- MORINI, Albania - Norwegian television reporter Erik Stephansen is
on the remote mountain frontier of Kosovo with some cutting-edge personal
technology in his hand: the new Iridium satellite telephone. Luckily for
him, there is no breaking news: He has had to dial a number on his Iridium
unit five times. When he finally gets through, the connection drops after
three minutes.
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- The $2,300 Iridium phones, billed as
allowing subscribers "to communicate virtually anywhere in the world,
are proving to be less than ideal.
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- "I wanted to talk to my daughter.
She's 12 now, so at least she understands when it cuts off," says
Mr. Stephansen, circling round and pushing the hefty mobile phone,s baton-shaped
antenna up and down. He reconnects on the second attempt.
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- Journalists and aid workers, among Iridium,s
prime potential customers, have swarmed into Albania for the Kosovo refugee
crisis, providing an ideal test run for the highly touted system. But the
$2,300 Iridium phones, billed as allowing subscribers 'to communicate virtually
anywhere in the world,' are proving to be less than ideal. Many users report
trouble making connections and complain, as Iridium concedes, that the
phones rarely work inside buildings.
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- Iridium LLC is backed by a consortium
of global telecommunications companies that spent about $4 billion to make
the ideal use-it-anywhere phone. With investors including Kyocera Corp.
of Japan and Motorola Inc., Iridium, based in Washington, launched 66 low-orbit
satellites and spent $180 million in advertising before the system's launch
on Nov. 1.
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- Iridium says any problems with its global
satellite-communication system are due to improper use by customers, marketing
glitches and financial problems. But the troubles in the field come at
an awkward time for the company. Monday, it reported lower-than-expected
first quarter revenue, a wider-than-expected loss and fewer-than-predicted
subscribers. And just last Thursday, chief executive Edward Staiano quit
amid a plunging stock price. Iridium said it risked technical default with
its lenders until it won an extension on covenants related to $800 million
in secured loans.
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- The company, for its part, says the phone
has performed well in the crisis. It says it has offered aid agencies in
Kosovo free use of the phone to allow ethnic Albanians expelled by Yugoslavia
to contact their relatives. In one week this month, Iridium adds, 12,000
calls were successfully completed from the region around Kosovo.
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- What about the commercial customers in
Albania conspicuously fiddling with, and cursing at, their hand-held units?
"It sounds like they haven't had any training," says Michelle
Lyle, an Iridium spokeswoman. "If people don't use it properly, it
won't work."
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- The inability to use the phones indoors
or in cities has been a serious shortcoming in the field. Even amid crises,
many satellite-phone users prefer to make their calls from offices or hotel
rooms, not standing outdoors. During a recent downpour, Tina Hager, an
American-born photographer, tried unsuccessfully to place an Iridium call
on the steps of a hotel in Kukes, a small town 10 miles from the Morini
border crossing. "Once you do get through, it's addictive," she
said. "But it isn't as good as I hoped."
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- Like other satellite phones, Iridium
doesn't work inside buildings because of the relatively weak signals to
and from an orbiting satellite. Motorola didn't think this would be a big
problem when it first planned Iridium a dozen years ago, because there
were relatively few cellular-telephone users then.
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- To handle calls from cities, Iridium
built a parallel circuitry inside the phone that uses the increasingly
common GSM mobile-phone standard. But that isn't working in Albania. Albanian
authorities switched off GSM roaming agreements when their system was swamped
by a sudden inrush of foreigners toting ordinary mobile phones.
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- Frustrated users believe they are following
instructions, and have many theories about their Iridium problems. One
theory holds (correctly, Iridium says) that Albania's mountains may block
signals. Many users think their calls fail after a couple of minutes because
they are dropped while a signal moves from one satellite to another, but
that's a rare occurrence, Iridium says.
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- The World Food Program, a United Nations
agency that helps feed poor people and refugees in more than 80 countries,
has tested the Iridium unit in Africa and East Europe and decided not to
buy more. "The idea is beautiful. But it's new technology. The product
doesn't quite do what they wanted," says Gianluca Bruni, one of the
WFP's senior communications coordinators.
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- Inside the hotel restaurant in Kukes,
aid workers, Western officials and media people - whom Iridium views as
prime customers - prefer phones using the rival Mini-M technology developed
for the Inmarsat system. Inmarsat, too, has its limits. Subscribers use
Norwegian-made Nera and Danish-made Thrane & Thrane models, which are
bulky, weighing five pounds and shaped like laptop computers.
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- Made by a London-based consortium called
the International Maritime Satellite organization, the Inmarsat phones
run about $1,700. The Iridium phone's typical $2,300 cost can run much
higher in countries that have high import duties.
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- The Kosovo crisis is bringing congestion
on the Inmarsat satellites, though it rarely lasts more than half a minute.
But the Inmarsat models are proving to be relatively reliable workhorses,
robust and easy to point at their two stationary satellites over the Atlantic
and Indian Oceans. Their flat antennas lift off and sit on an inside window
ledge, enabling users to make calls or link their computers indoors.
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- The World Food Program uses Inmarsat
mini-M phones for satellite calls placed by its officers. In the long term,
Mr. Bruni says, heavy users may move away from commercial satellites. The
WFP, for instance, has pioneered a way to bypass satellite calls as much
as possible, due to the call rate of about $2.70 per minute. Internet mail
is now the WFP's first means of communication, done through local phone
systems; even countries like Albania now have good Internet access. The
group uses handheld radios for local voice calls. For remoter stations
dealing with refugees, a new radio system links computers in the field
with base in the capital, Tirana.
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- "It works," says Mr. Bruni.
"Our theory is that you don't need long-haul communications. On Day
One of an emergency, yes, the satphones are used, but that's pretty much
it. The satphones are now last in the line."
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- Back in Washington, meanwhile, Iridium
has its hands full with searching for a chief executive, a new chief financial
officer and a head of marketing. The company said arguments within the
Iridium board room were behind Mr. Staiano,s departure. Analysts said the
disagreements related to distribution and marketing arrangements. Iridium
is also facing a late-May deadline for renegotiating its bank loans, which
came in technical violation after the company failed to deliver promised
first-quarter subscriber numbers.
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- And Iridium Monday said that it had a
net loss of $505.4 million, or $3.45 a share, compared with a net loss
of $203.6 million, or $1.45 a share, a year earlier. Analysts polled by
First Call were looking for a per-share estimate of $3.17. Iridium had
revenue of $1.45 million in the recent quarter, and none a year earlier
because it hadn,t begun operating the system commercially.
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- Partner Motorola has already put several
hundred salespeople on direct sales of Iridium phones, and Iridium itself
plans to better tailor the product prices and service for specific markets,
such as oil-rig workers, aid agencies, or governments. There are also plans
for speedier training aids, such as inserting a laminated card on the phone
that gives usage instructions and technical shortcuts.
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- And Iridium thinks its answer is more
and better training, both of its own salespeople and its customers, to
avoid improper use or false expectations. Says Leo Mondale, senior vice
president of strategic planning at Iridium, "We've identified dramatically
higher customer satisfaction among users who were properly informed of
the capabilities and limitations of the satellite service and trained in
its use, versus those who opened the box and turned on the unit."
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