TV-Based Internet Firm Decides to End Service

NetChannel Inc., the developer of a television-based Internet service, is shutting down its service on May 3 and customers who purchased the RCA Network Computer will be entitled to a refund for the device.

NetChannel, based in South San Francisco, developed an Internet access service that competes with Microsoft Corp.’s WebTV Networks. The company has been looking for additional funding or a major financial partner for the past month.

However, NetChannel said it is continuing to look for funding or a strategic partner.

“The company is not closing. There will be come continued restructuring of the company and there will be some layoffs. However, NetChannel is still in business,” said Jim Gustke, vice president of marketing at NetChannel.

NetChannel now has about 60 employees, after laying off 16 staffers two weeks ago.

Thomson Consumer Electronics, a U.S. unit of Thomson SA of France, markets the network computer device under the RCA brand. The network computer lets customers access the Internet through the NetChannel service on their TVs. Thomson said it will refund customers for the cost of the network computer.

Thomson said the cost of the refunds was “minimal” to Thomson, but he declined to give any estimates. Thomson said it shipped a total of 40,000 units to retailers.

NetChannel said it sent an e-mail message to all its 10,000 customers saying that its service would shut down on May 3 and that customers will not be billed at all for May.

Thomson said its customers can return the product to the retailer where they purchased the RCA Network Computer with a proof of purchase and they will be refunded the full cost of the device. The network computer was priced at $199 with a standard keyboard, or $249 including a wireless keyboard.

NetChannel has reportedly been in talks to be acquired by America Online Inc. The Wall Street Journal reported Wednesday that its acquisition talks were still continuing.