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The bigger US cellular phone organizations have tens of millions of buyers. Iridium currently (Mar 06) has about 150,000 - 100 times smaller than key mobile phone firms. The expense of its 66 satellite network is about $6 billion, and while those are all sunk charges, the satellites will have to be replaced at some stage.

A similar equation applies for the equipment. Famous mobile phone models offer in quantities of numerous thousands, and the underlying technology changes little from model to design, allowing improvement charges to be split over many units, and with most effective high quantity production methods. However the Iridium satellite phones are selling quite slowly, and have special technology in them.

And so, whereas your typical mobile cellular phone business can possibly make money by giving you a no cost mobile phone and 1000 minutes of airtime for only $30/month; Iridium totally can not.

Lack of competition and price inelasticity

You've plenty of selections when choosing a typical cell phone service. But there is only one totally global satellite cellular phone supplier - Iridium - and only 1 source of Iridium handsets.

Could Iridium sell its 9505a mobile for less than $1500? Nearly certainly - the underlying variable expense per phone sold, to Iridium, is likely $50. No need to decrease the phone price tag, since you'll find no competitors.

Iridium might choose to drop the cost with the device being a way of encouraging much more men and women to subscribe for their provider, 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 sell its airtime for much less than the rates it does? That's a far more complex query; for sure, the variable additional price of accepting 1 more call onto their network is close to zero, but they have enormous fixed charges that have to be covered. And, much such as the phone value, for folks who really require a satellite cell phone, $1.50 a minute can be a bargain. And for those who don't will need a satellite telephone, even 50¢ a minute is possibly as well a lot. Iridium almost certainly feels that for your sort of people who will need and use its services, its costs are fair.

Future satellite mobile phone cost trends

Thinking about these issues above, we do not predict major drops in either device or airtime expenses occurring with Iridium satellite program within the foreseeable long term.

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