A year ago, Iridium appeared doomed.
Once advertised as an always available phone for globetrotters, the Iridium satellite system was famously unable to get its signal to leap tall buildings and too expensive for most travelers to try. Its main developer, Motorola Inc., vowed to let Iridium’s 73 satellites incinerate in the atmosphere if nobody was willing to take over the system.
Yet soon after the World Trade Center attack, as many cellular phones and landlines failed to connect, emergency workers standing in the rubble in Manhattan got through using Iridium handsets.
Such situations, when other forms of communication are muted, is exactly the kind of uncommon circumstance the “new Iridium” targets for its services. Instead of pitching satellite phones to jet-setting executives, Iridium now focuses on people in distant military operations, aboard ocean liners or otherwise cut off from regular communication channels, such as the rescuers at the World Trade Center, Pentagon and site of the plane crash in rural Pennsylvania.
Investors in the new Iridium plucked the $5 billion satellite system out of bankruptcy court last year for $25 million, hopeful they could give phone connections to enough people in remote locations and find other uses for the satellites to sustain a business.
Although they declined to share sales figures, Iridium officials said last week the venture has been successful so far.
“We have seen more applications for the Iridium system than we ever envisioned,” said Dan Colussy, Iridium’s chairman. Colussy led the group of investors that purchased the satellite system.
Sending e-mails, instant messages and other data through the satellite system, as well as connecting countries with no existing phone service, are among the ideas being pursued by Iridium. The company could also benefit if the Federal Communications Commission lets satellite companies use their spectrum for land-based networks, as well.
Iridium phones were suddenly in demand after the recent terrorist attacks.
The company sent 50 handsets from its Leesburg, Va., headquarters to government officials, who dispatched them to the Pentagon, National Guard and other agencies. A shipment of 600 phones en route to Florida was diverted to rescue efforts in New York and Washington.
Yet the recent disaster, while showing how valuable Iridium can be, also highlighted some of the company’s challenges and its limited base of potential customers.
As soon as landlines and cell phones started working again, the Iridium handsets were no longer needed. Many of the phones owned by emergency personnel go unused for long periods of time.
“Disasters are perfect examples of pockets of need,” said Tim O’Neil, a wireless services analyst at Wit SoundView Technology Group. “But it will still be a significant challenge to find these little pockets of needs around the world.”
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The biggest question still looming over Iridium is whether the company can find enough customers before the life span of its satellites expires, making it practical to launch an entirely new line of satellites.
Colussy said there is a nine-year life expectancy for Iridium’s 66-satellite constellation, seven spares currently in orbit and another five nearly completed spares that are scheduled for launch next year.
Iridium’s first incarnation failed after its phone system proved too expensive and unreliable in areas with tall buildings.
To make calls, Iridium phones need a direct line of sight to satellites.
The new Iridium has several advantages over its predecessor, including no debt, new phones and lower operating costs. Iridium has replaced bulky handsets with slimmer models, selling them for around $1,500 apiece, down from $3,000.
Charges on the system have shrunk to around $1.50 per minute from as much as $7 per minute.
Colussy’s group purchased Iridium last year with the security of a two-year, $72 million contract from the U.S. Department of Defense. That contract includes options for five one-year renewals, which could boost the deal’s value to $252 million.
The arrangement gives 20,000 military personnel and other defense workers unlimited Iridium airtime.
Gino Picasso, Iridium’s chief executive, said even with the expected increase in military traffic now, the number of defense department users is expected to remain below 20,000.
Still, Picasso said the company could see a boost in sales as companies revisit their disaster plans.
Iridium is also looking for new markets by offering the capability to send data. The company rolled out data services in June and hopes to add quick messaging services by the beginning of next year.
While Iridium’s data transfer capability is slower than dial-up connections, Colussy said it allows people to send and receive e-mails, spreadsheets and similar items in remote locations.
He expects the messaging technology to open other markets to Iridium, such as the monitoring of remote gas pipelines and tracking the location of ships, planes and trucks. Iridium has also had preliminary discussions with the Federal Aviation Administration about continuously transmitting black box voice and data recordings to locations on the ground, Colussy said.
Iridium does face competition for these data endeavors.
London-based Inmarsat Ltd., another satellite company, offers faster data services in particular areas, which many shipping firms already use.
Another potentially lucrative market for Iridium could arise if the FCC lets satellite firms use their spectrum for land-based wireless services.
That way, Colussy explained, Iridium could partner with a traditional wireless system to put out a handset that alternates between cellular and satellite service depending on the user’s location.
“It’s a matter of whether the FCC wants to reshuffle how spectrum is utilized,” he said.
But before the new Iridium can hope to succeed with these endeavors, the company must let potential customers know it still exists.
“There’s still a continuous flow of misinformation,” Picasso said. “Some people say, `Didn’t the satellites get pushed into the ocean?'”