Space invader.

Backed by Bill Gates and Craig McCaw, Teledesic's Russell Daggatt plans to fill the skies with communications satellites, linking remote outposts and bypassing the landlocked Information Superhighway. On the way to the bank, however, he must get by the FCC, GM's Hughes Aircraft subsidiary, terrestrial competitors, and a host of naysayers who insist that if Daggatt were meant to fly, he would have been born with wings.

It's rare an interview transcript contributes anything more to a story than a faithful rendering of question and answer. Hero's an exception, printed in boldfaced capitals on the first of a 94-page packet: Subject: Teledesic Inc. Interview With: Russell Daggatt. Notes: Daggatt occasionally speed-mumbles through technical jargon.

That's somewhat inaccurate. Daggatt does not mumble; perhaps the transcriber was handicapped by a bad tape. And jargon, of course, is a subjective term that depends on one's technology expertise. That Daggatt speeds, however, is incontrovertible: He accelerates as the session proceeds, chattering about phased-array antennas, thin-film solar collectors, and fast-packet communications, seemingly fueled by the 10 megawatts of power that will drive each of the 840 sofa-sized satellites he plans to launch into orbit by the year 2001.

There's a method to Daggatt's mania. From the second floor of a modest, four-story, professional building on Seattle's Lake Washington, he is plotting to change the world. Fate permitting, start-up Teledesic aims to dismantle the centralized, metropolitan infrastructure erected in the Industrial Revolution and reintegrate it with a multibillion-dollar satellite system that will serve remote areas, bypass the landlocked Information Superhighway, and forge a colossal Internet in the sky.

Enabling corporate and other business customers to exchange an array of voice and computer data is a key part of the decentralized Teledesic plan. But the master vision is much more seductive, Daggatt allows, and sometimes pushes him into a role as "an evangelist of sorts." Simply put, Daggatt hopes his birds will do what egalitarian-minded governments throughout history could not: redistribute wealth, empower workers, and eliminate the gap between the (information) haves and have-nots. In linking users off the beaten path, start-up Teledesic aims to plug in Tibetan monks, Rwandan bushmen, and Kurdish shepherds, turning them loose to surf the Net and shrink the world.

Like most grand plans, this one is riddied with uncertainty and controversy. By some accounts, Daggatt and Teledesic partners Bill Gates and Craig McCaw propose to shoot the moon. Teledesic is similar to the Star Wars, "brilliant pebbles" scheme developed by contractor Martin Marietta, which opened - and closed - to less than stellar reviews during the Reagan administration. What's more, Daggatt must run the FCC gauntlet, convincing the agency to fork over a swath of bandwidth that currently is the sole province of a larger, more powerful class of satellites, including those controlled by Los Angeles-based Hughes Aircraft, a division of General Motors.

The litany of potential difficulties mounts. Teledesic estimates the cost of launching its network by 2001 at $9 billion. That's a bargain for ubiquitous global access, Daggatt reckons. But Eastman Kodak CEO George Fisher pegs the Teledesic price tag closer to $40 billion. As CEO of Motorola, Fisher launched that company's $3.37 billion Iridium satellite project.

There's terrestrial competition aplenty, and legitimate business and scientific questions about the Teledesic system: Will its circuitry be scorched by radiation? Will its sensitive transmission frequencies be affected by foul weather? How will Teledesic launch 800-plus satellites in a two-year period when a competitor such as TRW has put up just 200 satellites over the last 35 years? Will there be much demand for advanced telecommunications services in the resource-poor backwaters Teledesic plans to serve?

Teledesic is "either a stupid idea or a clever way for Bill [Gates] to achieve his real goal - world domination," quips Howard Anderson, managing director of research firm The Yankee Group in a recent issue of Network World.

"They are hallucinating," says John Pike, director of space policy for The Federation of American Scientists in Washington, DC. "Teledesic either will disappear without a trace, or it is a license to print money. If they're serious about getting this going, someone had better pour the concrete for launching pads soon."

