Posted on 10/03/2002 10:06:57 PM PDT by HAL9000
Envisioned by cellular pioneer Craig McCaw, backed by Bill Gates — and financed in part by their bottomless wealth — the idea of delivering high-speed Internet via a constellation of satellites seemed almost a sure thing.But after 12 years of management changes, network design revisions and most recently, telecommunications industry turmoil, the vision of an Internet-in-the-sky has come crashing down to Earth.
Teledesic's board has halted work by a contractor building two satellites, effectively putting the ambitious idea into deep hibernation.
"Obviously by suspending work on the contract, the board of Teledesic is saying, as we see it today, it's not feasible to do this," said spokesman Todd Wolfenbarger.
The decision announced this week means layoffs for 25 people. Another 10 or 12 employees will stay on at Bellevue, Wash.-based Teledesic, evaluating "possible alternative approaches," a company press release said.
Teledesic, started in 1990, was envisioned as a network of space-based satellites that could deliver high-speed Internet to businesses and consumers anywhere in the world. The network would relay voice and data over a portion of the radio spectrum, with Teledesic hoping to offer full service by 2005.
It was the latest brainchild of one of Seattle's favorite sons. McCaw had almost single-handedly spun together the new industry of cellular telecommunications. His company, McCaw Cellular, impressed telecom executives, Wall Street investors and customers alike and was bought by AT&T Wireless in 1994.
And Teledesic, although it never had more than 200 employees, certainly had its star power.
The company had McCaw for a founder, Microsoft Chairman Gates as a backer, a $100 million commitment from The Boeing Co. and $200 million from Saudi Prince Alwaleed Bin Talal. With some of the richest men in the world behind it, the company wasn't hurting for money.
But despite the promise, the vision and the war chest, Teledesic had its issues.
The company went through several management changes, including rotations through chief executives and co-chief executives.
"It's hard to have consistency and hard to develop your roadmaps and service with different types of visions that are being replaced every so often," said Sean Badding, vice president of the telecommunications research firm The Carmel Group.
The designs and scope of the project changed as well over the years.
Ultimately, even men with very deep pockets have their limits.
"Really, for the people who have already invested money in this thing, it really doesn't make sense," Wolfenbarger said. "The risk is not outweighing what they think the reward is."
Teledesic still owns rights to a portion of high-frequency spectrum.
But under agreements with the Federal Communications Commission ( news - web sites), the company would have had to meet a series of deadlines with the ultimate goal of offering service by 2004, which it could not do under the current financial climate, Wolfenbarger said.
With no big customer lined up ready to commit, the board opted to put the project on ice.
"Craig (McCaw) was supposedly a genius who could see the future and see around corners," said O. Casey Corr, who authored a biography of McCaw. "This proves that he's mortal."
Other companies, including McLean, Va.-based StarBand and Hughes already offer Internet connections through a satellite network, though their service is far less ambitious than what Teledesic had planned.
StarBand recently filed for bankruptcy, joining other troubled satellite ventures including Iridium LLC. Backed by Motorola Corp., it built a satellite network offering voice and data service but, crippled by debt, ended up cutting off service two years ago. A new venture, Iridium Satellite LLC took over the bankrupt company's assets.
Teledesic, with its grander vision of high-speed connectivity, may have been ahead of its time, said Badding. "At this time, there are more questions than answers about the viability and the economics for these types of services."
McCaw isn't out of the satellite business altogether, either.
He still is a major investor in London-based ICO, which similarly hopes to offer satellite-based wireless communications in the future. At one point, McCaw sought to merge the company with Teledesic and issue new stock in the combined company. But he abandoned that effort early last year due to the sagging market.
Badding said he remains hopeful McCaw will one day revive Teledesic.
"Teledesic still has tremendous amounts of potential in the future," he said. "In the next seven to eight years it clearly is going to be a different story."
FCC Chairman Michael Powell has been pushing satellite Internet as a solution for the U.S. But most Direcway subscribers are dissatisfied with their service, Starband is in bankruptcy, and other companies like Teledesic and WildBlue never got off the ground.
Meanwhile, Canada, South Korea, Japan and several other industrialized countries are moving forward with superior wireline and terrestrial wireless systems.
This leaves the U.S. with Michael Powell's other option - reestablishing the Bell monopolies.
The phone call that I got last month from a senior-level telecom executive revolved around the feasibility of using high-altitude robotic blimps (cost: less than $150k each - with less transmission delay, too) in lieu of satellites (cost: upwards of $100 Million each).
Slow response time, not enough capacity, "fair access policies", too expensive, etc.
I worked on this project for a while, and it was chaos.
First off, they never understood that there's NO MARKET in those places. There are no phone lines there for a reason. The only place there'd be any demand for this system would be in places where people already use things like phones -- and in those places, Teledesic wouldn't have enough market share to survive. (As Iridium and Globalstar already discovered.)
The Teledesic people never did understand how to put together a system. Their requirements had no objective basis, and they were often wedded to really ruinous design choices. A clue to how bad they really were can be gained by looking at how many satellite companies they hired and fired: there were several before us, and several after -- I think the total was something like 10.
This project should have died 5 years ago.
On the plus side, they had this one blonde secretary ... oohhhh, golly what a babe. (Yes, she could type, too.)
I beg to differ. Teledesic was not GEO satellite-based; it was LEO (low earth orbit) based. Unfortunately, Teledesic's constellation plan was way too ambitious, and required TONS of birds (240, I think).
LEO satellite service has relatively low latency due to the short hop (875 miles vs. 22,600 miles for GEO) to the birds.
Alcatel's LEO service, SkyBridge, only requires 67 LEO birds, is still planned for sometime this decade, and is the only way many people (including me), even in the US, where something like 50%+ will NEVER have cable or DSL, will ever get broadband service.
There has been some question as to whether Alcatel is throwing in the towel on SkyBridge, but so far they are denying it.
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