teledesic2Bill Joy used to say, “not all smart people work at Sun” (he was right). Max Levchin is making a killing in Web 2.0 by resuscitating Web 1.0 projects that were too ambitious for 1999 but — thanks primarily to Moore’s Law — are just right for 2009.  Sometimes all it takes is a change of scene or season for something that was a failure the last time to be a big success today. And that’s why I’m predicting the eventual return of Teledesic or something just like it — some new form of Internet in the sky.

This is the first of probably three columns about what will be in coming months the huge story of how the Obama Administration reinvents the Internet.  They are obliged by law to do so and are required, in fact, to submit a grand plan to Congress by February 16, 2010. This National Broadband Plan is intended to accomplish the very same goals as the Clinton-era National Information Infrastructure (remember Al Gore’s “information superhighway?”) only this time it might actually succeed, again thanks mainly to Moore’s Law.

I’ve written before about the last time we went through an exercise like this.  It wasn’t pretty, with the big telephone companies essentially stealing $200+ billion in tax credits in exchange for, well, nothing.  That’s why U.S. broadband, which used to be the best and cheapest in the world is only middle-of-the-pack today.  The National Broadband Plan is supposed to fix that, though at a cost some are predicting (hoping?) will be more than $100 billion.  This time the cable TV companies will be joining the telcos at that trough.

In the broadest of terms what the Obama Administration wants to do is to bring 100 megabit-per-second Internet service to every home and business in America.  They will task ISPs to provide such a service in exchange for being allowed to continue operating as ISPs.  In places where such services can be easily provided at reasonable cost with an acceptable level of profit, which is to say in urban and higher-density suburban areas, this will be no problem.  Ramp-up fiber-to-the-home, fiber-to-the-curb, and DOCSIS 3.0 cable modem services and we’re there.  The simple business expedient of putting local TV stations out of business and grabbing their advertising income will, alone, more than pay for the upgrade costs.

Where there’s a problem is providing this same level of Internet service (100 mbps) in all the more sparsely-populated parts of America.  It is from those areas the telcos and cable companies will come, hat in hand, to ask the government to cover the difference between what they can charge and what it actually costs to provide the service.

Serving these non-urban areas is what I see driving a return to satellite projects like the ill-fated Teledesic.

For those who don’t remember it or have forgotten, Teledesic was one of a number of 1990s plans to use low-earth orbiting satellites to provide wireless Internet service almost everywhere on Earth.  By being closer to the ground than geosynchronous communication satellites, the Teledesic network could support many more low-power users (analogous to having more cell towers) and support low-latency services like Voice over IP (VoIP) which won’t work on a geosynchronous satellite link. The original Teledesic plan called for 840 satellites, later reduced to 288 satellites that would be flying in somewhat higher orbits.  Craig McCaw, Paul Allen, and Bill Gates were all involved in the project, which eventually died when the Internet bubble popped and it couldn’t be financed.

I know I am putting this all too simply, smartypants, but for the purposes of this column that is enough detail.

Teledesic died because it was too ambitious, too costly, and the people behind it made some fundamental mistakes, some involving rockets and the true cost of sending stuff into space, which I know something about.  Remember my Moon shot?  Well it is continuing and I’ve learned quite a bit about space economics along the way.

For Teledesic one key requirement was getting 840 or 288 satellites into orbit for a good price.  Toward that end they standardized on a satellite design that could be launched by any space-faring nation which was supposed to put all those nations in competition, fighting for Teledesic’s business. To set an aggressive baseline price, Bill Gates personally flew to Russia to cut Teledesic’s launch deal himself.

The Russians saw Bill coming.

Gates was negotiating for use of former Soviet SS-18 intercontinental ballistic missiles to launch scads of Teledesic satellites at a time.  Bill’s negotiating position was a tough one (or so he thought) paying no more than $7 million per launch.

Let’s pause for a moment to understand something about those SS-18 missiles.  These were (and still are) the biggest ICBMs around, each capable of lofting 10 independently targetable H-bombs over the pole at the U.S..  SS-18s were launched from underground silos that were designed with a different philosophy than U.S. Minuteman silos: SS-18 silos are hardened to survive a U.S. nuclear attack and then make a second strike.  This second strike capability made the SS-18s the scariest mothers around.  Forget about mutually assured destruction (MAD), the SS-18s made possible mutually assured RE-destruction, killing any survivors of the first wave.  In the eyes of U.S. generals and diplomats, those SS-18s simply had to go.

And they did go, or were at least intended to, as a major condition in the Strategic Arms Reduction Talks (START and START-2).  In exchange for certain favors including chopping the wings off American B-52 bombers, the Russians agreed to destroy 100 SS-18s, taking 1000 warheads out of the game.  There were a number of ways to accomplish this, but the cheapest by far was to launch the SS-18s into space.  It’s easily verifiable, almost impossible to spoof, and might even accomplish some good, like providing the world with 100 mbps Internet service.

Back to that $7 million launch price negotiated by Bill Gates. For the Russians, launching SS-18s came with a negative price, since each launch eliminated the need to disassemble, destroy, and verify the destruction of a missile, the total cost of which could easily reach $1 million.  So launching satellites, while it incurred certain costs for modifying the missiles to replace H-bombs as cargo, began with a price of negative $1 million. The cost of the missile, itself, was zero.  And Bill Gates‘ $7 million would have been nearly all profit for the Russians.

The Russians could have launched the entire Teledesic network for free and still come out financially ahead.

Had Teledesic been able to cut the right deal with the Russians, their satellite constellations would have been launched almost for nothing and we might have satellite Internet service today.

Speaking of today, a decade later, technical and political realities have changed.  Where Teledesic was a $9 billion gamble that didn’t pay off, there is right now $7.2 billion sitting in the FCC’s Universal Service Fund — money the telcos and cable companies are going to try to claim to provide National Broadband service to indian reservations and logging camps.  To serve all of America’s 110 million housing units will cost a lot more than $7.2 billion, which is where those numbers approaching $100 billion came from.  There’s going to be a financial food fight at the FCC to pay for rural broadband service.

But not if a Teledesic-like satellite system were revived.  What would have cost $9 billion in 1996 would cost less today because digital technology always gets cheaper.  Where the 1996 money was coming mainly from private capital markets, $7.2 billion could come from the FCC this afternoon.  By embracing a bold satellite initiative using low-orbiting satellites with low latency the Obama Administration could sidestep dozens of local and regional boondoggles saving tens of billions, providing a solid service that would not only reach every remote part of the U.S., but the rest of the world, too.

Imagine the international political power that would come with having such a global network.  Friendly nations could get cheap Internet, unfriendly nations would find it difficult to keep their citizens off the net.  It could be a bully pulpit in space.

And I know a thing or two about pulpits.