Though cynics abound among industry observers, Pike's profound skepticism is extreme. In fact, no one knows whether Teledesic will fly or fail; for now, it remains a figment of the imagination, a virtual product based on the best guesses of rocket scientists, telecommunications engineers, and microchip designers. Before placing your bet, however, review the horses. Teledesic's $20 million in seed capital is largely the pocket cash of Gates and McCaw - the former is a silent partner in the venture; the latter, in an office down the hall from Daggatt's, is its chairman. Given the recent track record of these technology moguls, it seems safe to say that their mommas didn't raise no fools.

"Most of the world will never get access by wireline to the advanced digital capability needed to send sophisticated information," Daggatt says, citing as potential customers hospitals who wish to transmit complex medical images, such as X-rays. "That is where we come in."

Teledesic reflects a shift in satellite technology, one that places it on a collision course with Hughes. Like its rival 1,100 miles to the south, Teledesic plans to serve as a conduit of fixed broadband service for voice, video teleconferencing, and computer data. Unlike Hughes, which plans by 1998 to place its nine-unit, $3.2 billion Spaceway system in a geostationary orbit 22,500 miles above the Earth, Teledesic's satellites will sweep the globe, traveling a so-called low-Earth orbit, a scant 435 miles up.

Being closer to Earth has critical advantages, Daggatt argues. The split-second extra it takes GEO signals to make a 45,000-mile round-trip might make a GEO system incompatible with the error-free, rapid-fire protocols of terrestrial, fiber-optic lines. (John Pike calls the lag time issue hogwash.) Communication with GEOs requires either exponential loads of additional power or larger, more expensive satellite dishes. In theory, outnumbering the much-larger Hughes satellites by nearly 100-to-1 means more capacity for Teledesic; cost-effective expandability; and lower-cost, mass-production manufacturing. All this, Daggatt says, equals service at a cost to customers one-third that of Spaceway. Teledesic executives speak boldly about 20 million subscribers, 2 million simultaneous connections, and $6.5 billion in revenues by 2006.

Teledesic will share inner space with forerunners of the LEO genre, such as Motorola's Iridium and Loral-Qualcomm's Globalstar. Both these projects will beat it into space by several years. But these other LEOs are premium-priced, narrow-band systems that serve only mobile phone, fax, e-mail, and paging. Teledesic proposes a broadband service relaying data-dense transmissions to fixed sites at rates comparable to conventional long-distance calling. Bandwidth is a measure of a communications circuit's carrying capacity.

Ultimately, Teledesic plans to operate as a wholesaler, selling capacity to telecommunications franchises world-wide, enabling these companies, in turn, to expand or upgrade their services. Teledesic will partner with state telecoms and other large global players, Daggatt says, nodding in assent to a mention of Britain's Cable & Wireless. In addition to serving exotic locations, Teledesic will enable corporate network managers to integrate their far-flung systems in a single, digital network, an option not generally available because of the uneven quality of global infrastructure.

FCC approval will take time. The agency has to line up the backing of representatives from the 126-nation International Telecommunications Union before it can act. Aside from granting Teledesic permission to operate in the frequencies between 17 gigahertz and 30 gigahertz - under a dated international law, GEOs enjoy squatters' rights to the swath - Daggatt suggests the FCC consider creating distinct regulations for LEOs and GEOs. Even for rule-happy Reed Hundt & Co., that may be far too complicated.

Like many technology firebrands, Daggatt thumps his chest and characterizes the competition as a dinosaur. In a broader sense, the competition between Teledesic and Hughes shapes up as a knockdown, David-and-Goliath-type battle with a modern twist - a reprise of the recent battles of Earth-bound telecommunications titans such as TCI's John Malone and Bell Atlantic's Raymond Smith.

Spaceway, the entrenched favorite, represents the macrocosm, a string of giant mainframes in the sky, a new wrinkle of a mature technology funded largely by GM's deep pockets. Teledesic, the scrappy underdog funded by global venture capital, embodies the microcosm. The system's switched architecture facilitates two-way communications with the ground and distributes tasks among individual satellites. When complete, Teledesic stands to become the world's largest parallel processor in a technology universe that is spinning control and functionality outward toward end users.

