Magazine article Insight on the News

Satellite Phones Now Connect the World, at Sky-High Prices

Magazine article Insight on the News

Satellite Phones Now Connect the World, at Sky-High Prices

Article excerpt

Iridium LLC, the first satellite cellular-phone system aimed at consumers, was launched in November at a cost of $5.7 billion, one of the largest private infrastructure efforts in history.

Seven-dollar-per-minute phone calls are coming to a portable phone near you -- and some are calling them a bargain. A system called Iridium, which officially went online Nov. 1, promises to provide the world's first practical satellite phone system for consumers.

Unlike ordinary cellular phones that rely on local transmitter networks, satellite phones can make and receive calls anywhere on the globe. Although military and government users have used such technology for years, "portable" satellite phones available to civilians were briefcase-sized units that cost as much as $30 per minute. The phones also imposed a lag time as long as 30 seconds between bits of conversation.

Iridium LLC, a new company created by Schaumburg, Ill.-based Motorola Inc. in combination with 25 business partners, started launching a network of low-Earth-orbit satellites in 1996. The "constellation" of satellites, in place since September, will pass off the calls from satellite to satellite until they can be beamed back to Earth. Combined with roaming agreements with cellular providers all over the world, the satellites will allow phone calls from inaccessible locations such as the summit of Mt. Everest or the middle of the Sahara. In addition, the phones will work in more civilized places where cellular service exists, but U.S. providers don't have local contracts.

Re-sellers of Iridium's services -- called gateways in the company's parlance -- will set a varied rate structure that extracts a heavy price, however. For calls carried on a cellular network, Iridium clients will pay a 25 percent premium over ordinary users. When the phone has to search for a satellite, rates will broach $7 a minute. Like all satellite phones, Iridium phones won't work indoors and may have problems in the handful of large cities that lack cellular networks.

Initially, Iridium phones will cost about $3,000, though few stores have them in stock yet. (Internet retailers are ready to take orders.) Electronics giants Motorola and Kyocera, which have licensed the technology, are shipping or preparing to ship thousands of handsets to stores by the end of the year. …

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