DBS Turns Eye Towards Two-Way Data Services

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In an effort to keep satellite technology competitive with bundled cable services, direct-broadcast satellite providers this year are rolling out new high-speed data services that no longer require a telephone return path.

Until recently, the two-way satellite broadband technology was considered too expensive for consumer use, and was deployed mainly to commercial accounts, such as retailers and gas stations. Now StarBand Communications and Hughes Network Systems are building two-way satellite terminals that sell for several hundred dollars each and are relatively easy to install, although they require professional installation.

EchoStar Communications Corp. is helping to promote the new StarBand service, which has been available to consumers through Dish Network dealers since last November. Dish retailers will package the DBS television service with the broadband service, offering a single-dish solution and a $10 monthly discount on a bundled service package, StarBand director of marketing and advertising Howard Lossing said.

"We have been very pleased with the response," Lossing said, adding that there has been pent-up demand among millions of households that don't otherwise have access to a two-way, broadband pipe.

StarBand hardware also is available through RadioShack stores, which promotes MSN high-speed Internet access from Microsoft Corp. Sales through RadioShack are somewhat hindered by the retailer's decision to require the purchase of a new personal computer with the two-way satellite system, Gilat Satellite Networks Ltd. chairman Yoel Gat said at a recent Merrill Lynch satellite conference in New York.

An earlier broadband satellite product from HNS, DirecPC, has had only limited success in the consumer market, in part because of its need for a dial-up connection and, until recently, lack of significant marketing.

Later this year, DBS giant DirecTV Inc. plans to bundle a two-way service called "DirecTV Broadband Powered by DirecPC" along with its multichannel video service, offering a bundle similar to ones that package an MSO's digital cable with their own high-speed Internet services.

DirecTV sister-company HNS runs the DirecPC service. Other companies, including America Online, will market their own "Powered by DirecPC" services.

HALF-MILLION THIS YEAR

"We want to get as much distribution as possible, but still have a differentiated product," HNS vice president of DirecPC services Dave Zatloukal said.

Zatloukal projected that 500,000 to 600,000 satellite broadband products could be sold overall in North America in 2001.

DirecTV reseller Pegasus Communications Corp. plans to bring out its "Pegasus Express Powered by DirecPC" service within the next several weeks, perhaps as early as the end of this month, Pegasus senior vice president of John DiDio said.

"We're completing beta testing as we speak," DiDio said last week, adding that Pegasus and equipment manufacturer HNS were starting to fill its distribution pipeline with equipment.

In addition to the satellite television dealers it relies on within its National Rural Telecommunications Cooperative territories, Pegasus is increasing its distribution base. Last month it announced it added 12,000 dealers and installers to its network through an agreement with DSI Distributing, which specializes in satellite equipment.

Partnerships between broadband and DBS television providers are important competitive tools, Zatloukal said.

"Bundling is a key component because it is something that DSL doesn't necessarily have," he added. "And it's a must-have against cable because cable does have it."

Pegasus, HNS and StarBand are each helping to train dealers to install the two-way satellite systems. The broadband systems typically require a larger dish than the earlier DBS models, and use additional LNBs designed to send signals back into space. In many cases, the dishes must be carefully aligned to seek signals from separate satellites delivering television and data services.

HNS offers a certification process for installers and offers its distribution partners access to its installer network as needed. In a DirecPC installation, Zatloukal said, the consumer is responsible for installing the software onto their PC. The professional installer carries a laptop to make sure the dish is properly pointed and can access the Internet.

PC, SIGHT-LINE ISSUES

At StarBand, "We like to have the installer leave the job when the customer is up and surfing," whether it is the installer or the consumer that installs the PC network card, Lossing said.

Before a new two-way satellite system is sold, consumers need to be pre-qualified. Their PC configurations and whether they have line of sight to the satellites in question must be determined. Satellite executives don't believe that the slightly larger dish sizes will keep the two-way services out of suburban and even urban markets.

HNS spent a lot of time on designing the new dish, using a cream-colored exterior that more readily blends into a landscape, Zatloukal said.

"You don't want it to be a shiny pink or red that stands out from the house," he said.

DBS executives admitted that satellite broadband services will hold the most appeal for consumers in areas where there's no competition from cable modems or digital subscriber lines, but added that the numbers of those without access to the competing services total 50 to 55 million.

One disadvantage satellite may have is its latency, because the return signal must pass 2200 miles back up to the satellite. HNS has developed technology to minimize the latency and give users a quicker response time, Zatloukal said.

"Where satellite can excel is with multicast and broadcast applications," Zatloukal said. When many Internet users want to access a live sports event or Victoria's Secret fashion show at the same time, for example, "it could bring down the whole Internet backbone" if the users were all using terrestrial lines, he said.

DirecPC plans to deliver premium content from major programmers, as well as movie trailers and other forms of video streaming, that could be accessed live or stored on a hard drive.

StarBand has run print and radio consumer ads for its service since its launch last fall. The company has not ventured into online banner ads, Lossing said, in part because the company does not want to stimulate more demand than it can meet. StarBand's goal is to have new customers' equipment installed within four weeks.

Pricing for two-way satellite services-still higher than high-speed cable-is expected to decrease as competition within the category heats up.

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