The bigger US mobile or portable phone companies have tens of thousands of consumers. Iridium currently (Mar 06) has about 150,000 - 100 times smaller than important cell phone organizations. The fee of its 66 satellite network is about $6 billion, and while those are all sunk expenditures, the satellites will have to be replaced at some stage.
A similar equation applies on the equipment. Well-known cellular phone versions sell in quantities of several thousands, and the underlying technology changes little from design to design, allowing development expenditures to be split over several units, and with most effective high quantity production techniques. However the Iridium satellite phones are selling very gradually, and have special technology in them.
And so, whereas your standard cell mobile phone firm can likely make money by giving you a free cellular phone and 1000 minutes of airtime for only $30/month; Iridium totally can not.
Lack of competition and price inelasticity
You've plenty of options when selecting a standard mobile phone provider. But there is only 1 entirely global satellite mobile phone service provider - Iridium - and only 1 source of Iridium handsets.
Could Iridium market its 9505a handset for much less than $1500? Nearly certainly - the underlying variable fee per phone sold, to Iridium, is possibly $50. No need to have to decrease the phone price, mainly because you will discover no competitors.
Iridium might choose to drop the price from the mobile as being a way of encouraging much more people to register for their program, in a similar way to how regular mobile phone operators give away mobile phones, but to date it has resisted this kind of temptation.
Could Iridium market its airtime for less than the rates it does? Which is an additional complex query; for sure, the variable additional price of accepting 1 more call onto their network is close to zero, but they have huge fixed expenditures that have to be covered. And, significantly such as the phone price tag, for those who genuinely require a satellite phone, $1.50 a minute is usually a bargain. And for folks that don't need to have a satellite telephone, even 50¢ a minute is almost certainly as well a lot. Iridium probably feels that with the sort of individuals who need to have and use its services, its costs are fair.
Long term satellite cellular phone cost trends
Considering these problems above, we do not predict key drops in either mobile phone handset or airtime expenses occurring with Iridium satellite assistance within the foreseeable long term.
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