News

Satellite-Data Cos. Eye Rebound

1/12/2003 3:52 PM Eastern

Cable operators, take comfort: While 2002 didn't do you any favors, it was
downright unmerciful to your broadband-via-satellite Internet competitors.

Bankruptcy, marketing freezes and financing delays battered such companies as
StarBand Communications Inc., Hughes Network Systems' DirecWay and start-up
WildBlue Communications Inc.

But while some industry observers placed heavy odds against all of these
services surviving over the long term, at least two of the three players said
their prospects are now looking up.

After enduring a painful divorce from marketing partner and investor EchoStar
Communications Corp., StarBand was forced to file for Chapter 11 bankruptcy in
June 2002, and it went through three rounds of layoffs.

The latest was in September, when it had to let 36 employees go, including
president David Trachtenberg.

With a new service and a lower-cost residential offering in the works, the
McLean, Va.-based provider is hoping to emerge from bankruptcy in mid-2003 with
breakeven operation, according to chairman and CEO Zur Feldman.

That means finding a way to increase its subscriber base, which has held a
flat line through 2002 at about 40,000 customers. To jump-start subscribership,
StarBand used last week's International Consumer Electronics Show in Las Vegas
to announce the development of a new product, '480 Pro.'

With a built-in four-port router, a static Internet-protocol address and
three to four times the upload speeds of current StarBand residential offerings,
480 Pro is aimed primarily at small businesses and teleworkers, although it
could find a home with telecommuters or residential customers who want easier
home-networking setups.

Things don't look as promising for the DirecTV Inc.-affiliated DirecWay
two-way satellite service. In December, the direct-broadcast satellite
provider's parent company, Hughes Electronics Corp., said it was placing the
satellite broadband Internet service in maintenance mode.

While DirecWay will add new customers to its 160,000-customer base, the
company will not aggressively market the service while it ponders other options
for broadband.

Then there is the sector's newest entrant, WildBlue. That company made a
surprise market re-entry in December, when it announced $156 million in funding
from Intelsat, Liberty Satellite and Technology Inc. and the National Rural
Telecommunications Cooperative.

That cash should put WildBlue back on track for a 2004 service launch,
according to vice president of business development and marketing Brad
Greenwald.

WildBlue is aiming for a service that's equivalent to cable-modem platforms,
offering somewhere in the range of 1 megabit per second downstream and 256
kilobits per second upstream for $45 to $50 per month, with equipment selling in
the "several-hundred-dollar range," Greenwald said.

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