar fails, another generation of
satellite services, this time targeting the burgeoning
market for Internet access, are on the drawing boards
for launch from 2003. Their strategy is to offer
sizzlingly fast Internet service at speeds of more than
2.0 megabits per second - 50 times existing modem
speeds.
Probably the best funded is Teledesic, the pounds
6.3bn venture backed by Bill Gates, Craig McCaw, a
billionaire pioneer in the US mobile industry, as well as
[Boeing] and Motorola. Teledesic's network, double
the price of most others, uses satellite-to-satellite
switching technology similar to Iridium's. That's
expected to give it the edge in high value-added
services like video-conferencing.
Another burgeoning Internet service provider is
SkyBridge, half owned by [Alcatel], the French
telecoms equipment maker. Headed by Pascal
Sourisse, a 37-year-old engineer, SkyBridge plans to
start putting its 80-satellite, pounds 2.6bn network in
place in mid-2002 with Internet service planned to
begin in 2003. It is still rounding up financing, however,
and could be more vulnerable than others should
problems emerge at Globalstar.
Two other satellite Internet systems are also on the
drawing board. Spaceway, backed by [Hughes
Electronics], and serving North America, plans to
begin in 2002. Astrolink, headed by Lockheed Martin,
is aiming for a 2004 launch.
(Copyright 1999 Newspaper Publishing PLC)
_____via IntellX_____
Publication date: Aug 19, 1999
¸ 1999, NewsReal, Inc. |
