New Iridium service shifts focus to vertical markets

Turning back time to one year ago, the satellite telephony market was in a shambles and it was clear the billions of dollars spent on putting communications satellites into orbit would soon be burning up in the Earth’s atmosphere.

Satellite telecommunications provider Iridium LLC of Reston, Va., found itself being accused of misreading the market and, with a multi-billion dollar debt hanging over its head, filed for bankruptcy in August 1999 and started preparing for the decommission of its satellites.

The failing company was saved only by its acquisition by Iridium Satellite LLC for US$25 million, a mere pittance compared to the cost of putting the satellites into orbit. And now, under the new management of the Leesburg, Va.-based Iridium Satellite, the Iridium service is re-launching. The question, however, remains: will the Iridium service succeed in round two or is it doomed to repeat history?

According to Ginger Washburn, chief marketing officer at Iridium, the company was to start activating customers towards the end of March and will fully re-launch the service sometime in the spring. And this time, she said, will be different. The new company will be focusing on vertical markets and moving away from the original launch’s focus on the consumer market.

Iridium also bagged a deal with the U.S. Navy to supply satellite phones and service to the military arm’s vessels, which, according to Ian Angus, president of Angus Telemanagement Group Inc., gives the company a healthy customer base to work from.

Aside from re-focusing to more appropriate customers, Iridium has also enhanced their services, Washburn said.

“What will be different will be that there will be some new enhancements in software that will provide improved voice service, but also officially by June 1, we will also be able to provide data,” Washburn said. Data services include e-mail, e-commerce and Web access. At first, it will be switched-circuit data, but by the end of the year, the company will move to burst packet data technology.

Washburn made a point to distinguish the old Iridium LLC from Iridium Satellite LLC, saying Iridium Satellite has streamlined the operations of the service and reduced the operating cost to less than seven per cent of the old company’s costs.

“Between the elimination of the debt in the purchase [of Iridium LLC] and the reduction of operating costs, those are two very, very distinct differences in the new company,” Washburn said.

The new launch of the services is obviously a lot more financially stable than it originally was, but how will the company compete against low-cost cellular and PCS phone services?

That isn’t the intent, Washburn said. Because of the global nature of satellite phone services, the main target is industries that are not within the typical metropolitan areas covered by cellular and PCS carriers.

“They appear to have re-thought their marketing,” Angus said. “They’re not trying to sell this to every consumer, but rather to the targeted groups – people that travel, people at sea and in isolated areas, which is the logical market for them. But satellite-based telephony is proving to be a very expensive business to be in.”

The U.S. military contract appears to be enough for Iridium to pay its bills, but not enough to profit from alone, Angus said. He noted that it is still unknown whether there is a commercial market big enough to sustain Iridium.

Iridium’s service providers do not seem worried about the future of the service. The company signed 13 service provider agreements in March. Toronto-based Rent Express Communications Inc., a service provider during the original launch, jumped at the chance to renew relations with Iridium, said Rent Express president George DeMarchi.

“We actually had a good relationship with Iridium and, for the most part, it worked very well for our clients,” DeMarchi said. “I think where some of the confusion was in the early days was Iridium may have been used in some markets that it wasn’t designed for. It wasn’t a solution for a person going to be in downtown Rome.”

As a company that rents telecommunications devices, DeMarchi said his clients that would be most interested in the new Iridium service would include those in the mining, forestry and nautical industries, as well as world aid groups.

DeMarchi said he is not worried at all about Iridium failing this time, as the problems last time were with the financial model, not with the service itself. He said he has already received many inquiries from past customers about the new Iridium service.

“When deployed properly, it worked very well and basically brought communication to people who had no alternative,” DeMarchi said.

According to Washburn, phones for the new Iridium service will cost under US$1,000. Iridium Satellite LLC can be found on the Web at