Iridium: 'the little satellite that couldn't'

May 1, 2000
WASHINGTON - Iridium, the "little satellite that couldn't," has become a textbook example of how not to run a commercial space program. This has been the case ever since Iridium Inc. in Washington terminated service of the constellation of 66 tele-communications satellites on March 17
Disaster postmortem

By John Rhea

WASHINGTON - Iridium, the "little satellite that couldn't," has become a textbook example of how not to run a commercial space program. This has been the case ever since Iridium Inc. in Washington terminated service of the constellation of 66 tele-communications satellites on March 17.

Observers agree that Iridium's business plan and technological implementation were fatally flawed from the start - with the business plan being the more egregious of the two failures.

Iridium's business woes are well documented. The customer base had reached only about 55,000 satellite telephone users at the time of termination, far short of the million users Iridium leaders had projected by then when they began service in November 1998.

The technological issues have been kept relative quiet, and represent a topic that nobody in the industry is willing to be quoted on. Still, under the cloak of anonymity, industry observers cannot say enough about what they regard as the wrong satellite in the wrong orbits aimed at the wrong market.

The 66 satellites, were originally supposed to supply communications services to developing countries. The idea was that Iridium would be an affordable alternative to a more expensive telecommunications infrastructure based on hard-wired networks or cellular systems using repeater towers.

Iridium's leaders ignored the most important lesson that the communications satellite industry has learned in its nearly 40 years of existence: put as much capability as possible into the space assets so that users can access the system at minimal cost and effort. The classical example of this is the Global Positioning System, or GPS, in which U.S. taxpayers through the U. S. Department of Defense have subsidized the space portion to the benefit of the users and suppliers of the ground-based equipment.

Iridium didn't come close to meeting this objective. Originally conceived in 1987 as a $1 billion system to serve business travelers - particularly when they were in developing countries that lacked sophisticated communications - the Iridium system continued to grow in cost and executives continued to change its business focus.

When the company finally pulled the plug in March the cost had grown to $5 billion, including an additional $100 million invested just to add cellular capabilities and links to terminals in villages of developing countries.

Space-based cleanup

Now the issue is what to do with the existing satellites in orbit. This will involve an additional expense to bring them down in a controlled way so that they burn up in the atmosphere away from populated areas, says Marco Caceres, senior space analyst with the Teal Group consultancy in Fairfax, Va. - the one person who will speak for the record about Iridium.

Iridium officials have been exploring the alternative of selling off the crippled satellites, including offers to the U.S. military and even a Middle Eastern group that would use them for distributing Muslim religious messages.

Caceres, however, says he doubts these efforts will succeed. U.S. military forces increasingly rely on commercial communications services, as demonstrated in the peacekeeping missions in Bosnia and Kosovo, he notes. The exorbitant operational costs are likely to frighten away other potential buyers.

From a user standpoint, Iridium was costly and inconvenient. An Iridium receiver cost $1,000 - down from its original cost of $3,000. At this price, Iridium could never keep pace with the cellular phone suppliers, who give away their receivers to stimulate market growth. In contrast to the pocket-sized cell phones and GPS receivers, the Iridium receivers were "bricks" that didn't even fit into briefcases.

Even in developing countries Iridium faced tough competition, where the market was modest at best. The more affluent developing countries were willing to install their own state-of-the-art fiber optic terrestrial networks, so Iridium was squeezed in the middle. Iridium had only one real advantage over cellular systems: it did not rely on land-based towers as cell phone systems do, which are vulnerable to bandits and drug czars.

Technology problems

Since it was conceived in 1987, and throughout its tempestuous life, Iridium suffered from substandard technology. First, it was an analog system, like the failed Japanese high definition television (HDTV) developed around the same time. The digital revolution swept both away, bleeding the financial resources of their developers in the process.

The most sensitive technological issue in the whole Iridium story is the use of commercial off-the-shelf, or COTS, electronic components and the resulting spacecraft failures in orbit.

Nobody is willing to publicly name names or cite examples, but this practice was widely known throughout the industry. The developers shied away from radiation-hardened parts since the satellites were in low-Earth orbit, but the consensus among industry experts is they took too many shortcuts.

As a result, the failure rate in orbit is believed to have been about 20 percent, double the 10 percent that the Iridium organization had planned for during the development phase.

Nonetheless, sources estimated that the Iridium organization built at least 100 satellites. These included those needed to replace the ones that failed in orbit and the backup satellites that could be activated when one of the operational satellites failed. This approach added to the system's expense since the six orbital planes of the system required replacements to be launched at an uneconomical rate.

The company that stands to gain from the Iridium failure is San Jose, Calif.-based Globalstar Telecommunications LP, which industry sources say did the job right.

The Globalstar satellites are in higher orbits than Iridium, and are built with radiation-hardened Class-S electronic parts. This is a $4.3 billion effort that has also been plagued with the usual startup problems of signing up customers and getting necessary regulatory approvals. The company has been cutting its coat to fit its cloth by slashing prices to users and lowering its own growth rate expectations.

To put the whole Iridium failure in context, the $5 billion lost on the venture is comparable, in constant dollars, to the $1 billion that the Ford Motor Co. squandered on the Edsel automobile in the 1950s.

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