The new wireless networks trade on infrastructure and
consumer demand that’s already established.
Imagine the Internet didn’t flow from a tangle of buried wires but instead rained down freely from the sky. Wherever you go, it’s there, nearly anywhere in the world, its presence orchestrated by a band of satellites that toss signals to one another like baseballs, assuring seamless connectivity. Under their steady presence, the Internet is simply there, in homes, in buildings, in cars, along roadside rest stops and busy city sidewalks. The Internet’s everyday presence in the atmosphere would be so ubiquitous and assured that one day schoolchildren would surely giggle to think humans once tried to get the Internet to work over antiquated wires and underground cables.
Such was the romantic appeal of attempts to build a commercial broadband satellite system in the 1990s. The most ambitious of the satellite ventures was Teledesic, which planned to spend $9 billion to send 840 active satellites into space, where they would hover at low orbit, delivering IP signals at a downstream data rate of 720 Mbps.
The idea tantalized technology visionaries. Microsoft Corp. invested $30 million for 8.5 percent of Teledesic, and individual investors included cell phone billionaire Craig McCaw, along with Microsoft co-founders Bill Gates and Paul Allen. Their faith added to an impression at the time that the future of the Internet was sky bound, with satellites making for a more powerful and capital-efficient delivery foundation than expensive wireline networks.
Teledesic was one of several attempts around the same time to harness the power of satellite communications for global data and voice communications. Maryland-based Iridium, backed by Motorola, launched its satellite phone network in 1998 with a ceremonial phone call placed by Al Gore, then the U.S. vice president. With plans to operate 77 satellites across the world, Iridium planned to cover the entire Earth, challenging terrestrial cellular networks and delivering mobile phone availability where there had been none. But just nine months later, the high-flying company would file for bankruptcy protection as gawky handsets, horrendous service woes and rising competition from lower-priced cellular networks hobbled efforts to attract subscribers. There was irony in Iridium’s quick failure: It had been named after the atomic structure of iridium, which features 77 electrons (think satellites) orbiting a nucleus (think Earth). As things turned out, the original Iridium never got to 77 satellites, launching instead with 66. (Iridium’s satellite network was purchased for pennies on the original investment dollar in 2001 by a group of private investors that continues to operate the company.)
Iridium’s costly failure was the first event to pop the balloon on satellite data networks. A separate voice and data network launched by Loral Corp. and Qualcomm would be the second. Launched commercially in 2000, the Globalstar network of 48 low-orbit satellites offered mobile phone service for $1.79 per minute or more. But it, too, struggled to cover costs, and in 2002 it filed for bankruptcy protection, emerging in 2004 after a restructuring. Today, its base of around 300,000 subscribers is concentrated around industry segments, appealing to users who fall beyond the reach of cellular and landline phone networks.
Teledesic never recovered from the broader segment downturn, which spooked investors. Competition from wireline Internet operations, meanwhile, was rising, as consumers flocked to affordable high-speed Internet services.
As investor enthusiasm ebbed, Teledesic had steadily pared its scheme to launch 840 satellites, first dropping the number to 288 satellites, and later to just 30. In October 2002, Teledesic, then controlled by McCaw, stopped building its satellite network altogether, and the following summer it submitted a brief letter to the FCC saying it was abandoning its claim on a large swath of radio spectrum.
The end of Teledesic disappointed adherents who believed a network of satellites presented the best combination of economics, service capability and potential for a global high-speed Internet network.
“Teledesic was a magnificent dream, and I was a true believer all along,” said a Teledesic attorney, Mark Grannis, in a 2003 article published by Space News Business Report.
Yet the dream of a wireless Internet hasn’t evaporated. Today, as AT&T, Verizon and others transition to high-performance mobile data networks, and as ventures including the McCaw-backed, MSO-inclusive Clearwire seek to popularize broadband wireless Internet services, Teledesic’s vision remains alive. The difference, though, has to do with capital and timing. The new wireless networks trade on infrastructure and consumer demand that’s already established. Like many failed communications technology ventures, Teledesic didn’t lack for a good idea. It just got there too early. And it aimed too high.