The Rise and Fall and Rise of Iridium

Iridium’s constellation of 66 comsats was a technological triumph but a business disaster-until an executive and a computer geek found salvation in the Pentagon.

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Motorola’s engineers, hunkered blissfully away from the rest of the world for 12 years, did come up with some advances. Iridium’s satellites are the only ones in the cosmos that communicate with one another as well as bounce signals back to Earth. That capability makes the system the only one in the world that can connect absolutely anywhere to absolutely anywhere else, should a North Pole explorer have an immediate need to reach a South Pole colleague. And Iridium is easy to use while in motion—at sea, in an airplane, or in a desert Humvee, for instance; finding the nearest of the 66 orbiting satellites requires only a small telephone antenna. Transmissions to distant geostationary satellites, on the other hand, require users to lug around much bigger antenna contraptions.

With dozens of satellites to launch, Iridium’s constructors had to figure out how to build and launch them cheaply—and quickly. “They learned to make a complete satellite in two to three weeks, where a geostationary craft takes 24 to 36 months,” says Mark Chartrand, a satellite industry consultant based in Baltimore. “They were so small and light they could send several of them up on one rocket. Technically, this is a good system.” Indeed, at the peak of satellite construction, Iridium was turning out a satellite a week.

The launches began in May 1997, and within a year, 66 satellites had been launched, plus a few spares. There were also some failures: The old Iridium launched 16 satellites that never achieved the proper orbit or were inoperable after reaching orbit. As for launch vehicles, Iridium was true to its global roots, sending up Boeing Delta-2s from U.S. bases, Protons from Russia and Kazakhstan, and Long Marches from China. Protons were capable of lofting five Iridium satellites at a time, while the Long Marches could handle only two.

When Colussy was negotiating for Iridium, he learned that there were seven spare satellites in storage, which he arranged to have launched after the takeover. Including operational satellites, spares, and failures, Iridium has launched 95 satellites.

As successful as the Motorola designers were in coming up with small, manageable satellites, they made a dire mistake: they chose a pitifully small (by 2004 standards) band for transmitting data. The $5 billion system can send no more than 2.4 kilobits per second. Globalstar, also built in the 1990s, offers 9.6 kilobits. A standard dial-up computer modem, the one you likely dumped for cable because it was maddeningly slow, does 56 kilobits per second. “Motorola designed this system in the mid-1980s for voice, and now almost all our customers want to link their palm top or laptop to it,” admits Mark Adams. “A big part of my job has been to roll out data services working with what we’ve got. To say, ‘Here’s this multibillion-dollar infrastructure. What else can we do with it?’ ”

Adams’ answer: Short-burst data from sources far beyond the reach of either dial-up or cable. Oil companies, for instance, can place Iridium-linked sensors along their Canadian or Siberian pipelines, sending one-line messages to headquarters in case of a leak or other emergency. Trucking and shipping companies can keep track of their fleets. “There are lots of vertical markets that can use transmission speeds below 10 kilobits,” remarks D.K. Sachdev, a retired executive from the satellite consortium Intelsat. “Look at BlackBerry [a hand-held wireless device that enables users to receive and answer e-mail], which has been a great success among executives.”

Before Adams could tweak his multibillion-dollar infrastructure, though, Colussy had to save it from being dumped in the Pacific. He came up with a business transaction nearly as global as Iridium itself. “The old Iridium board was a United Nations of investors who owned the gateways around the world,” Colussy recounts. “Naturally I started with them” in seeking backers for the new Iridium.

Colussy, who tells his tale over fresh tuna and watermelon served at an umbrella’ed patio table by a uniformed servant, brought a background as corporate American as they come. An engineer trained at the U.S. Coast Guard Academy in the 1950s, he added a Harvard MBA, then rose to the position of president of Pan American Airways in the 1970s. He converted the last company he ran, UNC Corporation, from a struggling builder of nuclear powerplants for submarines to a thriving aviation services provider, then sold it in 1997 to General Electric for $725 million. By 2000, he was comfortably retired. Still, he couldn’t resist the opportunity to turn Iridium around, so he started making calls to see who was willing to throw good money after bad.

In the end, he got four investors. The first was Syncom, a Washington, D.C.-based firm specializing in telecommunications investments that was eyeing Iridium for its potential in Africa and other developing regions. The second, Saudi Prince Khalid, he never met, but Colussy recalls that he “had some pretty tough negotiations with [Khalid’s] investment bankers.” The third investor was Brazilian telecom company Inepar. Colussy then added Quadrant, headed by an Australian venture capitalist.

Colussy was also working the Pentagon, with a lot of help from Mark Adams, who at the time was an engineer with the consulting firm Mitre Corporation. Although Motorola had originally rebuffed the Department of Defense (one more miscalculation), the armed forces eventually became part of the original Iridium consortium. They even built a secure system gateway in Hawaii for military use. Adams and Colussy got Department of Defense officials to commit to giving them $36 million a year in military business if their buyout came off.

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