Friday, October 04, 2002

Teledesic Enters Suspended Animation Teledesic Suspends Work Under Satellite Contract (Teledesic / Press Release) BELLEVUE, Washington September 30, 2002 Teledesic LLC, a satellite communications services company, today announced that it has suspended work under its satellite construction contract with Italian satellite manufacturer Alenia Spazio SpA and will significantly reduce its staff as it evaluates possible alternative approaches to its 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. We also believe that providing ubiquitous, quality broadband service to the world, including those three billion people who have never had service, will be a viable business and remains a worthy mission," said Teledesic Co-CEO William Owens. "Teledesic's global license for 1 GHz of nongeostationary satellite spectrum with international ITU priority is widely viewed as a significant regulatory achievement that is not likely to be duplicated." Early this year, Teledesic engaged Alenia to build the first two satellites of its planned 30-satellite constellation of mid-earth orbiting satellites designed to provide broadband communications to any part of the globe. However, after continually reviewing the foreseeable financial markets and the commercial prospects for satellite point-to-point communications, the company does not believe that it is prudent, purely on speculation, to continue the substantial capital expenditures required to construct and launch the satellites consistent with the timing required to meet FCC and ITU regulatory milestones. Over the past ten years, Teledesic has spent hundreds of millions of dollars on design and development of global broadband satellite system concepts. "Teledesic has dedicated and talented employees passionate about the Teledesic vision, leading industrial partners, and some of the most astute private investors from around the world," said Teledesic Chairman and Co- CEO Craig McCaw. "We have met our regulatory milestones to date and remain financially solvent. Our decision to suspend our activities results from an unprecedented confluence of events in the telecommunications industry and financial markets. We do not presently see elements in place that would result in returns to our shareholders that are commensurate with the risk. We continue to believe that the Teledesic service would ultimately provide unique and measurable benefits to the world, and we are looking at scenarios to preserve the ability for that service to be realized." Commentary I gained considerable insight into McCaw's business methods from an excellent book on the history of the wireless telephony industry - Wireless Nation. It details McCaw's rise to power and the methods he employed to get there. McCaw leveraged everything he possibly could to have liquid capital available acquire spectrum licenses and build his systems. His methods included getting the equipment vendors to finance McCaw Cellular's equipment purchases, because if one vendor didn't offer such financing, McCaw threatened to buy the needed equipment from another vendor. In Teledesic, McCaw tried do exert the same kind of leverage he used in the wireless telephony industry to system integrators, satellite builders, and launch providers. Such attempts backfired badly and Teledesic careened from one system integrator / satellite builder / launch provider to another. One of the first he tried to do this with was Boeing, which backfired particularly badly. Boeing could have built the Teledesic system with the system performance, agressive schedule, or cost that Teledesic wanted - pick any two. Teledesic tried to force Boeing to meet all three requirements, and Boeing knew that it couldn't realistically be done. Boeing knew exactly what it cost to design and build such specialized satellites, launch them, and provide system integration and operations services. It had done all of this - recall that Boeing was then a large Department of Defense contractor; bigger now after the acquisitions of Rockwell Aerospace (GPS satellites, Space Shuttle), McDonnell Douglas (Delta rockets), and Hughes Electronics' satellite group. Teledesic then went to McCaw's "old friends" at Motorola, who pledged to build the Teledesic satellites, but that deal soured within a few years. Depending on how you count, at this juncture Teledesic is on its third, fourth, or fifth set of "strategic partners." In the meantime, McCaw was allocating most of his time and resources to his (then) new telecommunications company, Nextlink Communications (now XO Communications). I think McCaw's ultimate, real goal for Teledesic was revealed in a little-noticed request filed with the FCC for permission for Teledesic to begin providing terrestrial wireless services using the spectrum that had been allocated for Low Earth Orbit (LEO) broadband satellite systems such as Teledesic (at one point, there were many such proposed LEO broadband satellite systems.) In that proposal, Teledesic's primary argument was that 1) the spectrum had already been allocated, and