Welcome to the dawn of the new satellite economy. To get a clear picture of the landscape, imagine a speed race for world domination.
One company, Seattle-based Teledesic Corp., commands a daunting lead as it speeds toward victory and the attendant spoils. Teledesic has come this far through foresight, good timing, a liberal use of lobbying oil, and deep reserves of cunning - all of which helped it gain a license to 500 MHz of Ka-band spectrum.
Teledesic's Slice of Spectrum
Sources: US Department of Commerce, Wired
Covering only a sliver of the communications spectrum, the license nevertheless gives Teledesic control of the bandwidth of what it calls the Internet in the Sky - a cheap way to send huge amounts of data as much as 2,000 times faster than a 28.8 Kbps modem among millions of netizens in every corner of the world at the same time.
True to the scale of ambitions shown by its founders, Craig McCaw and Bill Gates, Teledesic's plan is to throw a net around the globe, a geodesic weave of 288 inter-communicating satellites that move in 21 circular orbit planes about Earth's poles, staggered at altitudes between 434 and 441 miles high. This is low-earth orbit (LEO), the new paradigm for satellite communications, one where data traffic - email, video conferencing, Web pages, even voice calls - is shuttled through space to its final destination.
Many satellites launched in the 40 years since Sputnik took flight have been of the geostationary orbit (GEO) variety, rotating at a distant 22,366 miles above Earth and far too high for good Net connections. "That may be OK for broadcast applications, but it's not good for interactive applications," says Russell Daggatt, president of Teledesic. "Time delay is a problem - it wreaks havoc with interactive services."
The focus on cutting delays is the crux of Teledesic's strategy. Its network architecture borrows heavily from common land-based local-area networks which need close and constant contact between the points sending and receiving data. In low-earth orbit, Teledesic reasons, it can transmit data more efficiently than it could from the GEO band. And that LEO data connection will outpace anything on earth - 64 Mbps on the downlink, up to 2 Mbps on the uplinks, and the ability to support more than 2 million simultaneous 16 Kbps connections.
The early lead Teledesic has built up could be derailed by new obstacles - notably, competing new bandwidth technologies and the nagging question of how Teledesic will pay for the project's US$9 billion price tag. And the company faces more competition - Motorola's Celestri and the international venture SkyBridge are working on similar if younger projects. For now, Teledesic has a tremendous advantage thanks to the spectrum license it worked hard to win.
And therein lies a tale of corporate stealth, new-economy style.
Turning obstacles into steppingstones
It all started with what many satellite dreamers regarded as an obstacle to setting up an alternative to GEO satellite services. To offer bandwidth, services had to have licenses to a piece of the communications spectrum. And to get that, they had to follow the rules of spectrum allocation, which were centered on GEOs. Any new, non-GEO system wanting space to operate in could have it, provided it fit its network around all the existing GEO services to avoid interference. The GEO services were not required to reciprocate.
The problem was, GEOs follow a path around the equator from which they send their signals down to fixed ground stations. LEOs, on the other hand, roam above Earth along various paths, beaming signals to other satellites in their constellation as well as down to homes and offices on Earth. Teledesic saw in this obstacle a golden opportunity: a ready-made justification for its aggressive strategy in grabbing access to its own spectrum.
"Under that regime, you could never put up a LEO system," said Daggatt. "The C-band and the Ku-band are where most satellites are now, and GEO continues to have priorities in these." So the United States wanted to turn to the Ka-band as a part of the spectrum that would allow non-geostationary systems to have priority. Such non-GEO systems include big LEO operators such as Motorola's Iridium project for wireless phones and TRW's Odyssey.
The US saw its chance at the 1995 World Radio Conference, a confab of public and private communications bigwigs held every two years by the International Telecommunication Union. Teledesic learned that the US was planning to ask for one-seventh of the Ka-band to be set aside for crosslinks non-geostationary systems. This conference would decide the fate of the Ka-band. Teledesic made its move.
The appearance of a proposal for this new, non-GEO band written up by a company from a serene Seattle suburb put an ambitious face on the US plan that no one was quite ready for.
Getting on the agenda __"There may be any number of positions by which one's interests may be advanced. Focusing on the position rather than the [common] interest is confusing the means with the end."
- from The Global Negotiator by Russell Daggatt and Trenholme J. Griffin, 1990__
When it first crossed the FCC's transom, Teledesic's proposal had some logistical holes: which partners would design and build satellites and communications payloads? These would be easier to find if Teledesic addressed a more pressing need: finding its own spectrum. Daggatt knew that meant navigating domestic and international regulatory waters - and fast.
Daggatt seemed cut out for this task. A onetime international business attorney and the co-author of a 1990 book on the art of global negotiating, he joined Teledesic in March 1994 and quickly determined how to find the elbow room for its Internet in the Sky project. He would tattoo its proposal on the minds of technology bureaucrats around the world. They were the ones who would vote on spectrum allocation issues through the International Telecommunication Union, a subset of the United Nations.
Ordinarily, getting a proposal on the union's agenda involves taking part in preparatory meetings and study groups, and submitting technical papers well in advance of gatherings. But the Teledesic proposal wasn't discussed formally ahead of the conference. Instead, Teledesic and some of the US delegates argued that it should piggyback on another agenda item - the Iridium LEO satellite service that Motorola had designed for cellular phones.
The 11th-hour arrival of Teledesic on the agenda angered many delegates, including Francois Rancy, director of spectrum planning and international relations for the French National Frequency Agency and a member of the 1995 French delegation. Especially irksome was that Teledesic had more than a year to deliver documents to meetings, including a formal preparatory six months prior to the 1995 World Radio Conference, Rancy said.
