MIT Industry Systems Study
Communications Satellite Constellations
Engineering Systems Learning Center (ESLC)
Massachusetts Institute of Technology
“Technical Success and Economic Failure”
Version 1.1, October 14, 2003
This is a brief description of the stakeholder groups for the in-class stakeholder
“game” to be held in conjunction with unit 1.
LEO communication satellite industry
The LEO communication satellite industry is the major proponent and builder of the
system. They invest heavily in the system and have strong business incentives in the
success of the system. This stakeholder is typically an international alliance of
telecommunication and aerospace companies. For example, the international consortium
behind Iridium was formed by Motorola, Kyocera (Japan), Sprint, Vebacom (Germany),
Lockheed, Raytheon, Telecom Italia (Italy), DDI (Japan), and companies from China,
Canada, Thailand, and other countries in Asia, Latin America, and the Middle East.
This stakeholder group is emerging as a potential buyer of the Iridium system. The
buyer will typically be a group of shrewd, risk-taking investors who believe in the
fundamental business and technical case. They have the attitude that the basic system is
sound, but that it was mismanaged by the previous owners. They are confident in their
abilities to “turn around” the company and generate profits. Potential buyers will try and
negotiate for the best possible deal to acquire the bankrupt entity, including its physical
and non-physical assets (e.g. patents).
Terrestrial cellular phone industry
Service provided by LEO communication satellite constellations is designed to
complement the terrestrial cellular phone service in situations where the cellular service
is not available. Nevertheless, the expanding cellular system, specially the international
roaming capability supplied by GSM, has left a very narrow market for mobile satellite
services. In underdeveloped regions, where terrestrial system is not available, satellite
systems are attractive to those who need mobile communication capability.
Unfortunately, these are often the regions where most of the public cannot afford the end
user equipment and the service charges. It is likely that these regions will eventually
owe terrestrial systems once they overcome the technical and economic hurdles.
U.S. government (FCC)
The U.S. government plays the role of regulator for the systems developed in the U.S.
The FCC is in charge of allocating frequency bands which are critical to the design of the
satellite systems. The department of state ratifies the use of foreign launch vehicles and
other technology export issues.
Meanwhile, the U.S. government has a vested interest in the success of the system. It
is mentioned in the FCC filings of both Iridium and Globalstar, that the success of the
system would help to establish the U.S. leadership in the mobile, personal and satellite
communication industry, to improve the U.S. global competitiveness in
telecommunications, and to further U.S. information policy goals in other countries. The
military is also in need of mobile communication capability in battlefields, as proven in
the recent wars in Afghanistan and Iraq (2001-2003).
Governments in foreign countries, especially in key countries where gateways are
built, need to approve the building of the gateway and obtain regulatory permissions from
other countries in their region. Some foreign countries have a very rigid, state run
monopoly in the telecommunications sector. Such countries perceive Iridium as a threat
that might undermine the monopoly market position of the government.
This stakeholder group includes professionals whose work demands the use of mobile
satellite phones in remote places. Beside the military mentioned above, boat crews, oil rig
workers, wildlife workers, truckers are all potential customers of the system. In fact, this
group represents the core subscriber group that Iridium (and to some extent Globalstar)
were able to capture.
Launch vehicle industry
Launching of large numbers of satellites into their orbital slots in constellations
provided unprecedented business opportunities for the launch industry worldwide in the
mid 1990s. Launch vehicles in the U.S., Russia, and China have been used for the
deployment of Iridium and Globalstar. Unfortunately, this fueled expectations that were
never met as well as present day price wars due to a global launch overcapacity.
Investors and Creditor Institutions
This is the community that stands to loose the most (financially) from bankruptcy and
a “cheap sale” of Iridium. Investors lost on the order of $5 billion in this process and
creditors would likely disagree on the best strategy to pursue. Those individuals or
corporations holding debt securities (loans, bonds, notes…) have a higher priority over
equity investors (stocks).
Radio astronomers and other frequency band users
In early stages of its development, Iridium defeated an attempt by the radio
astronomy community in preventing it from obtaining the 5.15 MHz bandwidth in L
band. The astronomers accused Iridium of causing interference that denied the use of the
1610-1613 MHz OH band for 75% of the time, although this band had been allocated by
international agreement to radio astronomy as a primary user.i Other struggles for
bandwidth may exist between the LEO satellite communication industry and other
K. Tapping. Iridium: the story. http://www.casca.ca/ecass/issues/2000-ME/iridium.html [25 June 2003].