Will the Terrestar Satellite Phone Fly?

AT&T announced today that it has launched the new Genus hybrid cell and . It is available only from AT&T for $799. There is a two year contract and for $25 additional you can have capability. It’s almost like déjà vu all over again. I mean didn’t we run this drill in the late 1990’s resulting in two high-profile bankruptcies? Is this re-run going to be different?

One would think it will; there has been a lot of learning in 10 years and if Terrestar did a good job of observing , and I, they will have built a great business model. However, I think they have made one crucial error. We’ll get to that in a minute. First, here’s a bit about the phone:

The Genus is the world’s first truly smart ; It looks like a Blackberry, albeit a measure thicker, it runs MS Mobile Windows which is unheard of in the MSS market and Terrestar promises $.60/minute satellite phone calls. The target markets are Blackberry users who also venture ‘off the grid’ – out of cellular coverage. Think law enforcement, Border Patrol, forestry workers, power executives, oil and gas. You get the point. I did speak to one communications manager for a large eastern city that told me, “I have 100 that none of my senior people can use because they are not used to using them’. This suggests an added measure of confidence that A) the user knows how to use the service and B) they actually will do so. Only time will tell.

On the surface, this all sounds great. Here are some problems I see:

First: After gaining traction in the specialty markets, the Genus will be unleashed to the retail sector. Huh? Everyone has very important life agenda items but is spending $800 on a souped-up Blackberry with capability a ‘retail’ priority? I do not think so. I see boaters and outdoor enthusiasts being interested in this phone, but that is a relatively small market. And given the Genus’ limited (North American only) coverage, well, it may not be very realistic. This brings us to problem number two;

Terrestar has decided that the most qualified organization to sell the Genus is a cellular phone company. No offense to AT&T, but selling is hardly their core strength and the sales process for satellite phones is hardly that of selling cellular phones. AT&T is interested in cellular connections and adding Terrestar connections is hardly a top priority. So if TerreStar is not a top priority, who will buy an $800 souped-up Blackberry? I’ll leave that one to the philosophers.

It occurs to me that if you want to sell to specific markets, you work engage distributors who already sell there. And if that is the case, is AT&T a better choice than the dozens of provider, resellers and dealers in the US? I doubt it, especially since AT&T is not really the top cellular choice of the aforementioned markets.

I see the flawed distribution partner selection as a major point of failure, not due to a bad product – I’ve had people ask about the Genus – but due to a bad distribution model. I hope I am wrong, but I see Terrestar being added to the ICO dustbin of history.

Unless there is a sharp learning curve and the Satcom distributors are brought on board quickly.