A Phone for Anywhere on Earth

The world it was born into

In 1987 mobile phones were heavy, expensive and largely confined to cities and business users. Coverage was patchy, and different countries used incompatible standards, so a phone from one country often did not work in another. For a travelling executive, staying reachable abroad meant hotel phones and messages at the front desk.

Engineers at Motorola, then one of the world’s leading makers of mobile phones and an experienced builder of satellite systems, imagined a radical answer: put the network in space. A constellation of satellites in low orbit could cover every point on earth, so that one handset would work everywhere, from Tokyo to the Sahara. The original design called for seventy-seven satellites, the atomic number of iridium, which gave the project its name. The final design used sixty-six.

The bet

Motorola announced the project in 1990 and established Iridium as a separate company in 1991, bringing in an international consortium of investors and partners. The bet had two parts. Technically, that a global network of satellites passing calls between one another could be built and operated. Commercially, that enough people, especially business travellers, would pay a premium to be reachable anywhere.

Why it made sense

The technical bet was won. Building, launching and operating a constellation of satellites linked to each other was an enormous engineering achievement, completed on schedule. Commercially, the logic was clear in 1987: the terrestrial mobile world was fragmented, coverage was limited, and a global service would be uniquely valuable to people whose time was expensive.

How it lost

The project took eleven years and about five billion dollars. During those years the terrestrial mobile world changed beyond recognition. The GSM standard, first launched in Europe in the early 1990s, spread across much of the world, and roaming agreements let a single phone work in many countries. Handsets shrank and prices fell. By 1998 the places business travellers actually went, cities, airports and hotels, were well covered by ordinary mobile networks.

When Iridium began service on 1 November 1998, its handsets were large and cost around $3,000. Calls cost several dollars a minute. Because the phones needed a line of sight to the satellites, they worked poorly inside buildings and cars, exactly where executives spent their time. Subscriber numbers fell far short of targets; reports in 1999 put them at around ten thousand early that year, and the company cut prices sharply. In August 1999 Iridium filed for bankruptcy protection, nine months after launch. Plans were made to bring the satellites down. In 2000 a group of investors bought the network for a reported $25 million and relaunched it for customers who genuinely had no alternative: governments, militaries, ships, aircraft and remote industries.

Explaining both the same way

Iridium is often told as a story of engineers in love with technology. That is unfair to the decision and too easy. A symmetrical account asks what the system was optimised for and who actually needed it.

Iridium was optimised to solve a real problem as it existed in 1987: global reachability in a fragmented world. Terrestrial networks solved a different version of the problem, reachability where most people actually are, much more cheaply, and improved every year. By 1998 Iridium’s unique advantage applied mainly to people in places terrestrial networks would never reach. Those people existed and valued the service highly, as the successor company proved. They were simply too few to support a five-billion-dollar cost base. The system was not wrong. It was aimed at the wrong market at the wrong cost.

What the loss teaches

Iridium is a lesson in uncertainty and irreversibility together. A decade-long, fixed-design project committed to a forecast of a market that was changing fast. Each year of building made the commitment harder to revisit, which is the logic of escalation. And the core features customers would judge, handset size, indoor coverage and price, were fixed by early design choices.

Its afterlife is equally instructive. With the sunk costs wiped away, the same satellites became the basis of a durable business. Whether an asset is a disaster or a success can depend entirely on what it cost and who it is sold to.

Sources and limitations

Figures for the total cost (usually about five billion dollars, some sources say six), subscriber numbers and the sale price vary among sources; the numbers here are those most commonly reported, given as approximate. Some accounts give a sale price of $35 million rather than $25 million. Popular anecdotes about the origin of the idea are not repeated here because no authoritative source was found. The assessment of the market thesis is the author’s interpretation, drawn from the timing of GSM’s spread.