TELECOM Digest OnLine - Sorted: Re: Iridium II: Is Satellite Radio Doomed?

Re: Iridium II: Is Satellite Radio Doomed?

John Levine (
17 Mar 2005 04:11:54 -0000

> When the original Iridium was being drawn up on the planning boards,
> the accountants went over the numbers very meticulously. ...

> But the telecom industry changed between the drawing board and launch
> pad. Inconvenient bulky mobile-telephone receivers were replaced by
> dinky little cellphones. Cellphone companies built out their coverage
> area to include almost all potential customers in the 1st world. And
> cellphone and long distance rates plummeted due to competition.

Part of their mistake was to underestimate how fast cellular would
develop, which suprised just about everyone, but an equally big part
was to disregard what pricing was due to technology and what to

Actually, long distance rates plummeted more due to regulatory changes
and fiber optics than to competition. For the past century long
distance had been deliberately overpriced to subsidize local service
and (in places with PTTs) other bits of government bureaucracy. The
mistake there was not to realize that with a stroke of a pen those
subsidies could be and were removed, which is the main reason that a
call from the US to the UK or Hong Kong now costs 2 cpm rather than a

> Things change. A lot of satellite radio's target households have
> broadband and can get "internet radio" now.

True, but unlike Iridium vs. cellular, satellite vs. internet radio is
not an apples to apples comparison. With telephony, the question is
how you get a 3 KHz low-latency full duplex channel (not exactly, but
close enough) from one point to another. Satellite really broadcasts,
but internet radio fakes it with a separate connection to each
recipient. (There is real Internet multicasting but it's a pain to
set up and is only used in the geek community to broadcast IETF
meetings and the like.) With broad, the question is how you get the
same one-way signal to lots of recipients.

This means that it's a question of scale. With the current low
numbers of listeners, Internet has the edge as you note due to its
parasitic carriage.

> The car was supposed to be the last refuge of satellite radio that
> internet radio couldn't touch. But 3G, WiFi, and WiMax are showing
> that it can be done.

Two-way radio spectrum is far from free. 3G definitely works, WiFi is
OK for short distances, WiMax is grossly oversold for other than fixed
point to point service. They're swell for telephone and individual
data service but they're way too expensive for broadcast. Back around
the turn of the century, there was what you might call telephone
radio, with concerts and the like sent over phone wires to large
numbers of listeners. (It was really popular in Hungary for some
reason.) As radio developed, radio blew it away because there was no
incremental cost per listener, and the phone wires could be used more
profitably for telephony. If you use any Internet technology for
radio, you're in the same situation, using point-to-point bandwidth
for simulated broadcast.

If the total number of listeners to your station is small, in the
thousands, point-to-point looks good because of the low cost of entry.
But if satellite radio does what its backers hope, and has millions of
listeners per station, which is not implausible considering how many
listen to Howard Stern on normal broadcast, satellite wins big.

I think the real outcome will depend on questions like whether the
satellite radio stations are able to bribe car makers to install
receivers as standard equipment in cars so users need only call up and
subscribe, no installation or visible startup cost involved. It'd be
like cell phones are now, using the equipment as a loss leader made up
from subscription revenue. It looks to me like the incremental cost
of a Sirius or XM receiver and antenna would be about $100 which is
well within the range that cell plans subsidize.



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