The deal, signed late Wednesday, calls for Iridium Satellite, a company that is purchasing the assets of Iridium from bankruptcy court, to provide unlimited use for up to 20,000 government workers.
The Defense Department has the option to extend the contract through 2007 for $252 million.
Iridium's 66-satellite network, the world's first satellite phone system, was built at a cost of more than $5 billion. But the service, intended for global business travelers and high-end consumers, failed to attract enough customers. Globalstar Telecommunications, a competitor, is facing similar problems, though it remains in business.
Although Iridium's prices later fell, initial costs of about $3,000 per handset and up to $7 per minute put an end to any hope of making Iridium a mass-market communications service. The company, backed by Motorola, filed for bankruptcy earlier this year.
Iridium Satellite, a new company, is buying the assets of the old Iridium, having won the right in bankruptcy court Nov. 22. Iridium Satellite has contracted with Boeing to operate the satellite system, the Defense Department said. According to Reuters, Iridium Satellite is led by Dan Colussy, formerly the president of Pan American World Airways in the late 1970s.
Despite the flawed business plan, Iridium's service found a niche among industrial and military users. Mining operators, offshore drilling rigs, Iditarod dog sled racers in Alaska, and CNN international correspondents covering Kosovo were among the satellite phone customers.
The ability to deliver service nearly anywhere on the globe made satellite phones an attractive alternative to spotty cellular service for those willing to pay a premium.
Now the Pentagon hopes to enhance the Iridium network to provide secure voice connections around the globe. The Navy, in particular, has more than twice the demand for similar communications services than it currently can handle, the Defense Department said. Iridium will help alleviate the problem.
The Iridium service is expected to be used for Special Forces operations and combat search-and-rescue missions, and to provide polar communications, among other uses.
The Defense Department said the Iridium system may be extended in the future for use by other federal agencies and some allied governments.