Reviving Iridium

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About Satellite Telephones Contd...

Satellite telephones are another kind of wireless telephone services that communicate via satellites circling the earth. There are two types of satellites:
• GeoSynchronous Satellites: These satellites, located 22,300 miles above the earth, revolve round the earth every 24 hours and hence they appear stationary. Two frequency bands are used, one each for uplinking and downlinking. Such satellite systems are excellent for data transmission, but not very good for voice communications. This is because of the distance involved and the time taken for electrical signals to make one Earth-Satellite-Earth round trip. Because of the long time taken to send and receive signals, voice communications are usually not carried via GeoSynchronous satellites.

• Low Earth Orbit (LEO) Satellites: LEO satellites communicate directly with handheld telephones on earth. They are stationed as low as 900 miles above the earth's atmosphere. The communications equipment on a satellite catches the call from earth and passes it to an earth-based switching system. Due to the high speed, at which the satellite revolves, it is necessary to hand off a particular call to another satellite that is just rising over the horizon. The process is similar to that of a cellular system, except in this case the cell site moves rather not the subscriber. The demand for wireless cellular services has increased considerably from a mere 10 million subscribers in 1989 to around 520 million in 2001. Yet, using a wireless cellular service was not very convenient to people who were always travelling. They could not make calls to their desired places once they were out of their home network. Also, making calls to/from places, following different cellular standards or frequencies was not possible.

Moreover, the cost for making international calls was high and GSM users had to use only GSM compatible handsets that worked out rather expensive because of high rental and call charges. Here, MSS came to the rescue of those customers who required a telephone service that could be used anywhere in the world. The market for MSS has increased steadily in the last couple of years. With MSS, customers did not have to take different connections at different locations and change their handsets from country to country.

According to a study,⁹ the number of MSS subscribers was projected to increase from 0.5 million in 1999 to 8 million by the end of 2002. Also, the revenues from the business were expected to increase from $4 billion in 1999 to $19 billion by the end of 2002. Subscriber base for other services like data and paging was also expected to increase and their revenues were expected to reach around $2 billion by 2002 from $250 million in 1999.

Many players including Globalstar, Odyssey, and Inmarsat-P/ICO entered the MSS market seeing the strong growth potential (Refer Exhibit I). These companies employed different technologies like LEO, MEO and GeoSynchronous satellites to deliver MSS services to customers. The Iridium system used a constellation of 66 LEOs (See Exhibit II for a detailed description of the working of Iridium's satellite system). However, the success of satellite telephone systems was dependent on a host of factors such as:

• Competition from other forms of service.
• Customer demand.
• Cost and financing.
• The ability of companies to capture different segments of the market.
• Access to critical foreign markets.
• The success of these innovative new technologies in the long run.

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9] Leslie A Tailor of Leslie Tailor Associates conducted a study on Market Demand for Mobile Satellite Services, Satellite Statistics in 1999.