The larger US cell phone companies have tens of thousands of customers. Iridium presently (Mar 06) has about 150,000 - 100 times smaller than major mobile phone businesses. The cost of its 66 satellite network is about $6 billion, and although those are all sunk expenditures, the satellites will need to be replaced at some stage.
A comparable equation applies to the equipment. Famous cell phone designs sell in quantities of several millions, and the underlying technology changes little from model to model, permitting development expenditures to be split over quite a few units, and with most efficient high quantity production methods. But the Iridium satellite phones are selling very gradually, and have unique technologies in them.
And so, whereas your regular mobile cellular phone organization can most likely make money by giving you a free cellular phone and 1000 minutes of airtime for only $30/month; Iridium absolutely can not.
Lack of competition as well as price inelasticity
You have plenty of selections when choosing a regular cellular phone provider. But there's only a single fully global satellite cellular phone provider - Iridium - and only one source of Iridium handsets.
Could Iridium offer its 9505a handset for much less than $1500? Almost definitely - the underlying variable cost per phone sold, to Iridium, is likely $50. No need to reduce the mobile price, mainly because there are no competitors.
Iridium may choose to drop the cost with the phone as a way of encouraging far more people to register for their service, in a similar method to how traditional mobile phone operators give away 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 complicated question; for sure, the variable additional cost of accepting one more call onto their network is close to zero, but they've huge fixed expenditures that need to be covered. And, a great deal like the phone value, for individuals who truly have to have a satellite phone, $1.50 a minute is usually a bargain. And for people who do not need a satellite telephone, even 50¢ a minute is most likely too very much. Iridium probably feels that with the type of folks that need and use its services, its costs are fair.
Future satellite telephone selling price trends
Considering these problems above, we don't predict important drops in either handset or airtime expenses occurring with Iridium satellite program in the foreseeable future.
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