The storied Iridium satellite service launched Nov. 1, 1998 and plunged into bankruptcy nine months later. Its mission to deliver satellite-phone service to globe-trotting executives and consumers was destroyed by competition from unexpectedly pervasive and cost-effective terrestrial cellular services. After being bought out of bankruptcy by private investors, Iridium remade itself with the help of Matt Desch, who joined the company as CEO in 2006. Desch envisioned numerous business opportunities in commercial, not consumer, markets and also realized Iridium could make money by operating a wholesale business selling airtime. Iridium's primary markets today are maritime, aviation and terrestrial handheld devices. While the U.S. government accounts for 23 percent of Iridium's revenue, the fastest-growing part of Iridium's business is machine-to-machine communications. Iridium now has a multiple device strategy and even offers a mobile hot spot, the AxcessPoint, which provides basic Internet and email to smartphones and tablets via a Wi-Fi link to an Iridium phone. Desch is a 30-year telecom industry veteran who previously served as CEO of Telcordia Technologies and has held numerous senior management roles at Nortel Networks in the 1990s. He recently discussed Iridium's future with FierceBroadbandWireless Editor Tammy Parker. This is an edited version of that conversation.
FierceBroadbandWireless: Let's start with a non-Iridium question. The Federal Communications Commission is about to launch a rulemaking proceeding regarding the provision of terrestrial cellular communications on MSS frequencies. LightSquared and Dish Network both want to use their satellite spectrum for terrestrial services. What is your opinion of their individual plans and of the FCC's plans for a rulemaking?
Matt Desch: I've been a little skeptical about some of the early business plans around ATC (Ancillary Terrestrial Component), as many people know, because I've been around too long. However, I can see why people these companies are trying to do what they're doing. I'm supportive, and we're supportive, of anything that will end up working out to the benefit of both these formerly satellite spectrum companies and terrestrial operators--and to the benefit of the bandwidth hungry consumer. Fortunately, I think people are being much more pragmatic these days than they were five to eight years ago, when the ATC concept really started. I think it's going to take some time to see these opportunities materialize.
FierceBroadbandWireless: Are you supportive of the rulemaking preceding that the FCC's about to launch?
Desch: Oh, absolutely. I think there's not a complete record yet on that spectrum, and I think they need to get a lot more information. I expect the FCC will be deliberate about that and will rule accordingly.
FierceBroadbandWireless: Turning to Iridium, what are your goals for the Iridium Force initiative you announced last September?
Desch: A lot of people think, because it was our first product, that we're still a mobile satellite phone company, and, of course, that still remains an important part of our business. It's still probably 60 percent of our business, but the other 40 percent is growing much faster. Our real vision here is to go beyond satellite phones to enable truly personal communications in a much broader way using our network. So, it's about enabling the kinds of devices that people really want to use--such as smartphones and tablets and other devices--to be able to communicate in the 90-plus percent of the world that doesn't have any terrestrial cellular. So, while we'll continue to come up with new and smaller devices-- and the latest phone (Iridium Extreme) is quite compact and has all kinds of capabilities in it, including GPS--I think what we're signaling to people with our Iridium Force strategy is that we have a much bolder vision. It's about opening up our technology to enable all kinds of companies to innovate around us, so that we become an essential communications link for that part of the world that doesn't have terrestrial communications, and it's about allowing people to communicate in ways they really want to. For instance, instead of offering our own location-based services, we opened up the software interfaces in our system so others could develop them. In fact, there are 17 different companies now developing location-based services around our platform, and that's 17 more ways we can attract new customers.
FierceBroadbandWireless: Are these consumer plays?
Desch: Not really. We still think mobile satellite phones themselves are industrial tools and are used by those in remote locations who need [a satellite phone] all the time or need it as back up in emergencies when terrestrial networks are down. That will continue, but it doesn't mean we can't use our network to enable other consumer devices to work. That's what our new Wi-Fi AxcessPoint does. You're going to see in the coming years some interesting products from our many partners as we boil down the Iridium technology to its most cost-effective function, and that probably won't even be in a satellite-phone form factor anymore. Iridium can provide a global connection to all kinds of consumer devices going even beyond connecting an iPhone or Android device like we do today.
FierceBroadbandWireless: You're not envisioning offering satellite services in areas where people already have terrestrial service, right?
