Pentagon Moves to Keep Iridium Satellites Aloft

W A S H I N G T O N, Dec. 7, 2000 -- The U.S. Defense Department said it was stepping in to prevent $5 billion worth of Iridium communications satellites from falling toEarth and triggering possible “widespread anxiety.”

Staving off a fiery end to the 66-satellite necklace andits spares, the Pentagon on Wednesday awarded a projected two-year, $72million communications contract to seal a new ownership dealworked out in a New York bankruptcy court.

The new owners, led by Dan Colussy, president of PanAmerican World Airways from 1978 to 1980, have contracted withBoeing Co. to take over operation of the system fromelectronics giant Motorola Inc., Pentagon officials said.

For months, Motorola had been preparing a 14-monthcontrolled “de-orbiting” and destruction of the network in theabsence of a qualified buyer for the bankrupt satellitetelephone company it bankrolled.

Colussy’s venture capital start-up, Iridium Satellite LLC,won conditional court approval Nov. 22 to buy the operatingassets of the bankrupt company — a victim of weak sales, highoperating costs and technical glitches.

The Pentagon contract was a “precondition” for finalapproval 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 amatter of days,” said Ginger Washburn, chief marketing officerof the new Arnold, Md.-based company.

The new owners will market their services to commercialusers as well as to the U.S. military and other governmentusers. The State Department already owns 2,000 Iridium handsetsfor use in remote spots on humanitarian missions.

Rescue Prompted by Growing Need

The Pentagon said it was rescuing Iridium because of agrowing need for the encrypted services that will be madepossible through a special “sleeve” outfitted for securehandsets.

The Pentagon already owns about 1,600 Iridium satellitephones. It will get unlimited air time for up to 20,000government users for $3 million a month under the deal.

The initial award was for a “base period” of three monthsfor accounting purposes. But the deal is expected to last atleast two years, said Dave Oliver, a principal deputy undersecretary of defense for acquisitions.

“This will be ideal” for easing the current crush of theU.S. military’s ultra-high frequency mesh for networking andpoint-to-point communications, Oliver told reporters.

Currently, the department’s communications satellitesprovide 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-offsatellites could be dangerous. Although most hardware wouldburn up on reentry into the atmosphere, items as big as2-by-3-foot titanium fuel tanks might make it to Earth.

The National Aeronautics and Space Administration hadestimated that the odds of someone being killed by fallingdebris were one in 279, Oliver said.

Fear of Public Outcry Cited

Despite the relatively small risk, an interagency group ledby the Justice Department was “extremely unhappy at theprospect of a 14-month mass de-orbit,” a background paperhanded out at the Pentagon said.

“The group worried that this might create widespreadanxiety and lead to a public outcry for ill-consideredgovernment action,” the document said.

Motorola had planned to begin de-orbiting the 1,460-poundsatellites as early as Dec. 1, said Rusty Brashear, a spokesmanin Schaumburg, Ill. The satellites are steered from Earth byhydrazine-powered thrusters. They would have been nudged into aglide path to burn up over the ocean. Bringing them back isnecessary lest they become part of the thousands of bits oforbiting junk that could get in the way of working satellites.

Motorola postponed the deadline while the Pentagon workedout details of a deal to indemnify it against all risks,including product liability, in excess of its three existinginsurance policies for the craft. “We did not want to see thetechnology destroyed,” Brashear said.

Seattle-based Boeing, which already runs other military andcommercial satellite systems, said a four-month transitionphase for the Iridium takeover was starting immediately. Theoperational headquarters for the network is in Leesburg, Va.

Iridium’s rescue will not do much to change the mobilesatellite 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 overcomethe huge obstacles of usage fees, handset size, call qualityand customer support that were so damaging to Iridium’sbusiness,” he said.

The only other operational competitor, San Jose,Calif.-based Globalstar Telecommunications Ltd., will have toredouble efforts to capture subscribers and keep them happy,Lucas added.