Monday, October 12, 2009

Viking Funerals (2000)

FROM THE ARCHIVES, Oct. 12 - This originally appeared in Punk Planet, mid-2000. The piece was written ten years ago, so the writing is a little stiff. Also, I'd originally put the word 'terrorist' in quotation marks, maybe implying that I didn't yet believe in their existence? Yikes.

VIKING FUNERALS

From the NY Times business pages, St. Patrick's Day 2000:

A few years ago, William F. Farley was dating Miss America and talking about running for president. Now Fruit Of The Loom, the company he ran, is in tatters.

Could any word have brought such joy to my life as just this one little "tatters"? Would anything I ever read again, I wondered that bright St. Patty's morn, ever bring me as much delight as these two sentences?

Turns out I didn't have to wait long. At lunch, leafing through the LA Times and holding no expectations for any juicy tidbits, I stumbled quite innocently across the words "Iridium LLC" and "cratered" in the same headline. Some background: "Iridium" is the chemical element found in traces of platinum ore, supposedly brought to this planet 65 million years ago on the back of a dinosaur-killing meteor. "Iridium LLC" was the corporation that built the world's only global wireless phone network not two years ago - rendering it possible, for the first time in history, to call anywhere on the surface of the planet from anywhere on the surface of the planet. This one story seemed to sum much of the screwy, dizzying pace of the new economy, the chilling triumph of the one multinational entitled above all others to the overused image of a swelling globe on their corporate literature.

As it turns out, Iridium the company has not fared well. "Imploded", went the color commentary. Their initial five billion dollar investment came bundled with breathtaking pressures for "results" - in this industry's case, a fully operational system up and running a year before any of a half dozen competitors. They came through, more or less, on schedule... 66 satellites in a low Earth orbit constellation by late '98. But, as with any business, general laws of physics dictate that quality control declines the quicker production is paced. These folks were cranking out a new satellite every five days. And any design calling for total planetary coverage will be more complicated (meaning: more expensive) than a traditional communications satellite system. Unlike normal sky-to-ground relays, these satellites had to talk to each other, networking which begat larger onboard computers, which begat backup computers, which begat increased memory and extra sets of antennae and finer degrees of positioning and increased thruster burns, which requires fuel, which requires money, and so on and so forth. Hundreds of engineers, managers, and ground staff were complicit in a vast orgy of spending that spanned the 90's. Business partner Motorola shouldered the initial investment, but damages had to surface somewhere. By the time of Iridium's debut, infrastructure costs had translated into hissy $7 a minute calls on $2,800 brick-shaped telephones.

Subsequently, of the one million subscribers needed to just break even, Iridium never signed up more than 50,000. The revenue from their "global citizen" constituency of oil rig workers, container ship captains and arctic surveyors didn't even cover interest payments on the initial bond. By March 2000, only 19 months in, the company's finances had ceased "plummeting" and were officially "cratered".

A typical bankruptcy story. Yukks aplenty when it happens to someone else, but also loaded with sobering lessons for businesses of all sizes & stripes. For example, as a self-employed person I was able to extrapolate the following for my own company - 1) Set realistic deadlines (and if anyone from Mordam is reading, this terrible tragedy has at least taught me this much), 2) stay current (Iridium's business concept dated from 1987 technology) 3) Do not try to "brand" your product, in the way that "Pepsi" is a name-brand, if your product turns out to be a $2,800 brick-shaped telephone, 4) Customers don't like getting gypped on service. (Only 6 months into Iridium's operations and already 3 months into their cash crunch, Iridium gave away free phones to journalists in Kosovo; the phones failed to work indoors).

