Boeing Joins Gates, McCaw in Internet Space Venture


Lending key financial and technical support to a satellite venture backed by Microsoft Corp. Chairman Bill Gates and former cellular phone mogul Craig McCaw, Boeing Co. said Tuesday that it will invest up to $100 million in Teledesic Corp. and will spearhead plans to build a $9-billion satellite network for global Internet access.

The investment by Boeing, the prime contractor for the U.S. space station and the world’s leading aerospace firm, represents a significant coup for Kirkland, Wash.-based Teledesic. Teledesic has financial backing from Gates and McCaw, who built the largest U.S. wireless phone company before selling it to AT&T; Corp. in 1994. But the privately held company has been battling skeptics who question the ambitious plans to launch a satellite communications network that would bring high-speed wireless Internet access to even the Earth’s most remote villages within the next decade.

Critics maintain that there is insufficient launch capacity to put so many satellites into orbit in such a short time. And they add that even if the project could get off the ground, Teledesic would find it difficult to recoup its enormous investment since few people who aren’t already connected to the Internet are likely to be able to afford Teledesic’s high-tech wireless service.


But experts say Boeing’s resources may help Teledesic overcome the hurdles.

“In the past there has been a lot of skepticism,” said Marco Caceres, an analyst with the Teal Group Corp., a Fairfax, Va., consulting firm. “But now with Boeing, they have a whole lot more credibility . . . because Boeing is one of the world’s biggest players in the commercial [satellite] launch business.”

David Ryan, vice president of Boeing’s commercial space division that is handling the project, said Boeing and Teledesic have already agreed to scale down the number of satellites from 840 to 288 to stay within the $9-billion cost range.

Some officials close to the project concede privately that for Teledesic to be profitable, it may have to focus more on the multinational business market.

McCaw told the Associated Press that Teledesic selected Boeing, which will have a 10% stake in the satellite company, in part because of the company’s experience in space endeavors and in managing large, complex projects. He also said he wants to be able to tap Boeing’s experience in conducting global business and working with worldwide networks of suppliers and subcontractors.

Boeing recently acquired Rockwell International Corp.'s aerospace and defense business and has announced plans to merge with McDonnell Douglas.

The Federal Communications Commission last month awarded Teledesic the first license to launch the satellite system. But the project still needs approval from international regulators for the global green light.

But opposition appears to be mounting overseas to Teledesic’s bid to win a final international allocation of satellite airwaves that would enable the company to offer its services around the globe.

France’s Alcatel-Alsthom, which earlier this year agreed in principal to join forces with Loral Space & Communications Ltd. in a venture similar to Teledesic’s, recently took a public swipe at its rival in papers filed with the International Telecommunications Union. The ITU coordinates the worldwide allocation of satellite airwaves.

Alcatel told the ITU that without “clear-cut design constraints” an ITU decision giving operational preference to low-Earth orbiting satellite systems like Teledesic’s “can only provide the illusion of equitable access and . . . is likely to lead to a very inefficient use of the spectrum/orbit resources.”

Teledesic spokesman Roger Nyhus would not comment on the Alcatel statements.

But Jeffrey H. Olsen, a Washington communications lawyer who represents Alcatel’s SkyBridge satellite venture, said the filing was not meant to denigrate Teledesic.

It “neither implicitly or explicitly is suggesting that Teledesic can’t” go forward with its plans, he said.

Teledesic and Boeing will assemble a staff of 150 to 200 people to finalize the system design over the next six to nine months, Ryan said. The group will work out of Seattle-area offices, close to Gates, McCaw and Boeing.

Shares of Boeing closed at $96.25 Tuesday, up .975 cents on the New York Stock Exchange.

Times wire services contributed to this report.