The U.S. Defense Department said it was stepping in to prevent $5 billion worth of Iridium communications satellites from falling to Earth and triggering possible “widespread anxiety.”
Staving off a fiery end to the 66-satellite necklace and its spares, the Pentagon on Wednesday awarded a projected two-year, $72 million communications contract to seal a new ownership deal worked out in a New York bankruptcy court.
The new owners, led by Dan Colussy, president of Pan American World Airways from 1978 to 1980, have contracted with Boeing Co. to take over operation of the system from electronics giant Motorola Inc., Pentagon officials said.
For months, Motorola had been preparing a 14-month controlled “de-orbiting” and destruction of the network in the absence of a qualified buyer for the bankrupt satellite telephone company it bankrolled.
Colussy’s venture capital start-up, Iridium Satellite LLC, won conditional court approval Nov. 22 to buy the operating assets of the bankrupt company — a victim of weak sales, high operating costs and technical glitches.
The Pentagon contract was a “precondition” for final approval of the asset transfer at the bargain-basement price of $25 million, a representative of the new owners said.
“We expect the closing of the sale to take place within a matter of days,” said Ginger Washburn, chief marketing officer of the new Arnold, Md.-based company.
The new owners will market their services to commercial users as well as to the U.S. military and other government users. The State Department already owns 2,000 Iridium handsets for use in remote spots on humanitarian missions.
Rescue Prompted by Growing Need
The Pentagon said it was rescuing Iridium because of a growing need for the encrypted services that will be made possible through a special “sleeve” outfitted for secure handsets.
The Pentagon already owns about 1,600 Iridium satellite phones. It will get unlimited air time for up to 20,000 government users for $3 million a month under the deal.
The initial award was for a “base period” of three months for accounting purposes. But the deal is expected to last at least two years, said Dave Oliver, a principal deputy under secretary of defense for acquisitions.
“This will be ideal” for easing the current crush of the U.S. military’s ultra-high frequency mesh for networking and point-to-point communications, Oliver told reporters.
Currently, the department’s communications satellites provide less than half such services required by U.S. forces, crowding lower-priority users off the airways, Oliver said.
But the U.S. government was also concerned about fears, however misguided, that the “mass de-orbit” of cast-off satellites could be dangerous. Although most hardware would burn up on reentry into the atmosphere, items as big as 2-by-3-foot titanium fuel tanks might make it to Earth.
The National Aeronautics and Space Administration had estimated that the odds of someone being killed by falling debris were one in 279, Oliver said.
Fear of Public Outcry Cited
Despite the relatively small risk, an interagency group led by the Justice Department was “extremely unhappy at the prospect of a 14-month mass de-orbit,” a background paper handed out at the Pentagon said.
“The group worried that this might create widespread anxiety and lead to a public outcry for ill-considered government action,” the document said.
Motorola had planned to begin de-orbiting the 1,460-pound satellites as early as Dec. 1, said Rusty Brashear, a spokesman in Schaumburg, Ill. The satellites are steered from Earth by hydrazine-powered thrusters. They would have been nudged into a glide path to burn up over the ocean. Bringing them back is necessary lest they become part of the thousands of bits of orbiting junk that could get in the way of working satellites.
Motorola postponed the deadline while the Pentagon worked out details of a deal to indemnify it against all risks, including product liability, in excess of its three existing insurance policies for the craft. “We did not want to see the technology destroyed,” Brashear said.
Seattle-based Boeing, which already runs other military and commercial satellite systems, said a four-month transition phase for the Iridium takeover was starting immediately. The operational headquarters for the network is in Leesburg, Va.
Iridium’s rescue will not do much to change the mobile satellite services industry’s headaches, said Greg Lucas, managing partner of Regulatory Access LLC, a McLean, Va., satellite consultancy that operates the Web site, www.FCCFilings.com.
“All surviving players in the market must still overcome the huge obstacles of usage fees, handset size, call quality and customer support that were so damaging to Iridium’s business,” he said.
The only other operational competitor, San Jose, Calif.-based Globalstar Telecommunications Ltd., will have to redouble efforts to capture subscribers and keep them happy, Lucas added.