WASHINGTON — Prospects for a go-anywhere global telephone appear to have dimmed in the wake of bankruptcy filings for Iridium's $5-billion venture and a rival system backed by ICO Global Communications Ltd.
Both sought to offer global phone service over a network of low-Earth-orbiting satellites but filed for bankruptcy protection last month because they could not make debt payments. The financial woes of Washington-based Iridium and London-based ICO have cast a pall over the entire satellite industry.
But some experts say it's premature to write off wireless phones that can be used anywhere on the planet. They acknowledge that the odds for success are daunting, given the red-hot growth of ordinary cellular phones. Relatively cheap cell phones have become nearly ubiquitous in Europe, North America and parts of Asia, where they can be used in all but the most remote locations.
What's more, unlike some enterprises, satellite companies don't have the luxury of waiting a long time for their investments to pay off. Satellites don't stay up in the sky forever. And the low-flying variety that relay phone calls eventually wobble out of orbit and have to be replaced in five to seven years.
Still, some ventures, such as the London-based satellite consortium Inmarsat, have demonstrated that there is a market for a global satellite phone service, although Inmarsat's market is confined to oil rigs, ships and other maritime operators.
Some experts say if the industry could smooth some of its rough edges, satellite phones would attract more demand. These analysts note that Iridium's bulky phone is five to six times heavier than the lightest cellular models and costs more than $2,000 to purchase; calls cost $3 a minute.
"This was first-generation technology trying to make a go of things," said Cynthia Boeke, editor of Via Satellite, a trade magazine. "I do believe that with the globalization of the world economy, trade and entertainment . . . eventually a market will develop for these products."
Boeke cites video satellite operator Echostar Communications Corp. as an example of a down-on-its-luck satellite company that turned its business around by focusing on customer service and consumer needs.
Today Echostar has roared back--signing up more than 100,000 customers a month for its video service, a boom that's boosted its stock beyond $80 a share. Just last week, J.D. Power & Associates ranked Echostar No. 1 in overall customer satisfaction in the pay TV industry.
The head of Globalstar Telecommunications Ltd. agrees with Boeke's Echostar analogy and is pushing ahead with Globalstar's plan for a 48-satellite phone network despite the setbacks at Iridium and ICO Global.
Globalstar intends to launch service next month, at $1 a minute, and will offer a phone that costs about half as much as Iridium's model and is one-third the weight.
"I was not too surprised about the Iridium situation. I was surprised by the ICO situation, but we continue to have enormous confidence in this market," said Globalstar Chairman Bernard L. Schwartz. He added that the financial woes of his two rivals "make our job easier."
But Phillip Redman, an analyst at the Yankee Group consulting firm in Cambridge, Mass., said the threat from cell phones remains.
The devices' ubiquity leaves little room for satellite phones, and costly engineering problems make it unlikely that satellite phones will ever become a mass-market product, he said.
"They are like the picture phones" of the 1960s, Redman said. "The growth, if there is any, is going to be much slower than people anticipated."