Teledesic gives up on satellite Internet
By Helen Jung
Associated Press
SEATTLE — Envisioned by cellular pioneer Craig McCaw, backed by Bill Gates, and financed in part by their limitless 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 recent 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 ... it's not feasible to do this," said spokesman Todd Wolfenbarger.
The decision announced last 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 hopes of offering full service by 2005.
It was the latest brainchild of one of Seattle's favorite sons. McCaw had spun together almost single-handedly 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.
Teledesic, although it never had more than 200 employees, certainly had its star power, with McCaw for 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 was not hurting for money.
Nevertheless, Teledesic had issues. The company went through several management changes, including rotations through chief executives.
"It's hard to have consistency and hard to develop your road maps 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.
Teledesic still owns rights to a portion of high-frequency spectrum. But under agreements with the Federal Communications Commission, it 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 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 wrote a biography of McCaw. "This proves that he's mortal."
Other companies offer Internet connections through a satellite network, including StarBand of McLean, Va., and Hughes, though their service is far less ambitious than what Teledesic had planned.
StarBand recently filed for bankruptcy, joining other troubled satellite ventures. Iridium LLC, backed by Motorola Corp., had built a satellite network offering voice and data service, but ended up cutting off service two years ago, crippled by debt. The new 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," he said.
Badding 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."
