As expected, the demise of the
merger between EchoStar Communications Corp. and Hughes Electronics Corp.'s
DirecTV Inc. unit has resulted in broadband casualties.
Hughes announced late Friday that
it would close its DirecTV Broadband Inc. high-speed Internet service in 90
days, and the company issued pink slips to one-half of the unit's 400
For DirecTV Broadband's 160,000
customers, their digital-subscriber-line connections are now in limbo. The 200
remaining DirecTV Broadband employees will work to transition existing customers
to other service providers where possible. DSL customers are being directed to
the company's Web site (http://www.directvdsl.com) for information
on making that transition.
Formerly Telocity Inc., the DSL
service was acquired by Hughes in April 2001. But it struggled to gain market
share even as other competitive DSL providers, including Rhythms NetConnection
Inc. and NorthPoint Communications Inc., went under.
The unit never clawed its way out
of the red, and with the termination of the DirecTV-EchoStar merger, Hughes
decided to cut its losses.
"The landscape of the terrestrial
broadband industry has changed dramatically since we purchased this business
nearly two years ago and, despite continuing subscriber growth, DirecTV
Broadband cannot operate profitably now or in the foreseeable future," DirecTV
chairman and CEO Eddy Hartenstein said in a release.
"The immediate priority will be
to work toward transitioning customers to alternative service providers as
quickly as possible [in order] to minimize customer disruptions," he added.
Meanwhile, Hughes will continue
to operate its "DIRECWAY" satellite-broadband Internet service in a sort of
maintenance mode. It will continue to add new subscribers to its 160,000 base,
but it will not aggressively market the service, even as it explores other
broadband-service strategies, according to the company.
closing the broadband unit, Hughes will take a fourth-quarter charge of between
$100 million and $150 million, and it will take a $108 million nonoperating
charge to write off the unit's assets.