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THE INTERACTIVE SUPER-HYPE-WAY WHY THE $9 BILLION BIRDS FROM MCCAW AND GATES MAY NOT TAKE FLIGHT

By Published on .

It's part "2001: A Space Odyssey" and part "Star Wars." But critics say Bill Gates and Craig McCaw's $9 billion scheme to launch 840 communications satellites may be "Lost in Space."

"People are extremely skeptical ... [because of the] huge hurdles [and] questions where the financing is going to come from," said Joseph S. Kraemer III, managing director of communications industries consulting for Electronic Data Systems' consulting practice. "That's sort of the conventional wisdom."

Ironically, the conventional wisdom even a year ago would have been to praise Messrs. Gates and McCaw for their vision.

But skepticism about information superhighway hype is growing as other high-profile-and high-cost-projects get delayed.

And critics are questioning the ability to fund, successfully launch and manage a system that's perhaps the most ambitious venture of its kind attempted so far.

Microsoft Chairman-CEO Bill Gates and McCaw Cellular Communications Chairman Craig McCaw last week unveiled plans for Teledesic Corp., a global satellite communications network that would deliver an array of services-voice, videoconferencing, interactive multimedia, data-through 840 satellites. The service is modeled somewhat on the Defense Department's Strategic Defense Initiative, or "Star Wars."

Teledesic does not intend to market services directly to users. Instead, it envisions an open network for others to deliver their own services.

The system would open up communications for new wireless devices but also would tie into existing wired phone systems.

Messrs. Gates and McCaw are set to launch their space odyssey in the year 2001. But many critics say the odds of the satellites ever getting off the ground aren't good, despite the past successes of the venture's star supporters.

Mr. Gates created the world's largest personal-computer software marketer.

Mr. McCaw assembled the largest group of cellular phone systems in the nation and last year agreed to sell McCaw to AT&T Co.

The two men have each invested "a couple of million dollars" and each taken a slightly more than 30% stake in Teledesic, the Kirkland, Wash., company formed to run the satellite venture, said a McCaw spokesman.

Mr. McCaw is chairman of the new company, and McCaw Cellular has taken a minority stake in Teledesic through an affiliate company.

While Microsoft is aggressively moving onto the information superhighway, developing software for use in such products as TV set-top boxes, the company has no role in Teledesic, a spokeswoman said.

Teledesic "really is Bill's personal investment," the spokeswoman said. "The financial investment [for Mr. Gates] is very modest ... You can fairly assume that [Mr.] McCaw and McCaw Cellular are providing a lot of the focus."

AT&T will get McCaw Cellular's stake in Teledesic when the cellular acquisition is completed later this year. But AT&T, which is backing a variety of promising interactive technologies, appears to be leaving the Teledesic project up to Mr. McCaw for now.

Though Messrs. Gates' and McCaw's successes are undeniable, Teledesic's success is far from a given. Technology leaders often gain great media attention and big backing from investors when they try second acts, only to flop. Most recently, former Apple Computer Chairman John Sculley struck out at Spectrum Information Technologies, a troubled wireless communications venture.

The satellite scheme immediately drew skepticism in scientific circles. There currently are some 350 active satellites, primarily stationary satellites about 20,000 miles out in space.

Teledesic's 840 satellites would orbit about 435 miles above Earth, eliminating the time lapse communicating with distant satellites.

While many other proposed interactive technologies have at their center money-making applications like movies on demand or home shopping, Teledesic claims more idealistic goals. The company envisions using its satellites to bring affordable communications services into rural and remote areas of the world, leading the Third World into the 21st century.

"Universal service has always been central to this country's telecommunications policy," Mr. McCaw said in a statement. "There is an opportunity now to broaden this vision to include all of the world's citizens."

It remains to be seen whether that vision is backed by a viable business plan or whether Teledesic will be tripped up by the enormous hurdles of working with governments and phone monopolies and still somehow turning a profit.

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