Teledesic’s plan comes crashing down

The plan of co-founders Craig McCaw and Bill Gates to create an Internet-in-the-sky network looks like it will be permanently grounded. Teledesic this week said it has suspended satellite construction and eliminated a number of people from its staff as it evaluates alternative approaches to its business.

The move doesn’t come as a surprise to most satellite industry watchers. “They already scaled back and just reached a wall. They realized this didn’t make sense,” said Greg Caressi, research director with Frost & Sullivan. “No serious forecaster of the industry considered them a viable business during the last three years.

Teledesic has continually revamped its business plan. In 2000, Motorola and Teledesic ended their satellite construction agreement. Motorola, burned by its Iridium project, is transitioning out of the satellite communications industry.

Earlier this year, Teledesic hired Italian satellite manufacturer Alenia Spazio to build the first two satellites of its planned 30-satellite constellation of mid-earth orbiting satellites designed to provide broadband communications across the world. Now the company has determined that the weakened economy and commercial prospects for the network requires it to re-evaluate the business.

“We continue to believe that the Teledesic system would be useful to governments around the world in connection with disaster relief, anti-terrorism, defense services and other critical government activities,” Teledesic Co-CEO William Owens said in a press statement.

Caressi believes there is limited commercial opportunity for Teledesic, which holds a global license for non-geostationary satellite spectrum in the 1GHz band. The FCC won’t likely allow the company to change the purpose of its license to provide other services like terrestrial capacity, said Caressi. However, the company does have money and assets to enter the terrestrial space if it chose to purchase licenses, he said.