EchoStar Revives Broadband Internet Plan

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EchoStar Communications Corp. apparently wants to keep on the beam with satellite-delivered Internet services, striking a deal last week with SES Americom Inc. for broadband and video capacity on a bird set for launch in late 2004.

While the DBS provider declined further comment on the deal, the press release said the company would buy up all of the capacity on Americom's hybrid Ku/Ka-band AMC-15 bird, with plans to use it for satellite TV programming bundled with satellite-delivered, high-speed Internet service.

As EchoStar waits for the bird to launch, it will start to test some systems on existing Americom birds.

Ku-band transponders are traditionally used for video delivery, while higher-power, spot-beam Ka-band capacity can be used to funnel two-way high-speed data and local video. Marrying the two systems on one bird means video and Internet services can be beamed to a dish aimed at a single point in the sky, according to SES Americom senior vice president of residential satellite services Kevin Smyth.

It isn't EchoStar's first foray into satellite-delivered broadband service. In late 2001, EchoStar assumed a controlling stake in satellite broadband Internet provider Starband Communications Inc., and also invested $50 million in that company. But it didn't take long for that marriage to sour.

In April 2002 the DBS provider stopped offering StarBand service at wholesale, citing poor subscriber growth and complaints.

EchoStar also had plans for satellite Internet services related to its proposed merger with Hughes Electronics Corp.'s

DirecTV Inc., but when that merger fell through last year, so did the plans. Since then, EchoStar has backfilled its broadband offering, striking a deal with EarthLink Inc. to offer wired digital subscriber line service to Dish Network subscribers at a special rate.

For SES Americom, the EchoStar pact is part of a strategy to become a wholesaler of satellite-service delivery. Dubbed Americom to Home, the initiative seeks to develop a wholesale satellite platform for consumer services, renting out capacity to multiple providers.

Americom's orbital properties also play into future deals with the DBS players. Americom has two such positions — one at 85 degrees and the other at 105 degrees. The latter falls well within EchoStar's established orbital slots at 110 and 119 degrees, and within DirecTV's 109-degree position.

"So we are right at the middle of the sweet spot of where the DBS providers are," Smyth said. "As they look for ways to expand their capacity — they are not making any more of this, and this is prime real estate — that is one of the rationales for them to come to us with this type of deal."

Still, while the technology may still be worth exploring, it likely won't pose a huge threat to wireline providers for some time, according to Jupiter Research broadband analyst Joe Laszlo.

"I think our view of satellite services generally is that most companies in the U.S. have pulled back pretty heavily from considering satellite a strong viable alternative to cable or DSL," he said. "It's not to say that it never will be, but certainly over the five-year time horizon it doesn't seem like, whether it is Ka-band or one of the more traditional delivery strategies, satellites will be able to deliver cost-effective alternative to the main wireline guys."

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