Desch: One of the problems of the original Iridium was that it tried to take on the terrestrial environment directly and, frankly, that's a losing proposition. But there are cell phone systems in less than 10 percent of the earth's surface, and that percentage will hold up for many, many years to come...We're not just about providing a connection where people live, but about where they travel through and about where assets are...Fundamentally, we're the furthest reaching network in the world. We're the only network that spans 100 percent of the surface of the planet, and that has tremendous advantages from an application perspective to complement the devices that work on the terrestrial network. That doesn't mean we're not used where cell phones are used ... with as low as our costs are today, it might be even more cost effective to use one of our small machine-to-machine tracking devices even where there's a terrestrial network available.
FierceBroadbandWireless: Two-way personal communicator devices are made by Iridium partners such as DeLorme. What exactly are these products?
Desch: This is just one of many kinds of machine-to-machine solutions our partners sell. We have literally hundreds of partners right now developing all kinds of applications and using our tiny data modems the size of a matchbook for applications from tracking trucks, to oil and gas pipelines, to buoys in the ocean to, well, you name it. Because our M2M devices are so small and low cost, we've seen this new class of devices emerge--two-way personal communicator devices...The DeLorme product sells for $249; you can buy it in a consumer store, and you might pay $10 a month or so in services, but everyone can know where you are in real-time. You have the security of mind to know that if you push the emergency button that someone can communicate with you and will rescue you, anywhere in the world. You can use it to communicate either with SMS or through two-way email with an Android or other kind of smartphone. It has GPS inside of it, so it can be located at any time. It's almost a whole brand-new product category.
Another technology we've developed in recent years with consumer product potential is what we call netted communications. The first application has been with the military, where we provide a tactical radio service that supports non-line-of-sight, on-the-move soldiers with hundreds of people potentially--worldwide--being on the same channel and that operates like a push-to-talk phone...There's a commercial version of that we're developing now that will be available next year, for which we think there will be a lot of interest...These services work with a dedicated device, but one of the things we're most excited about--and this is part of our Iridium Force strategy--is that we are taking our waveform, or, if you will, the air interface, of our system and we're packaging it to be used in the military's existing software-defined tactical radios... Again, we're trying to make Iridium voice and data connections so cost-effective and easy to embed in lots of existing devices--whether they be consumer, commercial or military--and allow that connection to be extended to anywhere in the world.
FierceBroadbandWireless: What types of new services are your commercial customers demanding from Iridium?
Desch: The fastest-growing and most dynamic market is the machine-to-machine area, which, of course, was launched in, and is one of the fastest-growing areas in, terrestrial wireless. There's a satellite component to M2M too, which extends industrial, consumer and military M2M applications beyond that 10 percent of the world where terrestrial is into the other 90 percent, and we have the best solution for that. That's another area where we are very complementary to terrestrial wireless systems. We're often put together with a cell phone M2M modem for applications to roam beyond the terrestrial network.
FierceBroadbandWireless: What is the status of Iridium NEXT, the constellation of 66 low-earth-orbit satellite that is set to launch in 2015 and ultimately replace your current satellite network?
Desch: NEXT will soon be two years into development by Thales Alenia Space, which is producing the satellites that will be launching between 2015 and 2017 to completely replace our current network. It is completely backward compatible with our existing system, so our existing devices will all continue to provide service on NEXT. At the same time, it will enable higher data rates with new devices and create more capacity as well as be a more efficient network to operate. It also will allow us to offer hosted payloads, which will create new business opportunities for Iridium in addition to our core mission of communications. And the best thing of all for us is that it's fully financed through completion, giving us visibility to our future to 2030 and beyond.
FierceBroadbandWireless: Looking into your crystal ball, what are Iridium's major goals for the next couple of years?
Desch: While you would think that building Iridium--one of the most comprehensive and largest new systems in aerospace today--would be the primary and only focus of the company, there's still so much more we can deliver on the existing network. We were blessed with an extremely flexible and powerful system that is lasting far longer than anyone ever imagined. The network, by the way, is quite healthy and we expect it to continue that way through the launch of Next. So, we're going to continue to innovate around our network, continue developing new features and services, keep adding partners who bring us to market in new and interesting ways. There are still a few markets where our partners can't sell our products, places like Russia and China; we're going to bring those online. We've averaged over 20 percent subscriber growth over that last 5 years, and I don't see that rate slowing in 2012.