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The larger US cellular phone corporations have tens of thousands of buyers. Iridium currently (Mar 06) has about 150,000 - 100 times smaller than key cellular phone businesses. The expense of its 66 satellite network is about $6 billion, and although those are all sunk fees, the satellites will have to be replaced at some stage.

A similar equation applies for the gear. Popular cell phone types promote in quantities of several thousands, and the underlying technology changes little from model to design, permitting advancement fees to be split over several units, and with most effective large volume production methods. However the Iridium satellite phones are selling incredibly gradually, and have distinctive technology in them.

And so, whereas your typical cellular phone organization can almost certainly make money by giving you a cost-free cell phone and 1000 minutes of airtime for only $30/month; Iridium completely can not.

Lack of competition and price inelasticity

You've a lot of choices when choosing a typical mobile or portable phone provider. But there is only 1 totally international satellite phone provider - Iridium - and only 1 source of Iridium handsets.

Could Iridium promote its 9505a mobile phone handset for much less than $1500? Nearly certainly - the underlying variable expense per mobile sold, to Iridium, is probably $50. No need to decrease the mobile phone handset selling price, due to the fact you can find no competitors.

Iridium might choose to drop the price tag of the phone being a way of encouraging additional persons to register for their assistance, in a similar way to how regular cellular phone operators give away phones, but to date it has resisted this kind of temptation.

Could Iridium promote its airtime for much less than the rates it does? Which is a lot more complex query; for certain, the variable added cost of accepting 1 more call onto their network is close to zero, but they've big fixed fees that have to be covered. And, significantly such as the mobile price, for individuals who genuinely need to have a satellite cellular phone, $1.50 a minute is often a bargain. And for folks who don't will need a satellite cell phone, even 50¢ a minute is most likely as well a great deal. Iridium likely feels that to the kind of individuals who will need and use its solutions, its prices are fair.

Future satellite cell phone value trends

Contemplating these problems above, we do not predict key drops in either device or airtime fees occurring with Iridium satellite service in the foreseeable long term.

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