Two More Companies Lining Up Satellite Phone Networks

from the try-try-again dept

Two of the biggest tech flameouts of the late 1900s and early 2000s were satellite phone providers Iridium and Globalstar. Both had what sounded like a great idea: mobile phones that would work anywhere on earth. But the business model was a little more difficult: handsets were bulky, service was really expensive, and most of all, the costs of setting up and running a business based on satellites are, well, astronomical. Somewhat surprisingly, Iridium is still around, but that's really only because it went bankrupt and the current owners were able to pick up the company and its billions in infrastructure for $25 million. Globalstar is still kicking, too, and each company has about 300,000 subscribers, which isn't many considering the cost of the networks.

But a couple of companies aren't letting a history of pain in the satellite business get in their way, and are looking to launch satellite phone networks of their own. They're focusing on covering just the US or North America, rather than the entire world, and one of the networks will use only a single satellite, so the costs will be lower than previous attempts. However, many of the drawbacks still remain: the phones, though smaller than previous satellite phones, still need line of sight to a satellite, meaning they won't work indoors or if environmental elements are in the way. Handsets are still expensive: one company says its first device will cost about $700, calling into question its CEO's claim that people will want to replace their BlackBerry with one. And they say service will be under $1 a minute, which is cheaper than Iridium, but still much more than typical cell service. They'll offer some minor advantages over existing satphones, which might tempt some users to switch -- but these companies are all fighting over market that's very small relative to their infrastructure costs. While most things in the tech world tend to come down in price over time, satellites remain really expensive, and that's a difficult obstacle for companies to overcome.


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  1.  
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    Cheese McBeese, Apr 10th, 2009 @ 4:33pm

    So how will these new companies compete and differentiate from Iridium? I don't get it. Who is financing them?

     

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    Jake, Apr 11th, 2009 @ 10:02am

    Sounds like they're making the same mistake as Iridium and trying to break into the conventional mobile market, rather than targeting individuals and organisations who spend a lot of time away from populated areas.

    Still, for all that, I'm not sure their overhead is as bad as you say; how many cellphone masts can one build and maintain for the same price as one satellite? Probably not enough to cover the whole of North America.

     

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  3.  
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    Anonymous Coward, Apr 11th, 2009 @ 11:08am

    All these phones are expensive and the service is even more expensive. These fellas are offering a cheaper smaller phone, service, and the same coverage as the other two services out there. There also is probably a big survey to back up the market for these and they are going at this from a significantly cheaper vantage point. So they only need 100k subscribers over a couple years to break even pulling from the other companies after that it is gravy. The writer unwittingly gave all the reasons why a single satellite system is going to be a success. It is not for the average joe, it is for the firefighter in the Rockies or the border patrolman in the middle of nowhere or the tour guide or cattleman...there are a lot of people who would sign up if only it were not so expensive and cell service period is a big boon to these people who dont care if they cant get it in their basement.

     

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  4.  
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    Derek Kerton (profile), Apr 11th, 2009 @ 11:10am

    There's More To It

    Carlo,

    There's more going on here than just another Iridium. The new satellite companies are taking advantage of many advances in technology.

    The most important is that the handsets they propose are NOT just satellite, but are cellular-sat hybrids. Thus, whenever possible, the phones will use the much cheaper cellular networks, and work indoors as well as any cell phone. However, outside of cell coverage, they will continue to work on the satellite.

    So, unlike sat phones of old, whose business model was killed by the expanding, cheaper-to-use cellular networks, these phones will take advantage of those cheaper networks whenever they can.

    Meanwhile, Qualcomm has partnered with these new sat firms to develop new multi-mode baseband chipsets (the guts of a mobile phone) which can easily jump between sat and tower - at what they called "a comparable cost".

    See: http://www.wirelessweek.com/article.aspx?id=163082

    Two business models are obvious:

    1) The new sat phone companies can sell service, and strike roaming/MVNO deals with cellular companies like Verizon or Sprint. The customer would not know or care that some calls are handled terrestrially. This is a lot like MetroPCS turned on its head: MetroPCS builds out in cities, and roams on Verizon outside the city. Sat services just would do the opposite...but charge more per minute for the advantage of FULL nationwide coverage.

    2) The sat companies can offer roaming to any cellular company that wants to offer FULL nationwide coverage. Much like VZW is so proud of their new worldphone Blackberry, which can finally roam to Europe, they could release a phone or two that could boast complete coverage. VZW, in this case, would pay inbound roaming fees to the sat company.