In his 1994 book, "Microcosm," technology guru and former CE contributor George Glider codifies this centrifugal force. Inexorable Darwinism with a 21st century twist, Gilder's "Law of the Microcosm" posits that technology gets better, cheaper, and faster as it gets smaller, and that big fish swimming upstream - Spaceway, for example - cede competitive advantage and may face extinction.

Hughes President Steven Doffman, who declined to be interviewed for this piece, reportedly has said the Spaceway plan is superior because it is less costly and does not require huge breakthroughs in satellite and launch technology. Daggatt says Teledesic last year refused an offer from Hughes to pool the resources of the two companies in a single project.

Daggatt has complete command of the business and technology issues surrounding Teledesic. But it's clear he takes a special interest in the system's populist tendencies. Man always has grouped together in cities and other population clusters because of natural resources and technology, Daggatt postulates. At the dawn of agriculture, that meant closeness to seacoasts and riverbeds. Later, in the Industrial Revolution, inland cities were organized around railroad lines and the factories tied to them.

To the extent that the information revolution is tied to wireline technologies, Daggatt argues, it's merely an extension of the industrial model. Particularly in over-populated or developing nations, it does not make sense - economically or environmentally - to continue forcing people to migrate from the countryside, seeking economic opportunity in "increasingly congested urban nightmares." Gaining the full potential of the information age, Daggatt concludes, involves "technologies that allow people to choose where they live and work based on family, community, and quality of life not on access to the infrastructure."

In the five years prior to signing on at Teledesic, Daggatt, 39, worked as a river rafting guide. "Craig McCaw is probably the only man alive who thinks adventure travel is satisfactory preparation for a job as president of a satellite company," Daggatt cracks. He chuckles as he relates the story of how he was recruited by McCaw, then CEO of McCaw Cellular. McCaw began the search for a chief executive in 1993, three years after Teledesic was formed on paper. "When he went looking for someone to head the company, the recruiters kept bringing him white-haired guys from the aerospace industry," Daggatt says. "Craig said, 'Get these guys out of here and bring me a young terrorist."'

Not that Daggatt looks the part. A lawyer by training, he more closely resembles a high-school chemistry teacher on holiday in Martha's Vineyard. Dressed during a recent interview in an ecru, long-sleeved, flannel sport shirt; white cotton slacks; and a pair of Rockport walkers, the Harvard graduate is the epitome of prep.

Culturally, Teledesic is making a transition from the cloak-and-dagger climate that marks many start-ups to the transparency that befits later-stage companies with multiple stakeholders. Daggatt, too, seems suspended between these two poles. Reclusive by nature, he describes the machinations of dodging a reporter from the Seattle Times who sought last year to profile Teledesic. Eventually, Daggatt consented to speak about the company and its 50 employees, but doggedly refused to provide any information about himself.

Clearly, Daggatt also is coming up to speed on communications with the national business press. He complains that many publications cast Teledesic as offering service to "the Australian outback." But it's Daggatt himself who underscores broader social themes, relentlessly touting the system as a messianic force and as alms to the poor. Some observers question whether the stance is a slick marketing pitch to win support in the international community for a complex project.

It's unclear how closely Daggatt is tethered to McCaw, but a recent episode offers one indication. A day before a scheduled interview with CE, Daggatt got cold feet and pulled out. In a replay of the Seattle Times incident, Daggatt emphasized that Teledesic is a team, and that he was uncomfortable with the proposed profile. Pressed, he pointed out cryptically that "the company's two founders have two very different personalities: Bill Gates is used to being in the spotlight, while Craig McCaw has always been more reticent." A few hours later, the cancellation was rescinded. One reason: Daggatt sought McCaw's approval, and "Craig said, 'What the hell, why not go ahead and do it?"'

An outdoorsman who favors mountain climbing and long-distance running, Daggatt scarcely has time these days for serious training. A 90-hour, seven-day work week, crisscrossing the globe, drumming up support for the new venture, seems to impinge on his leisure time.

