The bigger US cell phone companies have tens of thousands of customers. Iridium currently (Mar 06) has about 150,000 - 100 times smaller than main mobile or portable phone organizations. The cost of its 66 satellite network is about $6 billion, and although those are all sunk fees, the satellites will need to be replaced at some stage.
A similar equation applies towards the gear. Well-liked cellular phone designs sell in quantities of several millions, and the underlying technology changes little from design to model, permitting development fees to be split over numerous units, and with most efficient large volume production techniques. But the Iridium satellite phones are selling very gradually, and have unique technology in them.
And so, whereas your normal mobile or portable telephone firm can most likely make money by giving you a free cell phone and 1000 minutes of airtime for only $30/month; Iridium absolutely can not.
Lack of competition and price inelasticity
You have a lot of choices when selecting a regular cellular phone provider. But there's only one completely international satellite telephone service provider - Iridium - and only one source of Iridium handsets.
Could Iridium offer its 9505a handset for much less than $1500? Almost certainly - the underlying variable price per mobile phone handset sold, to Iridium, is most likely $50. No need to have to reduce the device price, due to the fact there are no competitors.
Iridium might choose to drop the selling price of the mobile as a way of encouraging a lot more people to register for their service, in a similar way to how traditional cellular phone operators give away mobile phones, but to date it has resisted such temptation.
Could Iridium offer its airtime for less than the rates it does? Which is a more complex question; for certain, the variable added price of accepting one more call onto their network is close to zero, but they've huge fixed fees that need to be covered. And, a lot like the mobile phone handset cost, for those who truly will need a satellite phone, $1.50 a minute is often a bargain. And for people who don't require a satellite cellular phone, even 50¢ a minute is almost certainly too significantly. Iridium probably feels that to the type of individuals who require and use its solutions, its prices are fair.
Long term satellite telephone price tag trends
Considering these problems above, we don't predict main drops in either phone or airtime expenditures occurring with Iridium satellite support within the foreseeable future.
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