Iridium wasn't the first satellite phone service, Inmarsat was. This outfit began in the 1980s, with a network of stationary satellites that required larger (currently laptop computer size) phones. Inmarsat's customers are mainly ships or facilities in remote locations. The large terminals are a disadvantage for military use. However, in some cases the military uses Inmarsat, especially since Inmarsat now offers fast Internet access. Iridium will be offering this as well, but not with the higher access speeds.
Iridium has brought in enough money over the last two years to put up replacement satellites and now it's satellite fleet is good until at least 2010. The Department of Defense expects to continue being a major customer.
When the Iridium company went bankrupt in 2000, a private company and the Department of Defense came to the rescue. Iridium's $8 billion in assets (mainly a network of 66 low orbit satellites) for $25 million, the Department of Defense provided a three million dollar a month contract for a large chunk of Iridium's capacity. Originally, Iridium was trying to sell satellite phone service for $14 a minute. What killed Iridium was the unexpected rapid growth of ground based cell phone systems. There just weren't that many places on earth not covered by a cell phone network when Iridium went online in 1998. But the Department of Defense felt there was a military market for Iridium, and events in late 2001 proved this to be correct. By purchasing Iridium cheap, and getting the cash flow from the Department of Defense contract, the new Iridium was able to lower its prices and appeal to the more price conscious NGO (Non Governmental Organizations, foreign aid workers and the like) and journalists. Some commercial operations, like oil and mineral exploration teams, also found the cheaper Iridium attractive. You can now get Iridium voice service for as low as 20 cents a minute.