The larger US cellular phone businesses have tens of thousands of buyers. Iridium presently (Mar 06) has about 150,000 - 100 times smaller than main cellular phone companies. The expense of its 66 satellite network is about $6 billion, and although those are all sunk fees, the satellites will have to be replaced at some stage.
A comparable equation applies towards the gear. Well-known cell phone designs market in quantities of several thousands, and the underlying technology changes little from model to design, permitting development fees to be split over quite a few units, and with most efficient large volume production methods. However the Iridium satellite phones are selling really gradually, and have special technologies in them.
And so, whereas your normal cellular mobile phone company can almost certainly make money by giving you a free of charge cell phone and 1000 minutes of airtime for only $30/month; Iridium totally can not.
Lack of competition as well as price inelasticity
You have lots of options when choosing a typical cellular phone provider. But there is only a single completely worldwide satellite mobile phone provider - Iridium - and only 1 source of Iridium handsets.
Could Iridium offer its 9505a phone for much less than $1500? Nearly definitely - the underlying variable price per device sold, to Iridium, is possibly $50. No need to decrease the mobile cost, due to the fact you'll find no competitors.
Iridium may choose to drop the price tag from the handset being a way of encouraging far more individuals to register for their provider, in a similar method to how traditional cellular phone operators give away phones, but to date it has resisted this kind of temptation.
Could Iridium offer its airtime for less than the rates it does? Which is a far more complicated question; for certain, the variable added cost of accepting 1 more call onto their network is close to zero, but they've large fixed fees that have to be covered. And, a great deal like the device price tag, for people who genuinely have to have a satellite telephone, $1.50 a minute is often a bargain. And for those who do not require a satellite mobile phone, even 50¢ a minute is probably as well very much. Iridium most likely feels that to the sort of folks that require and use its providers, its prices are fair.
Future satellite cell phone selling price trends
Considering these problems above, we do not predict important drops in either phone or airtime charges occurring with Iridium satellite assistance in the foreseeable long term.
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Iridium, the satellite phone company, has been working hard to re-invent itself following its 1999 bankruptcy. Last September it returned to the stock market through a reverse takeover, and has set about raising money for a new fleet of low-earth orbiting satellites.
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Inmarsat was chartered as an intergovernmental organization (IGO) in 1979 to exploit the emerging satellite technology for mobile communications to improve maritime communications, specifically to enhance safety of life at sea.
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