    Anyways, it's hard to compare these new efforts to Globalstar or Iridium. The goals are very different, the target markets are very different, the technology has changed a great deal, and the business models are very different. If these new businesses fail, it will be on their own merits!

     

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  5.  
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    d, Apr 11th, 2009 @ 3:49pm

    Re: There's More To It

    Meanwhile, Qualcomm has partnered with these new sat firms to develop new multi-mode baseband chipsets (the guts of a mobile phone) which can easily jump between sat and tower - at what they called "a comparable cost".

    Qualcomm... sounds familiar. Oh yeah, the company that partnered with Globalstar and half heartedly non-delivered on its promises?

    These companies' business models are no different than that of Globalstar (but certainly different than Iridium). Globalstar's phones were "multi-mode" and capable of using cellular networks right from the start.

    The problem for any new satellite phone company will remain the same as before: people that truly need satellite phone capability are few in numbers and a lot of the areas they would like to use those phones would require to have gateway (like Globalstar) and probably put them in jail if they use pure satellite connection (like Iridium). Don't even have to go far for an example, three a years ago an American "operative" was arrested in Russia just because he had Iridium phone.

     

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  6.  
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    John Shepler, Apr 11th, 2009 @ 9:15pm

    It's a Niche Market

    There's still a need for satellite access, both telephone and Internet, in areas where cell tower coverage is spotty. That includes much of the Western USA as well as the oceans and many places worldwide. The smaller size of these phones should give them a real advantage for regular users.

     

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  7.  
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    Derek Kerton (profile), Apr 12th, 2009 @ 4:15pm

    Re: Re: There's More To It

    In response to comment #5,

    Sure, specific Globalstar phones could operate on cellular networks, too, but I would hardly call it roaming. This is how Globalstar referred to it:

    "If you wish to add cellular service to your handset, please consult your local cellular providers to determine technical compatibility. Once cellular service has been successfully loaded on your Globalstar phone, you will have separate cellular and satellite phone numbers and bills."

    So, basically, it was not roaming. It was "get your own, separate cellular account." That's hardly different from just carrying two phones, with two accounts. What number should people call you on? The one that doesn't work indoors, or the one that doesn't work out of town? The new solution has one bill, and one number that can reacy you in more places than ever.

    Also, these earlier models were large, and were more expensive to build. The new solutions are smaller, cheaper, multi-mode chipsets.

    Do you think Qualcomm has a reputation of bailing out on its customers? Globalstar could not get or guarantee sufficient volumes to motivate any vendor, that's not Qualcomm's fault.

    I'm not saying I'm sure the new sat services will be winners, but I did say, and I stand by, that you can't compare them to Iridium or Globalstar.

     

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  8.  
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    Greg, Apr 13th, 2009 @ 9:17am

    Globalstar

    Globalstar is still kicking, as the article says...appears to be focused on machine-to-machine and asset tracking by satellite. Not a bad business to be in at this stage, considering how cheap and available GPS devices are getting.

     

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  9.  
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    Anonymous Coward, Apr 13th, 2009 @ 1:09pm

    One cost cutting measure they are going with is launching their satellites through their contract with North Korea. Not sure how well that will work out though.

     

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  10.  
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    Anonymous Coward, Apr 14th, 2009 @ 1:10pm

    Re: Re: Re: There's More To It

    Do you think Qualcomm has a reputation of bailing out on its customers? Globalstar could not get or guarantee sufficient volumes to motivate any vendor, that's not Qualcomm's fault.

    Umm, yeah. Customer or partner, Qualcomm quite easily breaks their relationships and lucky is the company that does not end up on a wrong end of a lawsuit, as Qualcomm is one of the most litigious companies in the industry.

    You also forgot to address the whole satellite "gateway" conundrum that restricted Iridium's use around the world and became the cornerstone of cost overruns at Globalstar.

     

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  11.  
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    John Satellite Phone, Apr 24th, 2009 @ 9:15am

    The technology is not cheap when the number of users are still only in the thousands instead of millions, yet the system is satellite phones systems are extremely capital intensive and can’t be grown in stages like cell phone networks in the early years.

     

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  12.  
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    heynow, Jun 10th, 2009 @ 12:44pm

    re er

    try terrastar and see what they have going ,,

     

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  13.  

    Satellite Phone Costs

    Satellite phone rental and sales costs have gone down as the technology has improved, and as use has become more widespread. We have very economical rental and sales plans at All Road Sat, so go ahead and have a look.

     

    reply to this | link to this | view in thread ]


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