currently wasn't in use because no LEO broadband satellite systems were yet in operation, and 2) interference wasn't an issue because Teledesic was the leading contender for the use of that spectrum and likely the only "victim" of interference were it to occur. Disclaimer - I had some peripheral involvement with the Teledesic system. I drank the magic Kool-Aid... I really wanted to believe that it would be built, and that it would materially benefit mankind as a whole. I think the Teledesic system, as proposed by Boeing, could have actually been built if McCaw had accepted Boeing's proposal. My minor point of agreement with the Press Release is that a system much like Teledesic will be increasingly needed in the future, and that need will grow more acute as the years go by and global society requires Broadband Everywhere (and discovers how ruinously expensive it is to connect some places with terrestrial wireless or fiber. A small example is that it's planned to run fiber across the Antarctic ice pack to the South Pole science stations - to do their science, they really need Broadband Internet Access.) A system much like Teledesic will be built... it's just a matter of when, and whose name will be on it. Followup 10/13/2002 I'm not surprised... but there's considerably more to the story of Teledesic's shutdown than the telecom downturn. My thanks to Ed Mitchell of HamRadio Online (linked at left) for the pointer to this story. Comments are always welcome! 5:01:02 PM

Hints Emerge About Spectrum Policy Changes FCC Chair Says New Wireless Policy Imminent From Reuters - Full article October 02, 2002 02:29 PM ET NEW YORK, Oct 2 (Reuters) - The The chairman of the Federal Communications Commission said on Wednesday the agency expects to announce later this month major changes in wireless spectrum policies and is nearing other decisions that will shape the telecommunications and media industries. Within a few months, the FCC expects to make a decision on regulations that govern how local telephone companies provide network access to their competitors -- an arcane issue that has become a lightning rod of controversy as local and long-distance telephone companies battle for customers. "We have equally ambitious initiatives in the area of spectrum policies ... and major initiatives in media ownership that we believe will have significant and positive impact on the market and on consumers," FCC Chairman Michael Powell said at a Goldman Sachs investor conference in New York. <snip> Commentary In the last last month, I've been hearing from a number of sources that the FCC intends to extend the idea of license-exempt operation of "smart" devices. This isn't much of a surprise to those who studied the formal comments and the hearings of the FCC's Spectrum Policy Task Force. The comments, mightily distilled, fell into two points of view. One was "Don't change anything! (We have our spectrum and we don't want to share it!)". The other was "The FCC should craft rules that will empower a new generation of radios that can operate with embedded rules to make efficient use of available spectrum without requiring a spectrum usage license." The former is simply more of the same with not hope for effective, efficient use of spectrum, and the latter offers considerable hope for effective, efficient use of spectrum. My detailed analysis of this development will appear in the next issue of Focus. Comments are always welcome! 11:14:56 AM

Good Coverage Of Open Spectrum In Wall Street Journal Some Visionaries See a Day When Spectrum Isn't Scarce By Lee Gomes Wall Street Journal There is a big new idea out there, one that may forever change what we think when we look up at the sky. The idea involves not stars but spectrum -- the radio spectrum, which cellphones, radar, TV stations, garage door openers and other gadgets use to transmit signals. Our current thinking about spectrum was shaped by technology from the dawn of the radio age. Transmitters back then were big, dumb louts that had to be confined to narrow parts of the spectrum lest they interfere with each other when they broadcast. And so we were forced to treat the spectrum as something limited, like real estate. We assigned selected parcels of it -- say, cellphone frequencies -- to specific users, in recent years often to the highest bidder. Strict antitrespassing laws were set for everyone else. But there is a movement afoot called Open Spectrum. It argues that modern technology allows us to build "smart" transmitters that don't interfere with each other. Such transmitters could listen to the airwaves and then change the way they transmit based on what they hear. If one part of the spectrum is busy, for example, they could use another. With no interference problem, there would be no need to divide up the spectrum. And with no divided spectrum, the bandwidth-scarcity problem vanishes. That's because the total usable spectrum is so vast it could accommodate everything anyone would want to do. [End Fair Use Excerpt] Commentary Not much :-) I've seen considerable mention of this article in technology press. Gomes did a good job of outlining the issues, illustrating the key fact that a major shift has occurred in Spectrum Management - that we now have the ability to embed the "Spectrum Usage" rules into "intelligent radios", as opposed to managing spectrum unilaterally. Efficient spectrum allocation and usage is a meter-by-meter, hertz-by-hertz, millisecond-by-millisecond process... and we now have Radio Frequency (RF) technology equal to that task. We have had it for years, actually... it just took that long to get enough attention. Comments are always welcome! 9:25:23 AM

