Satellite Phones -- Why Can't The Business Work? [Telecom]

Sat Phones: Why Can't The Business Work? By Jesse Emspak December 11, 2010 6:59 AM EST

Satellite phones aren't as clunky as they once were, and technology has made them more powerful. Gone are the days when satellite phones had to be accompanied by a suitcase.

Yet do date, the field is littered with bold attempts at a phone that could be used anywhere, without depending on earthbound cell phone networks. Billions have been invested, with relatively little to show for it.

Part of the answer is debt. TerreStar is only the latest casualty of a crushing $1.2 billion debt load. The company introduced its Genus phone last month, but it is in the middle of chapter 11 proceedings and it is unclear that the phone will sell enough to help TerreStar stay in business, especially when it carries a $799 price tag.

LightSquared, formerly known as SkyTerra, also planned a hybrid terrestrial-satellite network. That company too, carried a billion-plus in debt that carries interest rates topping 16% as of the end of 2009. Since then it has been taken private by Haringer Capital Partners, a hedge fund headed up by Philip Falcone, which LightSquared says has provided a total of $2.9 billion. But the satellite it launched in November has been unable to fully deploy its antenna. That means the satellite portion of the network doesn't work. Lightsquared will need to launch another satellite for its integrated network to deliver as promised. [...] Perhaps the most famous of the satellite phone companies is Iridium. Iridium's plan was ambitious - a constellation of 66 satellites that would allow their phones to work anywhere on Earth. In November

1998 the company was launched and only nine months later it was in chapter 11. The company accumulated some $3 billion in debt, and struggled to gain subscribers - rosy projections of hundreds of thousands never materialized. The phones were bulky, even by the standards of the day. They also didn't work indoors. [...] It's possible that satellite telephones are one of those markets that is simply not tenable by itself. It wouldn't be te first technology that didn't get much cheaper as time passed -- after all, in the 1930s there were visions of personal aircraft flying skyways in New York. Airplanes stayed expensive, while cars and roads got cheaper. Satellite phones may well be a similar phenomenon.

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Reply to
Thad Floryan
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Doesn't that sentence explain the basic problem? While it sounds like a good idea to have a "phone that could be used anywhere", the obvious costs of providing that versus the likely revenue would make such a thing pretty well economically uncompetitive compared to those terrestrial networks that can serve far smaller areas of the planet at a fraction of the cost.

A sat phone service could also never match the capacity requirements delivered by the various ground based mass-market networks right now. .........

Sat phones serve a niche market due to the costs and other limitations of the fundamental technologies involved, until these are resolved it will always be a niche technology.

Reply to
David Clayton

The thing is, very few people actually _go_ everywhere, and so a phone that works everywhere has a limited customer base.

Services like Thuraya, which limit themselves to wide but still fixed geographical areas, are probably more profitable in the long run than global systems.


Reply to
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