A wallet and a prayer: Can McCaw's name and money save the satellite industry?

About a month ago, Internet-in-the-sky venture Teledesic announced that it might buy or heavily invest in bankrupt Iridium as part of a strategy to reach the market quicker. Last week Teledesic - along with its Chairman Craig McCaw and his Eagle River Investments entity - agreed to lead a group of international investors in raising $1.2 billion for another Chapter 11 filer: ICO Global Communications.

The move has confused analysts, who either consider the satellite sector too small for so many players or do not agree that ICO is a sound investment. But McCaw might be doing what he has always done - taking a chance on a technology that might just move the market.

"His strategy evolves as opportunities emerge," said Robert Ratliffe, a vice president for Eagle River. "We did not expect ICO to be in the situation it is in presently. [McCaw] feels there are communications services efficiently delivered by satellite."

McCaw's strategy is not far-reaching but could become more developed with the passing of time, Ratliffe said.

"Over time, we may do other things like partnering with Teledesic. He is not locked into a specific structure," he added.

Regarding Teledesic's involvement with ICO, Ratliffe said that besides having a team with expertise to offer ICO, Teledesic is a large investor in the company.

Analysts have speculated that the satellite sector has room for only one provider - two at the most - but three is over the top. Ratliffe said that reminds him of the days when AT&T was certain there would be enough room for only one cellular provider.

"It is only the pundits who will predict what the demand is or will be," he said. "In various parts of the world, especially the remote parts, it is hard to imagine how it will be. We are not so bold as to say we are not taking chances."

Although a "foolhardy investment," anything that will potentially prop up the satellite industry is a good thing, said Andrew Cole, a principal head of the wireless practice at Renaissance Worldwide.

"[McCaw] believes instinctively in satellites and is pushing his vision of the Internet in the sky," Cole said. However, "we do not believe the market is big enough for more than one provider. It may be different for data as it is for voice."

McCaw is a believer in any technology if the price is right, the service has potential and the quality is there, Ratliffe said. McCaw has endorsed, whether by investing or simply supporting, activities of Level 3 Communications and Global Crossing, eliminating speculation that the investment in ICO will compete with the potential of undersea fiber internationally.

"Today, we cannot be connected to a small site on the side of the desert," Ratliffe said. "So we want to bring connectivity where it is not there today."

For ICO, the McCaw-led investment will enable it to complete the buildout of its system while providing working capital to launch its global mobile services by the second quarter of 2001. Although McCaw has commented that this investment aids his strategy of serving a broader group of customers, there is confusion regarding his decision to invest so heavily in satellite communications, whether it is ICO, Iridium or Teledesic.

"Brilliant people and smart investors do things that don't always make sense," said Bob Egan, research director of networking with the GartnerGroup. Regarding McCaw's interest in ICO, Egan said, "I don't get it. There is no room for a third player."