Microsoft Corp. said last week that it will invest $50
million and take a 26 percent stake in a new two-way satellite-broadband venture called
"Gilat-To-Home."
Backed by Israel-based Gilat Satellite Networks Ltd., the
new company will be based in McLean, Va., and it plans to have a U.S. consumer product
ready for sale in RadioShack stores by the end of this year.
EchoStar Communications Corp. declined to comment last week
on reports that it was likely to form a strategic alliance with GTH to bundle the
broadband-online service with its Dish Network direct-broadcast satellite offering.
But Gilat CEO Yoel Gat told analysts in a conference call
last week that GTH was already working with EchoStar's technology to ensure that
consumers could get both services off a single satellite dish. "The product is out
there today, and it's working," Gat said.
GTH is testing the new two-way service with employees of
Gilat's Spacenet division, Gilat vice president of investor relations Dianne VanBeber
said. She added that some Microsoft employees will join the tests next month, at which
point the GTH systems will be in 2,000 homes.
VanBeber confirmed that GTH has been talking to more than
one DBS provider about a possible alliance, including EchoStar and Pegasus Communications
Corp.
Pegasus previously announced plans to launch a
satellite-based broadband service this year, although it has not yet named a strategic
partner. A help-wanted ad in a recent Philadelphia Inquirer sought technical
employees for the new Internet service, dubbed "PEGTV" in the ad.
Gat said GTH's broadband service would likely be
branded by its partners, including Microsoft and any DBS providers. He added that the
Gilat-To-Home name could be changed over time to a more consumer-friendly brand.
Hughes Electronics Corp. would be GTH's primary
competitor. Through its Hughes Network Systems subsidiary, the company already sells
"DirecPC," a satellite-delivered online service with a telephone-return path.
Hughes plans an aggressive launch of a consumer two-way
broadband service called "Spaceway" in 2002, but analysts believe it will have a
two-way solution for DirecPC before that.
At least one other start-up, iSKY, plans to target homes
and small businesses with a two-way broadband-satellite-data service in late 2001, using
Ka-band frequencies.
GTH plans to raise $300 million through equity and debt to
cover expenses for the next three years, Gat said, at which point he projected the service
could have 1 million subscribers. He wants 3 million customers by 2005.
RadioShack plans to market a broad range of broadband
services, including those delivered by cable, satellite, digital subscriber line and,
eventually, fixed wireless, vice president of emerging technology and strategic
development Dave Martella said.
GTH gives RadioShack the chance to offer two-way broadband
service on a national scale, with standardized pricing and promotional offers in all
stores, he added.
RadioShack carries DirecPC and "DirecDuo" -- a
joint DirecTV Inc./DirecPC hardware platform -- but Martella noted some resistance to the
telephone-return path.
"Our goal is to never have to tell a customer
'no' when it comes to broadband," Martella said in explaining the need for
DSL and cable-modem services. "As good as satellite is, there are some customers who
don't have a southern exposure for a satellite," or who live in rental
properties where dishes are not allowed.
Gilat officials said GTH would be priced competitively with
other broadband Internet services. Gat said installation costs would likely be $150 to
$200 -- similar to the cost of installing former PrimeStar Inc. dishes. The dishes would
be about the same size as PrimeStar dishes, which ranged from 27 inches to 3 feet in
diameter.
GTH plans to lease Ku-band satellite spectrum from GE
American Communications (GE Americom), a shareholder in the new company. Gat said the
company is eyeing eight "GE4" transponders in the same orbital neighborhood as
the DBS birds at 101, 110 and 119 degrees west longitude.
The new company will target rural subscribers first. Gat
noted that there are 6 million to 8 million homes in the United States that don't yet
have access to flat rates for Internet access, and he estimated that 20 million homes
would not have access to cable modems or DSL within the next five years.