"A two-page proposal was distributed to the administrations a few weeks before the conference, and information documents were made available directly by Teledesic to administrations the week before the conference," Rancy said. "Of course, Teledesic did a lot of lobbying during the six months between the [preparatory meetings] and the World Radio Conference."
Global negotiations __"It is common for traveling American business executives and professionals upon arrival in a foreign country to be overwhelmed with hospitality and other courtesies provided by their foreign counterparts ... expensive parties ... lavish banquets.... Go ahead and enjoy it. But bear in mind that all this lavish hospitality is intended to create obligation on a personal level, which it is hoped will cause you to make decisions favorable to your generous hosts (but which may or may not be in the best interests of you or your organization)."
- from The Global Negotiator__
Getting the delegates' approval requires an international effort. With France and the rest of Europe somewhat weary of US domination in the LEO arena, Daggatt focused instead on developing countries to marshal support. The strategy made sense given Teledesic's desire, outlined in its application to the FCC, to wire countries with few telephone lines. Governments in these countries want to get wired quick, even in a wireless way.
"Look at India - they have 900 million people and a single 10 Mbps connection with all the world. That's a fraction of what Bill Gates has in his house," Daggatt said. "Africa and other places could see that our system was inherently egalitarian and that it could provide benefit to their countries. So they didn't want to preclude it."
Teledesic's lobbying crested with a full-on campaign at the 1995 World Radio Conference - including free lunches, lavish dinners, and canvas bags emblazoned with Teledesic logos - prompting some delegates to view it as an overt effort to buy votes. "It was a giant party, complete with favors," said an executive at wireless phone company Qualcomm, who, like seven other attendees of the 1995 conference interviewed by Wired News, talked about the conference on the condition of anonymity. These seven echoed the accounting of events at the WRC '95.
Teledesic says the freebies weren't a big deal. "The big monopoly telcos throw elaborate receptions at opera halls and give away Cross pens - it cost them $200,000," said Daggatt. "We weren't prepared to spend that kind of money. We were looking at the grass roots ... things we could do to enhance our money."
Other delegates remembered it differently - as a lobbying effort never before seen at a World Radio Conference. "What was unprecedented, I believe, was the scale and systematic aspect of this lobbying effort," noted Rancy. Recalled another, "It was an example of crass materialism, crass marketing, and buying votes.
But it worked.
Getting off the ground
And it worked despite another nagging question: How would Teledesic drum up the capital to make its satellite network fly? To receive an FCC license, applicants must demonstrate a commitment to finding resources to build and launch a system. Teledesic asked the FCC for a waiver of this qualification. It was granted, partly because it posed no threat to competition. Because it was the sole proposal, there was no competition.
Now the waiver is coming back to haunt Teledesic, fueling concerns about its ability to raise enough funds for the project. "The thing is, they have a lot of funding from the big names - Bill, Craig, and Boeing - but they're not close to getting the $9 billion," said David Cooperstein, telecommunications strategies analyst with Forrester and author of a recent report that gives Teledesic very low marks in the area of fund-raising.
Teledesic can coast on the waiver for a while, but eventually it will face what the FCC calls a project milestone, a deadline to show concrete progress in the project itself. The clock isn't likely to start ticking for several more months, but history shows that the stakes are high. In 1992, the FCC granted Norris Satellite Communications a Ka-band license and a financial waiver. In 1996, the FCC took back the license after Norris failed to meet its project milestones.
"I think, in general, the FCC has found waiving the financial qualification in satellite proceedings to be a bad idea," said Leslie Taylor, president of Leslie Taylor Associates and legal representative for Norris at the time of its licensing.
A major milestone will be finding a rocket and a launch pad to send its 288-plus constellation into orbit within a tight 12-month period - a launch rate of nearly a satellite a day. Launch pad space is scarce, with only six sites on the planet. And launch reliability varies. Motorola, a cagey veteran in the satellite arena, has been more conservative in its plans for Iridium. The company began launches in January and set September 1998 deadline to have all 66 stations in orbit - a rate of about one satellite every 10 days.
Another new obstacle for Teledesic: competing bandwidth from new technologies such as those setting up shop in the recently opened millimeter wave spectrum. Teledesic's neighbor in Bellevue, Washington, Advanced Radio and Telecom, is building a millimeterwave land-based radio network that will deliver bandwidth of 1.544 Mbps or more. One big advantage Advanced Radio has over Teledesic: It's building a network right now.
And Advanced Radio's network has a flexibility Teledesic lacks. "They can increase the size and bandwidth of the system as they get more demand," said Kelly Mullins, consultant with the Walter Group in Seattle. "With a system like Teledesic's, there's no building it half-way and offering services." Daggatt disagrees. While Teledesic must send up all 288 satellites before it can begin selling services, it can add to the bandwidth as needed by sending up more satellites, he said.
Still, Teledesic's history is one of overcoming daunting obstacles. And now that it's come this far, it's finding some unlikely supporters in its cheering section. Motorola, despite the competing Celestri network it's racing to set up, sees Teledesic's success as something that will rub off on others who follow. "They did lots of good spade work in breaking ground on the broadband issue and going with LEOs," said John Pientka, vice president and general manager of Motorola's advanced systems division. "If they get the launch capacity, that's good for everyone."
Such are the strange spoils of being there first.
Tomorrow: A look at how competing LEO systems are angling to give Teledesic a run for its money.
