WSJ. McCaw Re-Examines Strategy For Teledesic 'Sky Internet'
September 27, 1999
Tech Center
By SCOTT THURM
Staff Reporter of THE WALL STREET JOURNAL
Amid mounting troubles in the satellite-communications business, wireless
entrepreneur Craig McCaw is re-examining his planned Teledesic "Internet
in the sky" with an eye toward starting such a service sooner than 2004
and perhaps transmitting phone calls as well as computer traffic.
Mr. McCaw, who made several fortunes in the cellular-phone industry, is
believed to be exploring deals with other players in the satellite business,
including the bankrupt Iridium LLC phone system and the Hughes
Electronics Corp. unit of General Motors Corp., which has stakes in
satellite-phone and Internet projects.
It isn't known how far these discussions have progressed. It also isn't clear
how any deal would affect Teledesic LLC's planned $10 billion,
288-satellite project for high-speed, wireless Internet service. A
spokesman for Teledesic, of Bellevue, Wash., said Mr. McCaw remains
committed to the project, and that a technical review with prime contractor
Motorola Inc. is continuing.
However, the spokesman said Mr. McCaw wants to "more quickly
establish a position in the marketplace while also generating early
revenues." People familiar with the matter said Mr. McCaw is looking for a
smaller, cheaper system than Teledesic to prove satellite systems can make
money. These people said they didn't believe Mr. McCaw had yet chosen
a strategy.
In a statement, Mr. McCaw said Teledesic is evaluating "opportunities that
incorporate a variety of technologies" to serve "a broader group of
customers." Bill Owens, Teledesic's co-chief executive, said Teledesic is
examining "opportunities created by the unfortunate difficulties of others," a
clear reference to recent bankruptcy filings by Iridium and ICO Global
Communications Ltd.
Those bankruptcy filings have cast a pall over the satellite industry, making
it harder for Teledesic and others to raise the billions they need. Teledesic
has raised about $1.5 billion from investors including Motorola, Boeing
Co., Microsoft Corp. Chairman Bill Gates and Saudi Prince Alwaleed Bin
Talal.
Mr. McCaw "is not going to have an easy time raising nine, 10, 20 billion if
he focuses on going it alone," Marco Caceres, senior space analyst with
the Teal Group, Fairfax, Va., said.
There has been speculation for weeks that Mr. McCaw might take a role
in Iridium, because Motorola is the prime contractor and an investor in
both projects. But any restructuring of Iridium would be complicated,
requiring approval from banks, bondholders and the bankruptcy court. A
Motorola spokesman said he knew of no discussions with Teledesic about
Iridium and declined to comment further.
Mr. Caceres said a partnership between Mr. McCaw and Hughes "seems
very rational and makes more economic sense than messing with Iridium."
Hughes is an investor and contractor for ICO, and also plans its own
satellite-Internet project, dubbed Spaceway, that is expected to launch in
2002. But it isn't clear what Hughes would gain from such a deal, since
Spaceway is ahead of most competitors. A partnership also could face
regulatory hurdles.
A Hughes spokesman declined to comment on the Teledesic report.
Teledesic and Spaceway are very different projects, even though both plan
to use satellites to transmit data over the Internet. Teledesic plans many
satellites in low-Earth orbit to provide lightning-fast connections over as
much of the Earth as possible. Teledesic officials see their biggest
customers as big corporations and government agencies that want
guaranteed Internet access.
Spaceway plans eight satellites in a much higher orbit, and also is targeting
big corporate networks. The higher orbit could make it harder to transmit
telephone calls, however.
-- Jeff Cole contributed to this article.
Return to top of page | Format for printing
Copyright ¸ 1999 Dow Jones & Company, Inc. All Rights Reserved. |
