DirecTV to Offer 2-Way Broadband Net Service
Consumers without a prayer of ever getting high-speed Internet access from their cable or telephone companies will soon have an alternative.
The two leading satellite television suppliers are planning introductions of two-way broadband services late this year.
Hughes Network Systems Inc., the development and manufacturing arm of Hughes Electronics Corp., formally announced Thursday that its sister company, DirecTV, will begin marketing services that will enable consumers to connect to the Internet at speeds comparable to cable. EchoStar Communications Corp., the second-largest satellite TV provider, announced similar plans in February.
High-speed connections, which are in some cases 100 times faster than conventional phone lines, are necessary for consumers to tap into the Holy Grail of the Internet: the streaming of movies, games and concerts into the home over the personal computer. Dial-up telephone connections used by most consumers today are slow and produce blurry, jittery video.
Satellite Internet services could provide significant competition to the cable and phone companies.
Because the satellites’ reach covers the United States, consumers will not have to wait until their cable or phone companies upgrade networks in their neighborhoods. It could also bring the services to rural areas and underdeveloped countries.
For instance, Hughes said a company in India has placed an order for 50,000 terminals and plans to put the equipment in kiosks to give more people access to the Internet.
Over the last three years, U.S. cable and phone companies have spent billions of dollars to make their networks capable of handling two-way broadband Internet traffic. Now satellite services are joining the race to provide consumers bundles of telecommunications packages that include television, high-speed Internet access and, eventually, phone service. The companies think they can keep customers from defecting to competitors by offering one-stop shopping.
Today about 40% of the nation’s 100 million households can buy high-speed service from their cable operators and an additional 10% can get it from phone companies, according to Michael Harris of Kinetic Strategies, a Phoenix-based market research firm. He projects that in five years one-fourth of the U.S. population will still not have broadband access from either.
Some say that is a conservative estimate. “There are about 30 million households in rural markets where population densities make it un-economic for cable or DSL ever,” said Vijay Jayant, an analyst at Bear Stearns. “The only competition there is a dial-up phone line. This is going to be huge for Hughes.”
Though DirecTV has sold an Internet access service for several years, analysts said it largely bombed because it was poorly marketed, high-priced and did not offer speeds comparable to cable or telephone services. The product, in about 60,000 homes, connects consumers to the Internet at high speeds via satellite, but requires them to use a phone line on the return path.
Pradman Kaul, chairman of Hughes Network Systems, said technological advances and manufacturing economies have made it feasible to use satellite transmitters to uplink from the home to the Internet.
The new product is an outgrowth of equipment and services Hughes has provided to corporate customers for the last 10 years. Hughes makes the two-way satellite networks that banks and gas stations use for credit card authorization.
The cable industry, which has spent more than $30 billion to upgrade its networks over the last three years, holds the lead in selling high-speed Internet connections, with 2.5 million customers nationwide. Less than a million of the nation’s households have digital subscriber lines, which are marketed by phone carriers, and only 60,000 get Internet access by satellite.
Hughes said that DirecTV’s existing 8.3 million customers would need to buy a new dish to receive both television and high-speed service.
DirecTV, which will market its DirecPC service through its existing 26,000 retail distributors, plans to give customers who subscribe to both its television and Internet services a discount.
Hughes said it expects monthly fees to range between $40 and $50. Analysts say that a dish that receives both TV and Internet data would cost about $500. One for receiving just Internet services would be in the $200 range.
By comparison, equipment and installation costs for cable modems are $150, with monthly fees of $40 to $60. DSL costs $300 upfront and about $50 a month.