Subsidy For Broadband Wireless? Senate hears plea for broadband subsidy From CBS MarketWatch, ferreted out by news.google.com, Full article. By Kristin English, Medill News Service Last Update: 6:58 PM ET Oct. 1, 2002 WASHINGTON (CBS.MW) -- It will take a hefty government subsidy and an industry shakeout to bring about widespread use of fast, wireless Internet connections, experts told a Senate committee Tuesday. "This is a time when the government can play a critical role," said Reed Hundt, former chairman of the Federal Communications Commission and one of several witnesses before the Senate Commerce Committee. Wide implementation of wireless broadband technology at a reasonable price could help the industry out of its slump, panelists said, after 500,000 layoffs in recent years and the loss of $2 trillion in market value. Hundt said a vast broadband network linking all American households and businesses needs to be in place for the industry to remain competitive with overseas rivals. He said that less than 15 percent of American households and small businesses subscribe to broadband service, compared with more than 40 percent of Korean households. Broadband wireless Craig Mundie, chief technical officer at Microsoft (MSFT: news,  chart, profile), told the senators that the government should "foster a third mode of broadband communications into the home" in addition to cable and telephone lines by making more over-the-air spectrum available for wireless devices. Stanford University law Prof. Lawrence Lessig, a well-known writer on technology issues, supported Mundie's ideas and compared his vision for the future of broadband to the current standard for the electrical network, in which a user can plug any brand of television into a socket and have it work. But Peter Huber, a fellow at the conservative Manhattan Institute, disagreed with the need for government support. "The broadband policies we have put in place have remained an unmitigated disaster," Huber said. "Time after time, the high-tech industry has learned that the most important thing to get things moving is growth. What we got instead with the policies we put in place is a bubble of foolish investment." Competition and government support Michael Price, a telecom venture-capital investor, said there are too many companies in the industry right now. "Six, seven or eight competitors are too many for a maturing, capital-intensive industry," he said. "The European market provides evidence that the existence of three or four competitors still maintains a high degree of competition." Funding for a mass deployment of broadband wireless technology will require government assistance, the panelists said, because the industry is now too broke to pay for it. Hundt admitted that a broadband network would be expensive to implement, but compared its development to the development of the national road system in the 1920s. "Did America want to wait to build roads until after every garage had a car? Not at all," Hundt said. "Even while Ford's cars were pouring out of factories in the 1920s, Secretary of Commerce Herbert Hoover used government leadership to build a network of roads linking every town and city in the country." "There are two choices that we have to make," Hundt said. "Do we adopt a policy of monopoly or do we stick with a policy of competition? The right policy is competition, but the essential extra to a competitive policy is to have the government look at broadband and decide to invest." Price outlined a plan in which the government would pay a $300-per-subscriber subsidy to a service provider that supplies high-speed service for less than $30 per month for three years. "We need a technology New Deal," Price said. Huber, though, disagreed with such a subsidy. "This Congress cannot pay their way to that end. That will have to come from the private sector," he said. Senators agreed that some action was needed. "The telecom industry is in a tailspin," Sen. John Breaux, D-La., said. "We can't sit back and watch one of the most important industries go down the tank" Kristin English is a reporter for the Medill News Service in Washington.   