The larger US cellular phone corporations have tens of millions of clients. Iridium currently (Mar 06) has about 150,000 - 100 times smaller than main cell phone businesses. The expense of its 66 satellite network is about $6 billion, and although those are all sunk costs, the satellites will need to be replaced at some stage.
A similar equation applies towards the equipment. Well-liked cell phone designs promote in quantities of many millions, and the underlying technology changes little from model to design, permitting advancement costs to be split over numerous units, and with most efficient high volume production methods. However the Iridium satellite phones are selling incredibly slowly, and have unique technology in them.
And so, whereas your normal cell telephone organization can possibly make money by giving you a cost-free phone and 1000 minutes of airtime for only $30/month; Iridium absolutely can not.
Lack of competition and price inelasticity
You have plenty of choices when choosing a typical cellular phone service. But there's only one completely global satellite telephone provider - Iridium - and only 1 source of Iridium handsets.
Could Iridium offer its 9505a mobile phone handset for less than $1500? Almost certainly - the underlying variable price per phone sold, to Iridium, is most likely $50. No need to decrease the mobile selling price, because you will find no competitors.
Iridium might choose to drop the price of the phone being a way of encouraging far more persons to sign up for their support, in a similar way to how traditional mobile phone operators give away phones, but to date it has resisted this kind of temptation.
Could Iridium offer its airtime for much less than the rates it does? That is a much more complex question; for sure, the variable added cost of accepting 1 more call onto their network is close to zero, but they've big fixed costs that need to be covered. And, a lot like the phone cost, for individuals who really have to have a satellite cellular phone, $1.50 a minute is a bargain. And for individuals who don't require a satellite telephone, even 50¢ a minute is most likely as well very much. Iridium likely feels that for the type of individuals who require and use its services, its prices are fair.
Future satellite mobile phone selling price trends
Contemplating these issues above, we don't predict main drops in either phone or airtime expenses occurring with Iridium satellite support in the foreseeable long term.
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