CE Managing Editor Joseph L. McCarthy caught up with Daggatt in his Kirkland, WA, office, down the road from Boeing's giant aircraft facility and a short drive from the Microsoft compound in Redmond.

KILLER APPLICATIONS

Do people sometimes confuse Teledesic's technology with that of Motorola's Iridium project?.

Yes, that's one misimpression. Another is that everyone assumes the killer application of broadband technology is video on demand. That is a flawed view, because I don't know how many more dollars per month you can squeeze out of a consumer household for video services.

We think the killer applications are commercial transactions over an Internet kind of model and network connectivity. Imagine the Internet being more interactive, more real-time. That's the way the world is going, and our system is designed to be compatible with that model.

DIALING FOR DOLLARS 

How much of the $9 billion estimate for launching the Teledesic network do Bill Gates and Craig McCaw plan to pick up?

I don't know for sure. They certainly will provide only a small fraction of that total. Their holdings will be diluted to the point of insignificance. We need a broad, global ownership structure, with the company essentially owned by the service provider partners.

Have you been oat stumping for investment capital?

So far, we have not been focusing our efforts on fund-raising, though it eventually will become a big issue. At the moment, we do not feel a desperate need to establish our credibility. We're still in the process of identifying our ideal partners in the key countries around the world.

Will some of your potential partners be state-owned telecoms?

To a certain extent. In many countries, you have to deal with the state-owned telecommunications network. But there is a strong trend toward privatization and deregulation. And where that is taking place, the PTY is not always going to be the best partner, because of its cost structure and unwillingness to buy into new technology. As the pace of technological change continuously accelerates, you must cannibalize your own markets and technology, or somebody else will.

To start, you'd better design your network to be compatible with the fiber networks to ensure that the applications developed for those networks are going to run seamlessly on your system. You have to think about designing a network that will operate throughout the 21st century.

CHANGING CHANNELS

How will your system avoid piracy?

Piracy isn't really an issue for us. Our system is a two-way switched architecture, like the phone in your office. A user is assigned a channel, and his or her terminal is authorized in the system. So both the terminals and users have their own identification.

We are designing the system so that the satellite can identify an individual user. You can plug your chip or identification card into a Teledesic terminal anywhere. The satellite communicates with the individual user, who is billed accordingly, and it also communicates with that specific terminal at that location. Global positioning system satellites can pinpoint that terminal's location. So, if a country doesn't allow certain satellite activity, your terminal could be shut down. And if you didn't pay your bills, you would lose your authorization, although someone else could still use the terminal.

TELE-EVANGELISTS

How would you characterize the corporate culture at Teledesic?

We try to keep things as open as possible. With a start-up, you don't want hierarchy, tons of layers, or anything that inhibits communication. This mentality is a reflection ot the culture at McCaw Cellular: Craig McCaw always said, "When we find bureaucrats, we shoot them on sight."

Many of our employees travel all the time, so continuous contact - generally by voice mail - is vital. Much of my management is done in taxis on my cellular phone. Even outside members of this effort, such as consultants or subcontractors, with whom we interact daily, have voice mail boxes in our system so they can be contacted and copied on messages.

What qualities do you look for in your employees?

I prefer generalists who are articulate, communicative, intelligent, adaptable, and self-directed. They don't necessarily have to come from the satellite industry or have a highly technical background, but each must be an evangelist of sons who can drum up interest in Teledesic technology among the supplier community and potential service providers.

MASTER OF THE MOMENT

You went from an adventure-travel business to a high-tech start-up. What made you take the plunge?

I wanted a bigger challenge. The convergence of computing and telecommunications is the most significant thing happening on this planet, and I wanted to be part of something with historic impact.

I came into this business with no claims to technical expertise and few preconceived notions of how to run a high-tech start-up. I arrived with a Zen mind - a clean slate - which allowed me to question everything. I jumped into the business, and for a time, it consumed my every waking hour. It is still pretty intense. There's always more to learn. But at least I didn't have to unlearn a lot.