Unit 1

Unit 1
Problem Set Solutions
Describe the key differences between Iridium and Globalstar focusing on the system architecture
and technology on the one hand and on the business model on the other hand.
Iridium is a lower altitude higher capacity system. Iridium possesses intersatellite links (ISL) that
allows it to route calls using multiple nodes. Globalstar is essentially a “bent-pipe” architecture.
Iridium was conceived as an end-to-end service provider, where the ground stations (gateways)
were to be owned and operated by Iridium (in conjunction with regional partners). Globalstar on
the other hand would not own individual ground stations, but rather have local providers
according to a “franchise” model.
The November 1999 edition of Bloomberg magazine contained an article entitled “The Milking
of Iridium”. This article stated in part:
There are many reasons Iridium failed economically. The company had bulky telephones that
weighed as much as one pound, cost as much as $3,000 and didn’t work well in buildings or
cars. Iridium’s target market were international travelers who wanted to communicate with
people in other countries from cars, airports and other open areas. Anywhere meant any location
on the globe, not anywhere on the globe from inside a building. What was unanticipated was that
international business travelers would simply buy two or three $100-class terrestrial cellular
phones and pull out the appropriate one when emerging from the airport in Paris, Tokyo or New
York – a much cheaper proposition than an expensive and relatively bulky $3,000 phone..
Cellular phones had become a commodity, to be replaced and tossed away every 12-18 months.
This was wholly unanticipated in 1991, when Motorola first committed to the project.
Testing phase insufficient. Software had twenty million lines of code.
What may have doomed Iridium, however, where the multiple, and often conflicting, roles
played by Motorola.
July 1, 2000 post-mortem analysis in Marketing Management
December 12,2000 AP – sale of Iridium
Most revealing is perhaps the following statement of an unnamed high level Iridium employee in
Research, Planning and Market Strategy: “Iridium’s original market research was conducted
before wireless technology was widely available. By the time Iridium launched its commercial
service, the customer base from its original research had significantly decreased because wireless
communications were now widely available in populated areas.” At the time Iridium was
conceived, cellular or mobile phones were of limited use when users crossed international
borders. Europe, for example, had many different mobile standards, which meant a German
phone would usually not work in France or Italy. Motorola’s management saw immense
opportunity in creating a global wireless service with a single protocol and predicted a market of
12 million satellite phone users by 2002 and a 40% market share for Iridium. The company also
predicted 100 million cellular terrestrial cellular phone users by 2000. While Iridium had an 18
month lead over its closest mobile satellite service (MSS) competitors such as Globalstar,
Teledesic and ICO Global Communications this was not a major competitive advantage.
The main problem was that the marketplace had been transformed by ground-based mobile
networks that were rapidly exploiting new technologies and building scale throughout the
1990’s. Here was a major advantage of terrestrial networks compared to Iridium and its
competitors: “staged deployment”. Terrestrial networks started offering limited coverage at first
in urban, high-density and revenue generating areas as well as along major highways and traffic
arteries. Rural areas were often not covered in the early to mid-1990’s but this did not seem to
bother terrestrial cellular subscribers whose lives and needs were focused on large urban centers
and the surrounding suburbs. Once significant revenues started to flow into the terrestrial cellular
systems, a part of the proceeds were used to gradually expand coverage, robustify service and
increase capacity on an “as-needed, as-afforded” basis. A key factor in the growth of wireless
phones was the adoption of a single standard, known as GSM, in Europe and parts of Asia. By
January 2000 there were more than 450 million cellular subscribers worldwide (including GSM).
According to some observers, the rapid evolution to a single European standard took Motorola
by surprise, even though Iridium incorporated a GSM-based dual use mode as an afterthought.
The satellite constellations, on the other hand, did not have this luxury and were prefaced on an
“all-or-nothing” approach. A partial coverage Iridium was never envisioned and would have
been of even less value. Unit 4 discusses this aspect in more detail and presents ways in which
market uncertainty and staged deployment might have been considered while architecting
The future: Satellite service providers such as Iridium entered the market as rivals and
competitors to ground-based services. A new understand is emerging that satellite services are
complementary to ground based networks. Focus on specialized markets such as oil rigs, fishing
fleets, shipping,
INMARSAT has an estimated customer base of 108,000 subscribers.
From: DISCOVER Vol. 21 No. 10 (October 2000)
Table of Contents
Twenty of the Greatest
Blunders in Science in the
Last Twenty Years
What were they thinking?
By Judith Newman
Earth to Iridium
The award for "Most Expensive Piece of Immediately Obsolete Technology"
goes to Iridium, a communications company that 10 years ago promised
crystal-clear cellular phone service anywhere on the planet. Sixty-six satellites
were launched at a cost of $5 billion. "The phones were bulky. They cost
$3,000. A call cost several dollars per minute, and the system didn't work
indoors," says Richard Kadrey, a founder of Dead Media Project, a Web-site
collection of failed media and technology. "Most people simply don't need to
call Dakar at a moment's notice. In fact, the number of people who do is so
small that it is probably dwarfed by the number of people who really need to
talk to aliens." In 1999, Iridium took its place among the 20 largest
bankruptcies in history.
Competition: Success of terrestrial networks – price of communications too high compared to
terrestrial cellular service ?
Fundamental problem is large time delay between conception and launch.
This is true for many other systems as well. One way to deal with this is embedding flexibility
into the system design, see Module 4.
Handset: Too expensive and heavy
Usability: Can’t use indoors
System Introduction: Not sufficient testing, Availability of handsets, Marketing not set up for
onslaught of inquiries
Economic Instability: Asian crisis
Marketing: No clear differentiation, target population unclear
Why is there some success after September 11, 2002?
Need for decentralized systems
Clear niche customer markets are emerging: Journalists in Afghanistan, Military users in the
field, emergency relief (police…)