The first consumers to make two-way Internet connections via satellite can expect to pay a premium for the service, which rolls out this month.
For US$69.99 per month, households inaccessible to cable or Digital Subscriber Line (DSL) service will gain broadband access through an elliptical dish from StarBand Communications. The monthly fee is about US$30 more than most @Home customers pay for their cable modem service.
Another price barrier is the US$199 installation charge, compared with free hookups from AT&T in some areas. But with an estimated 55 million households unable to tap into broadband, the new satellite service is targeting a captive market. "It is slightly more expensive, but satellite technology is more expensive," said StarBand spokeswoman Sandy Colony.
StarBand sells its dishes through retailers that handle EchoStar Communications' Dish Network and Microsoft Internet Centers at RadioShack stores. The StarBand antennas will receive feeds from three satellites, including two of EchoStar's. That means EchoStar can sell its Dish Network channels through the satellite.
To entice customers, EchoStar is offering a package of Internet access and 150 channels for US$99.99 per month. The deals are offered only through Dish Network retail outlets. Of the 23,000 Dish Network retailers, 2,000 have signed up to sell the Internet connection, said EchoStar spokesman Marc Lumpkin.
"We expect it to help our business," Lumpkin said. "It's a huge advantage to be able to offer a one-stop shop for computer users and television viewers."
Gaining two-way communications via satellite also eliminates the need for a telephone line to the set-top box for interactive TV services.
To get StarBand off the ground, EchoStar teamed with Israel's Gilat Satellite Networks and ING Furman Selz Investments. Formed 10 months ago as Gilat-To-Home, the venture changed its name to StarBand in October.
Arriving first to market with the service gives EchoStar's Dish Network a slight head start over Hughes Electronics' DirecTV, which will begin selling its service before the end of the year. DirecTV is previewing its two-way Internet service at the Comdex show in Las Vegas this week. No pricing information has been released.
DirecTV's partners include America Online, EarthLink, Juno Online Services and another, to be announced this week, according to Hughes Network Systems spokeswoman Silvette Barr.
While DirecTV and Dish Network will compete, the cable modem purveyors have no reason to fear competition from the satellite connectors, Colony said.
"We're really not targeting the existing cable modem or DSL market," Barr said. "It makes sense for us to go after the frustrated population that cannot get cable or DSL."
The ability to bundle Internet and TV services gives satellite broadcasters another tool to widen the marketplace. If the satellite companies follow the lead of their cable rivals, they will add voice phone service as well.
Lumpkin declined to comment on prospect that EchoStar might enter the voice market.
The new Internet offerings come as EchoStar and other potential bidders prepare for a possible sale of DirecTV. With more than 9 million customers, DirecTV is the largest satellite broadcaster in the nation. If General Motors decides to sell off its Hughes Electronics subsidiary, DirecTV could be up for grabs.
Rupert Murdoch's British Sky Broadcasting, backed by cable mogul John Malone, is considered the most eager bidder for DirecTV. Microsoft, a partner with EchoStar in the satellite Internet venture and in its interactive WebTV Networks product, is also considering a bid for DirecTV. Murdoch is also entangled with EchoStar after his aborted attempt to buy the now 4-year-old company in 1997. Since then, Murdoch has gradually unloaded his 55 million EchoStar shares; he currently holds a 5.3 percent stake in the company.
While EchoStar Chairman Charlie Ergen has said he would like to merge with DirecTV, some insiders said those comments were simply an effort to drive up the price.
Combining the two largest US satellite broadcasters could raise questions among regulators.
