2 Broadband Firms Close Up Shop
Two notable broadband companies--one using digital airwaves, the other using high-speed telephone lines--shut down this week, becoming the latest casualties in a once-hyped but increasingly troubled industry.
Geocast Network Systems of Menlo Park, Calif., which planned to deliver video-rich news and information to consumers through the air, on Thursday laid off most of its staff--more than 190 employees.
Winfire Inc. of Newport Beach, which offered free high-speed Internet access to homes, announced plans on Tuesday to lay off most of its 300 workers.
The closures reflect the fund-raising problems that upstart broadband companies have endured since the market for tech stocks turned sour last year. Geocast had raised almost $80 million by last March, but was unable to come up with the significant sum it needed to move from the test phase to commercial launch.
Formed in 1998, Geocast planned to deliver a personalized package of broadcast-quality video, text and graphics to a storage device attached to home computers. The original plan was to join forces with local TV stations, using their video and a portion of their digital airwaves.
A few prominent broadcasting groups embraced the idea as a way to earn more money from their digital channels, which all commercial stations must begin broadcasting on by mid-2002. But other stations and investors balked at the expense, particularly the equipment needed to receive the personalized transmissions.
Geocast eventually agreed to pay a digital satellite broadcaster, EchoStar Communications Corp., to transmit its service.
Meanwhile, rival IBlast of Beverly Hills signed up about 250 stations for its service, and a third group of 175 stations formed the Broadcasters Digital Cooperative to explore data-broadcasting options.
IBlast now is negotiating to buy parts of Geocast, said Matt Jacobson, executive vice president of IBlast. “They had really good engineering talent, some good technology,” Jacobson said. “They just had a lousy business model.”
Granite Broadcasting President Stuart Beck, a leader of the cooperative, said the need to put digital receivers into homes was a huge problem for Geocast. Until that is solved, he said, it’s too early to launch any digital data-casting service.
Winfire provided free high-speed Internet service to customers who didn’t mind being bombarded with electronic ads. While a number of other companies provided free Net access over dial-up modems, Winfire was the first to give away digital subscriber line service, a faster, always-on Internet connection.
Analysts were skeptical about Winfire’s prospects from its start early last year, given its insistence that users provide personal data for sale to advertisers, get other customers to sign up and install the DSL modems and software themselves.
Winfire’s parent company, Steel Enterprise Holdings Inc., said it is looking for a buyer for the service, which had 57,000 customers. “We are working to minimize any service interruptions,” said Chad Steelberg, Steel’s chairman.
Steelberg added that “a majority of the staff will be released.” Winfire had 300 employees as of January, according to business information provider Dun & Bradstreet Inc.
Steelberg and his brother Ryan, Winfire’s co-founders, previously founded the Internet advertising service AdForce Inc., which was acquired for $500 million in September 1999 by CMGI Inc. CMGI itself has fallen on hard times since then, shutting down several ventures and scaling back its broadband ambitions.
