Iridium: a $5 billion satellite network built for a market cell phones had already taken

What Iridium was

Conceived at Motorola in the late 1980s, Iridium was a bold engineering project: a constellation of 66 satellites providing phone service anywhere on the planet. It was set up as a separate company in 1991 and raised around $5 billion from Motorola, a global investor consortium, and lenders.

Commercial service began in November 1998. Handsets cost thousands of dollars and calls several dollars a minute. Subscriber numbers fell far short of what the business plan required, and Iridium filed for bankruptcy in August 1999, less than a year after launch.

Why it failed

1. 1

   The market moved during a decade-long build

   When Iridium was designed, cellular coverage was patchy and roaming was difficult. Over the years it took to build the constellation, cell networks spread rapidly across cities, highways, and countries — covering most places its core target, the business traveller, actually went.

2. 2

   A product that fought its users

   The handsets were heavy, expensive, and needed a clear view of the sky, so they worked poorly inside buildings and cars. For a traveller in an office or hotel, the cheaper cell phone was simply better.

3. 3

   Fixed costs that required mass adoption

   With billions in infrastructure and debt, Iridium needed a large subscriber base quickly. Pricing set to recover those costs kept the product niche, which kept revenue far below what the debt required.