Not typical to this timeless tale is the irrevocable physical fallout. Most companies don't leave behind 50 tons of flaming space debris to rain down on the planet when they go chapter 11 (although I certainly wish mine could, at least for extra bargaining power with certain creditors). The night before Saint Patrick's Day, a final corporate buyer declined to step up, and a federal bankruptcy court judge decreed that Iridium LLC would be liquefied, its remaining employees cast free to wander the Earth, its 66 satellites - $5 billion in hardware - "de-orbited", their thrusters set to gently nudge downwards into fiery oblivion.

None of this should serve as an indictment of satellite phones as a concept. Future orbital systems won't do a damn thing to stop the two ladies sitting at the table next to you from holding separate conversations at top decibel on their matching sapphire blue Nokia 5190's with earbuds, but satellite systems are somewhat blameless when it comes to the second worst infraction of the wireless age - those tactless aluminum cell phone towers that've been mandatory for every US county since the 1996 Federal Telecommunications Act (out here in LA county I spot them from the freeway, preposterously straight palm trees with metal prongs jutting under the fronds). Although for the time being satellites are dependent on local, cellular installations. Orbiting systems may also be our best bet for increased privacy, at least in this country. Last March the European Council of Ministers met to update the 1995 "Legal Interception of Telecommunications Resolution" to allow euro law enforcement to listen in on all Iridium calls without a court order, lest terrorists figure out that fully private conversations could be had for a mere $7 a minute.

Iridium was special. Pomp, squander and hubris were signal traits of the 90's bull market, and from day one this company's sales antenna was hailing all three. Marketing plans called for lasers to beam the company's logo onto cloud banks over major cities. CEO's started referring to Iridium as a nation after the International Telecommunications Union assigned it a unique country code for dialing. Great woo was pitched to the US military (and the Pentagon did buy 800 units, raising the obvious question - why didn't Iridium just charge a quarter million dollars a phone and stay afloat?). This was history's first de facto planetary monopoly, a company technologically powerful enough to interfere with, by a factor of 100 to 1, the cosmic signals studied by radio astronomers. Their satellites were actually visible at night as "iridium flares", 10 to 30 second flashes of sunlight glinting off orbiter bows, brighter, in certain latitudes, than all other night sky objects but the moon. "Don't write Iridium off," said an in-house consultant after the first quarter 1999 losses, "It's a bit like Iridium is this big tanker in the ocean... It takes a while for the vessel to turn." Anyone with the nerve to make maritime analogies deserves all the icebergs they get.

And what of that falling space junk? After deorbiting, there will still be around 3,500 satellites in various strata, another 8,649 man-made objects tracked by U.S. Space Command. The Earth's atmosphere eventually flushes down and incinerates all low-Earth-orbit debris, but some pieces make it through. This last May, several large chunks of a DOD rocket rained down on two South African farms. Any surviving fragment, even the size of a bullet, has the destructive capabilities of, well, a bullet. To claim that Iridium's posting of a "deorbiting bond" to cover the $30-$50 million destruction of all satellites represents some sort of "act of good corporate citizenship," according to one outgoing exec is like handing out plaques to atomic plant agencies for properly storing their wastes. These people created the problem, and this is the best they can do?

Motorola has yet to destroy these satellites. Turns out a final decision doesn't come down until July 31. There are two prospective buyers lurking in the wings. I've slogged through many disgruntled Iridium stockholder chatrooms and no one has any idea how the system could possibly be made profitable at this point. Smart money stays on flaming death from space (one extant Iridium satellite will remain propped up on display at the Smithsonian, a warning to future generations). Nor is that front going to get anything but messier. Son Of Iridium is already in the works; Teledesic, the $9 billion, 280+ satellite system planned for 2004. Funded by Bill Gates and several Saudi princes, this little scheme is to provide two way video and voice communication by satellite internet service to everyone on Earth. But half the Earth's population has never made a phone call and earns less per capita in a year than what even the cheapest of handsets will cost. How exactly will this system pay for itself? Who will float the bonds to remove this junk in 2006? Query unknown. System error. "Teledesic," remarked a former competitor," is the kind of thing that James Bond used to have to stop".