A flood of cash was ploughed into building telecommunications systems in the 1990s, with generally bad results for the original investors. Some companies went through bankruptcy, but more or less came out the other side still functioning. Others collapsed completely, with the assets selling at fire sale prices.
The most glorious of those failures had to have been Iridium. Backed by Motorola, it launched a low earth orbit constellation of 66 satellites that were designed to communicate with brick-sized phones from any point on or over the planet. And it worked. I beta tested a unit, taking it to New Zealand where it easily handled a call from the top of Mt. Tongariro, all the way around the world to England. And kept me in touch with day to day business back home, the occasional dropped call notwithstanding.
Shortly thereafter, though, the company imploded and its initial investment of something like $6 billion was wiped out. An entrepreneur bought it out receivership for about $25 million, and has been operating it ever since.
Unlike the fiber networks of the same era, though, the Iridium constellation won’t last forever. It’s approaching the end of its useful life, and the company has to start replacing the birds soon. The plan is to begin launching Thales Alenia Space-built replacements 11 at a time on Space-X Falcon rockets beginning next June. According to a company spokesman, the total cost is in the $3 billion range, with the French government floating the necessary loan.
The difference between then and now is that Iridium claims to have “nearly a million” customers, which translates into actual cash flow. The service isn’t cheap – talk time and data connections cost more than $1 per minute, with speeds of 2.5 Kbps or slower typical – and the U.S. military accounts for about a quarter of total revenue. That’s a slow connection, but sufficient for M2M purposes, which is a growth area for the company. Whether that’s enough to pay off the note by 2019 as planned remains to be seen, though.