GOOD TECHNOLOGY, BAD MANAGEMENT: A CASE STUDYOF THE SATELLITE PHONE INDUSTRY

Q1. What were some of the problems of mobile phone services during the 1990s?

Ans. Some the problems of mobile phone services during 1990s are:

1. Mobile phone users were unable to make calls or had their connections dropped mid-sentence due to lack of infrastructure such cell sites which were necessary to provide the bandwidth for basic services

2. Users faced unavailability of connection or had to pay roaming fees while travelling with in the country

3. A new equipment (phone handset) had to be purchased or taken on lease by the users whenever the travelled abroad thereby adding to the increased expenses.

4. Cellular phone towers which were required to provide network were affected by natural disasters like hurricanes, tsunamis and tornadoes

5. Providing mobile services in remote areas was a challenge as it was tough to setup an infrastructure to provide network coverage

Q2. What are the advantages of satellite phone service over the cell or PCS mobile phone services?

Ans. when compared to cell phones or PCS services, satellite phone services had the following advantages:

1. Satellite phones can make and receive calls in areas where cellular phones have no coverage and landline infrastructure is non-existent

2. Stable voice and faster data transmission is achieved due to more bandwidth accessible to satellite phones

3. Satellite phone service is able to survive all disasters, because the satellites are safely distant from ground and hence serves as an important tool for emergency management and disaster recovery

4. Satellite phone service doesn’t require a new handset to communicate data when a user travels abroad due to its huge global coverage area.

5. Satellite phone service is much more reliable then cell or PCS services in terms of better transmission efficiency and quality as the call routing occurs through satellite

Q3. What are the advantages and disadvantages of LEO compared to GEO?

Ans. Advantages of LEO compared to GEO:

1. A LEO satellite’s proximity to earth compared to a GEO satellite gives it a better signal strength and less of a time delay, which makes it better for point to point communication.

2. A LEO satellite’s smaller area of coverage is less of a waste of bandwidth than a GEO satellite

Disadvantages of LEO compared to GEO:

1. A network of LEO satellites is needed to switch users’ signals from one satellite to other due to their more rapid movement than earth’s orbit which proves expensive unlike GEO satellites which have a 24 hour view of a particular area and frequent launching of satellites is not required.

2. LEO satellites have a short life span of 5 to 7.5 years whereas GEO satellites have the greatest lifespan of 15 years which in turn increases the cost of replacing them with new ones.

3. LEO satellites being close to earth have a small coverage area whereas GEO satellite’s distance from earth gives it a large coverage area, almost a fourth of the earth’s surface.

Q4. What did the terrestrial mobile phone companies do to cope with their narrow service region?

Ans. Due to Iridium’s elaborate technology, the concept-to-development time was 11years – during this period, terrestrial mobile phone companies spread to cover the overwhelming majority of Europe, Hong Kong, United States and even migrated to developing countries such as China and Brazil. Following decisions helped terrestrial mobile phone companies cope up with their narrow region.

1. They took advantage of the network effect and acquired a substantial customer base in different countries. This further helped them in reducing the costs and acquiring more customers

2. Since tapping the additional customer market required little investment, the companies invested in developing more reliable technologies and expanding their infrastructure.

3. Also, the companies expanded the size of their calling areas through strategic alliances with other companies.

4. Iridium’s underestimation of spread of terrestrial mobile phone companies led to the shift of its target segment-business travelers – to terrestrial mobile service providers while Iridium was working on its technology.

Hence, we can say that Iridium’s technological limitations and poor operation execution plus the swiftness of terrestrial mobile phone companies to exploit opportunities helped them survive and cope with their narrow service region.

Q5. What market did Iridium try to target?

Ans. Iridium appeared to have identified an attractive target segment after having screened over 200,000 people, interviewed 23,000 people from 42 countries, and surveyed over 3,000 corporations.Iridium knew its phones would be too large and too expensive to compete with cellular service, forcing the company to play in areas where cellular was unavailable. With this constraint in mind, Iridium sought a target market by focusing on international business executives who frequently traveled to remote areas where cellular phone service wasn’t available.

Also, iridium’s advertising and marketing strategy focused on large corporate customers such as oil and aviation companies where flawless communication is needed without any interruptions due to dropped or degraded signals.Iridium appeared to have a sound business plan as travel among business executives was increasing and terrestrial cellular networks didn’t cover many of their destinations. During the 11 years that passed between Iridium’s initial concepts to its actual development (gestation period), much had changed. Not only had the growth in cellular networks drastically eroded Iridium’s target market, but Iridium’s own technology was never able to overcome key design, cost, and operational problems which led to its ultimate failure.

Q6. How did mobile companies develop ‘substitute services’ for Iridium?

Ans. The following factors which were responsible for the failure of Iridium’s business plan helped mobile companies develop substitute services:

A highly leveraged capital structure Design limitations -- including phone size Service limitations – including severe degradation in cars, buildings, and urban areas High handset and service pricing The build-out of cellular networks A lack of control over partners’ marketing efforts

After coping up with all the above problems when Iridium actually initiated services, mobile companies had addressed many of consumers’ complaints which were linked to signal quality. Roaming fees and cost of services were also lowered by the mobile phone companies. Worldwide coverage and higher reliability of satellite phone services didn’t attract much to the consumers due to their high start up costs, software problems & service limitations as mobile phone services were available at low airtime fees and start up costs. This is how consumers though adopting inferior mobile phone service substituted satellite phone service.