Space: SatPhone Salvation


February 23, 2013: On February 6th a Russian rocket put six Globalstar communications satellites in orbit. This means that the Globalstar satellite phone again has worldwide coverage (except at the poles and in China and part of South Africa). These are second generation satellites Globalstar is putting up, which will provide cheaper and more reliable service. Chief competitor Iridium is getting ready to start launching its second generation satellites next year.

Globalstar and Iridium were two new companies that, in the 1990s, sought to bring less costly (but still expensive compared to cell phones) satellite phones (SatPhones) to a larger market. But the larger market was not there, not for calls that cost two dollars a minute (or more). Both firms went bankrupt a little over a decade ago, costing their investors over $10 billion. Both companies found new investors because the bankruptcy eliminated a huge amount of debt. The Department of Defense rescued Iridium from disappearing, by arranging for a new management team to take the bankrupt firm and get it going. Part of the deal was a large Department of Defense contract.

The Iridium satellite system was put up in the 1990s, at a cost of $5.5 billion. Alas, not enough customers could be obtained for the expensive satellite telephone service, and in 2000, the company was not only broke but no one wanted to take over its network of 79 satellites. The situation was so dire that the birds were going to be de-orbited (brought lower so they would burn up in the atmosphere). Then the Department of Defense stepped in with an offer. For $3 million a month the Department of Defense would get unlimited use of up to 20,000 devices (mostly phones but also pagers and such). That was enough for someone to come in and take over the satellite system (which cost more than $3 million a year to operate) and make a go of it. The new owners didn’t have the $5.5 billion in debt to worry about and were able to lower prices enough that they were able to sign up 80,000 other customers (civilian and military).

In 2004, the Department of Defense negotiated a new deal that cost them more than $150 a month per satellite phone account. This was necessary because the current Iridium network of satellites would need to be replaced, beginning in 2014. This was still a sweet deal for the Department of Defense. This satellite communications capability was the key to making the battlefield Internet work, and 50,000 or more satellite phone connections will be needed just to get started. This also makes all those satellites a vital military installation and target.