TECHNOPHILE: Watching the Satellites

Look heavenward at night and you might spot a new speck of light moving swiftly across the sky -- one of 66 Iridium satellites crisscrossing the globe some 500 miles overhead. Though they are usually best viewed with binoculars, periodically (maybe six times a night) one of these speedy orbiters will suddenly glow to 30 times the brightness of Venus. This burst of luminosity has come to be known by seasoned skywatchers as an Iridium flare ( It's the sun momentarily glinting off the passing vessel's highly reflective aluminum antenna. The glare will die out within 20 seconds, leaving uninformed onlookers to wonder what kind of UFO they've just glimpsed.Iridium flares may be a pleasant diversion (or petty annoyance) for astronomers, but the owners of Iridium World Communications Ltd. ( have little to look up about these days. In fact, it is likely that the company's insanely ambitious technological venture will soon come to be judged as one of the colossal failures of our age -- and a cautionary tale for these heady times.At least I can't think of any other business that cost $5 billion to build that has attracted only 15,000 customers. Yes, that's billion.It started off nobly enough. Conceived by a semiconductor engineer in 1987 and financed by Motorola and a consortium of international investors, Iridium was to be the first mobile-phone service to span the entire planet. Iridium World Communications had a space-age grandeur that went beyond the bottom line. Wherever you'd roam, from Mount Everest to the Mojave Desert, you could be reached with one phone number. Iridium would be the telco for the global village.But since Iridium's November 1998 debut, this vision has fallen apart faster than a dollar-store version of the Veg-O-Matic. In April, the company's CEO quit, followed by the chief financial officer and the top marketing person. Peeved investors brought a class-action suit against the company. And why not? In the first four months of this year, Iridium made $1.45 million, but spent $505 million to make it. Thus far it has attracted only about 15,000 users, a mite shy of the 600,000 it hoped to get by this year's end. The company has been granted three extensions to make its loan payments. When the next deadline arrives, August 11, will the company need another? Will it be granted? Rumors of bankruptcy abound.In retrospect, of course, it is stunningly obvious that Iridium would flare out. Bad timing is partly to blame. An inherent danger in developing any new technology is that it may already be obsolete by the time it hits the market. In 1987, no one could have guessed the worldwide cellular-phone market would be as large as it is now. But cellular service is much more pervasive than previously expected, robbing a good chunk of Iridium's intended audience. Because they require only cell towers rather than satellites to transmit calls, cell phones are vastly cheaper to use. Until recently, an Iridium call cost $3-$7 a minute. Compare this to AT&T's nationwide cellular service, which, as near as I can tell from its crazy calling plans, runs roughly between 14 and 25 cents a minute. You get the idea: Spend most of the time in your own country, and it's pretty obvious which mobile phone you're not going to use.But the truth is, the service was never meant for the everyday Joe. It was built for the globe-hopping business exec or the relief worker. But how many of those do you know? Enough to support a $5 billion enterprise?Even if a homebody wanted to appear all Austin Powers-like by carting around an Iridium phone that's the size and weight of a brick and costs a cool thousand ("It's Iridium, baby"), it's still not as useful as a regular cellular phone. In many cases, it can't even receive calls from within buildings -- the walls block the signals! Nor can it be used to check E-mail. Seems that in 1987 no one foresaw the Internet either. All together now: "D'oh!"Recently, Iridium added a worldwide paging service and cut prices somewhat in hopes of building something of a customer base. Its sales department (the portion that survived the recent layoffs, anyway) has redirected its focus to those living in sparsely populated areas where mobile phone don't reach, areas inhabited by oil rig workers, ship crews, hikers. This is desperation. You don't need to be an MBA to understand that sparsely populated areas don't have all that many people in them. Places with few people tend not to make happening markets.We live in a time when venture capital is thrown around in greedy abandon, when profits can be reaped in previously unimagined global proportions. But the laws of common sense still hold even in this rarefied sphere. And Iridium is that oldest of technological blunders: It scratches an itch that doesn't exist. It's a solution looking for a problem. It is, as one stock analyst told The Washington Post, "a reminder not to let technological exuberance override business prudence."Myself, I just wonder what'll happen to all those satellites.Contact Joab at

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