Commentary As is the case with now numbing regularity, key information about the Broadband Wireless Internet Access (BWIA) industry is overlooked. In this particular article, it's that Broadband Wireless is, in most cases, more cost-effective than wireline Broadband, and proof of that is that there's a thriving industry of Wireless Internet Service Providers (WISP) who are out there actually deploying(!) Broadband Wireless Internet Access systems. The vast majority are small and funded by bootsrapping and small investments, but there are large Wireless ISPs operating in major cities. Ed Mitchell reports in the 9/30/2002 entry of his Ham Radio Online / Common Sense Technology Weblog: DSL is Dead. If you've got DSL availability, good for you. If you do not, then forget seeing DSL anytime soon. With [last] Thursday's announcement by SBC that it would slash its infrastructure capital budget for 2003 by 25 to 38%, comes confirmation that DSL deployments are nearly dead. Verizon and BellSouth are expected to make similar announcements soon. Qwest has reduced its capital spending by about 60% (see also). A year ago, some estimated that up to 60% of Qwest phone lines could not provide DSL service, and without infrastructure improvements, DSL is dead. Ed didn't mention that AT&T Broadband earlier announced massive layoffs, and that expansion of cable modem service areas (which require substantial upgrades) has been halted pending its announced, but not approved by regulators, merger with Comcast. Comcast will certainly have halted its service area expansion... it will need all of its available capital to fund the purchase of AT&T Broadband if it should come to pass. Under the best of circumstances (for AT&T Broadband and Comcast), approval of the merger in 2003, it will be at least two years before sufficient consolidation, housecleaning, and reorganization will be sufficiently complete to contemplate resumption of buildouts and upgrades. Adding fuel to the "wireline Broadband industry stalled" scenario... Consumer Satellite Broadband Internet Access service Starband is not only in Chapter 11 Bankruptcy, but customers are deserting it in droves. I recently visited one formerly enthusiastic customer who simply gave up on the numerous problems - high latency, frequent outages, and "general weirdness" with the Windows PC and the software that was required to be part of every Starband system. I've heard somewhat similar stories about DirecPC, the other consumer Satellite Broadband Internet Access service. Lest you think that satellite systems are problematic, it appears that the problems stem more from those services target customers of consumers (at consumer price points) and the tendency to "pile 'em on" to the point of overloading transponders. One company that, from everything I've observed, does it right and I've not heard any complaints about is Tachyon (linked at left). Then there's this development: From the 9/30/2002 issue of Congress Daily: TELECOMMUNICATIONS Grinding Telco Lobbying War Escalates With the end of the session drawing near, some regional Bell operating companies are feverishly lobbying senators to influence the FCC to resolve "quickly and favorably" a number of proceedings governing high-speed Internet services, according to industry and congressional sources. The companies have been shuttling various chief executives around the Senate in recent weeks to appeal to lawmakers of both parties to intercede on their behalf with FCC Chairman Michael Powell, those sources said. "They are blanketing the Hill," one lobbyist for a competitive carrier observed of the rival Bells' lobbying campaign. What they're lobbying so heavily for is to be relieved of the "burden" of providing Competitive Local Exchange Carriers (CLECs) access to their infrastructure (phone lines, space in switching centers, interconnection) at FCC-mandated rates. They want the freedom to totally deny access to their infrastructure by competitors, or price such access at rates they claim will reflect the cost of their investment. It's highly likely they will eventually win their battle. They have a good track record, hiring the best law and lobbying firms to lobby and litigate their opponents in industry and government into submission - they have incredibly deep pockets and can fund the battle for however long it takes to achieve their ends. When that happens, the majority of the independent DSL-based Internet Service Provider industry goes away. Companies like SBC, Verizon, BellSouth, and Qwest don't want to deal with small, independent ISPs, preferring instead to deal with large ISPs like Earthlink ("Big" understands how to do business with another "Big".) So... not much left but Broadband Wireless Internet Access, and a "Pay As You Go" incremental build approach. That approach isn't fast, but it results in solid service for customers and a sustainable business model. Brief BWIA Weblog Note Apologies to readers of the BWIA Weblog for not adding any updates. There's a huge amount going on in the BWIA industry, but the last few weeks have been a busy time of travel, recovery from travel, minor health issues, and some scheduling problems, now all largely resolved. With today's items, I plan to resume regular updates, planned for each Monday, Wednesday, and Friday. Comments are always welcome! 6:50:31 AM

© Copyright 2002 Steve Stroh.