Ex-Internet mogul shakes up stodgy space investment club

Humphrey

April 5, 2000
Web posted at: 6:31 p.m. EDT (2231 GMT)

In this story: Iridium a $5 billion bust 'Saddest slide show ever' RELATED STORIES, SITES

By Richard Stenger
CNN Interactive staff writer

COLORADO SPRINGS, Colorado (CNN) -- A self-anointed space industry outsider, Douglas Humphrey lived up to his role this week, berating those on the inside for, among other things, "one of the most colossal disasters in the history of the world."

The CEO of Cidera (formerly SkyCache) offered a harsh prescription for the ailing space industry, increasingly sapped of financial strength because of burgeoning investments in the Internet. But he urged satellite companies to embrace the World Wide Web rather than fight it.

Participating in a panel discussion on the theme "Wall Street Rates the Best and Worst in Space" at the National Space Symposium on Tuesday, Humphrey said space industry representatives can learn much from the speed by which Internet companies plan and complete new ventures.

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Businesses paying for satellites face serious hardships because the financing process takes as long as a decade, according to Humphrey.

And once they place the satellites in orbit, satellite startups may need years to recoup their investments.

"What happens if in the meantime, the satellite becomes obsolete because of changes in technology or the market?" he asked.

A large man sporting rumpled clothes and a scruffy beard, Humphrey aimed much of his criticism at the bankrupt Iridium venture, a satellite network failure that cost $5 billion. The project had a 10-year deadline to succeed, an eternity in Web time.

"Iridium would not have happened in the Internet world," said Humphrey. "It was essentially a jobs program for aerospace engineers."

"It seriously damaged the public's perception of satellite companies," he said. He called the failure a "colossal" disaster. "The magnitude of the Iridium disaster has not yet been recognized."

Humphrey, who in 1997 sold his ISP startup DIGEX Inc. for $150 million, created something of a stir when he addressed hundreds of space engineers and financiers at the Colorado conference, most of them unaccustomed to such candid, public chastisement.

Humphrey's current enterprise, Cidera, uses satellite communications to speed up Internet connections.

"Meaning no offense, but that was the saddest slide show I have ever seen," Humphrey said to a fellow panelist who made the mistake of concluding his remarks with a visual aid that determined: One, investors like to make money. And two, they dislike losing it.

Humphrey predicted that the largest share of investment dollars would go to Internet-related companies over the next 10 years. Several fellow panelists share that opinion, adding that the funding shift would likely hurt space ventures seeking cash.

One of the most promising segments of the satellite market, however, involves orbiters that will accommodate wireless Internet traffic in the near future, the panelists agreed.

Hoyt Davidson, an investment banker with Donaldson, Lufkin & Jenrette, said that Internet-servicing satellites will "attract billions of dollars."

A major way satellite companies can gain investor confidence is to produce reliable, low-cost launch vehicles, "something an order of magnitude cheaper" than those currently in use, Humphrey said.

"The current firms have no incentive to do revolutionary change," he added. "If they dominate the market, why change?"

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16th NATIONAL SPACE SYMPOSIUM
U.S. Space Foundation

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