Hughes Dropping Internet Plan After Merger Fails

[Richard King]

http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_relnews.ht&s=APfhwCxYpSHVnaGVz

One of the first casualties of the failed merger.

[bryan27]

This isn't final. The article says:

"Hughes Electronics Corp. unit is likely to scrap plans to offer residential customers of its DirecTV service a satellite link to the Internet..."

"Hughes will find it difficult to continue its DirecWay Internet service, which has fewer than 175,000 subscribers and is losing money; and the
residential part of Spaceway, its $1.8 billion next-generation broadband effort, set to start in 2004, may be cut..."

No where in the article was it stated that Hughes WILL drop DirectWay or WILL NOT build Spaceway.

Prediction, DirectWay stays, Spaceway is unbuilt, DirectPC subs become DirectWay subs.

[Richard King]

Might as well post the whole thing then:

El Segundo, Ca., Dec. 12 (Bloomberg) -- General Motors Corp.'s Hughes Electronics Corp. unit is likely to scrap plans to offer residential customers of its DirecTV service a satellite link to the Internet, the Wall Street Journal reported, citing Hughes Chief Executive Officer Jack Shaw.

The aborting of a planned merger with EchoStar Communications Corp., which would have brought increased financial clout and more customers, means the Internet plan would be too risky, Shaw told the newspaper in an interview.

By early next year, Hughes will find it difficult to continue its DirecWay Internet service, which has fewer than 175,000 subscribers and is losing money; and the residential part of Spaceway, its $1.8 billion next-generation broadband effort, set to start in 2004, may be cut, the Journal said.

``We would look at a consumer offering'' again, though not until Spaceway, developed for large and small businesses, is operational, the paper cited Shaw as saying.

[Jacob S]

I would also think that at least one of the two will stay and they will just converge those into one. I think there will always be an internet by satellite service up and going as long as they can continue to add subs and keep the ones that they have. Do a lot more internet by satellite customers stay with them than video by satellite customers (Direct and Dish)?

[Richard King]

Do a lot more internet by satellite customers stay with them than video by satellite customers As I can attest to from my Starband sales experiences, they quickly abandon satellite internet as soon as an alternative is offered. Costs are too high to be competitive with DSL and expenses of maintaining the required hardware in space are too high to lower costs for the number of potential customers. Starband, Directway's only real competition, is operating under Chaper 11 at the moment.

Posted using Starband in a DSL area.

[Jacob S]

I am curious if those without an alternative stay with the service. I figure that the ones that can find an alternative will.

[Richard King]

Yes, for the most part they do, although DSL is expanding wildly here so over half of those I have signed up and installed since it was offered have gone on. I suspect the situation is similar in most of the country.

[Richard King]

Hughes Electronics Says It Will Close Internet Unit

http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_relnews.ht&s=APfo6jxWYSHVnaGVz


El Segundo, California, Dec. 13 (Bloomberg) -- Hughes Electronics Corp., owner of the DirecTV satellite-television service, said it will close its money-losing high-speed Internet unit, eliminating about 400 jobs.

About half of the DirecTV Broadband unit's employees were notified today that their jobs were being eliminated, while the other half will remain for about 90 days to ``wind down business operations,'' the company said in a statement.

The shutdown of Cupertino, California-based DirecTV Broadband is part of Hughes's effort to reduce expenses after the company ended an agreement three days ago to be acquired by rival satellite-TV broadcaster EchoStar Communications Corp.

``Despite continuing subscriber growth, DirecTV Broadband cannot operate profitably now or in the foreseeable future,'' DirecTV Chief Executive Eddy Hartenstein said in a statement.

Hughes said it will take a charge that will reduce earnings before interest, taxes, depreciation and amortization by $100 million to $150 million in the fourth quarter.

[Richard King]

http://www.thestreet.com/tech/georgemannes/10058692.html
I am amazed that DTV DSL has only 160,000 customers with all the television advertising that they do. I wonder how many Telocity had when they were acquired by DTV.

[raj2001]

One of the first casualties of the failed merger.

I am curious though, why are so many people going ahead and predicting Hughes demise? It almost seems as if some of you want Hughes and DirecTV to go under, just because the merger didn't go through.

[raj2001]

Originally posted by Jacob S
I am curious if those without an alternative stay with the service. I figure that the ones that can find an alternative will.

I always thought that if you are being served by any third party DSL there is always an alternative. DirecTV DSL in this area is being offered through Verizon, in other areas it's through Covad. I am pretty sure if that's the case everywhere then all you need to do is switch to another Covad partner ISP.

[Jacob S]

I mistyped my info. I meant to say 'I figure that the ones that could not find an alternative would stay'

[Richard King]

I am curious though, why are so many people going ahead and predicting Hughes demise? It almost seems as if some of you want Hughes and DirecTV to go under, just because the merger didn't go through.It's not that at all. I have shares of stock in both companies and want both to succeed as best as possible. It's just that many were implying before the failure of the merger that the merger would have no effect on the broadband plans of the companies and that the two competing in this area would be better for the consumer. It doesn't appear to be working out that way. If there are not enough customers to make two companies profitable, something has to break. It is already begining to happen. DirecTv had dropped their DSL service. DirecTv has stated they will no longer put any effort toward growing DirecWay, look for hardware and subscription subsidies to go away. Dish wrote off and abandoned their investment in Starband a while back. Starband is operating under chaper 11 at the moment (and hopefully will survive, but who knows). When I warn prospects about the Chaper 11 situation they don't buy the product, so their growth has most likely stopped completely. Without the combined market of one company harvesting broadband prospects among the one company's 17-18 million customers, broadband alternatives are not going to happen for quite some time.

[Jacob S]

Maybe this is why StarBand came out with their new deals for $100 a month in which includes hardware costs or a reduction in hardware costs.

If one company goes out and gets a special deal to go to the other service, then that one would survive, am I correct? I wonder if they would allow an internet by satellite merger? It is needed MUCH more than the television by satellite.

[Chaos]

They are officially scrapping their DSL service too. Now I'm scrambling for a DSL service that's priced right and offers a static IP address.

Any ideas anyone?

[dlsnyder]

This also probably doesn't bode well for the DSL partnerships that E* has been putting together. Wasn't E* supposedly going to launch some kind of bundled discount for DSL and DBS service this past summer? They already announced deals with SBC and Earthlink to put together something like that.

[invaliduser88]

www.directtvdsl.com site has the following:

December 13, 2002

Dear DIRECTV Broadband Customer,

We have some difficult news to share. With the dramatic change in the capital markets and the significant shift in the telecom operating environment, DIRECTV Broadband can no longer stand as an independent business.

It is our sincere regret to inform you that DIRECTV Broadband will discontinue operations. DIRECTV Broadband’s network will be operational for a minimum of 30 days. We are working with our last-mile carriers to determine alternatives for your broadband service.

We know you have many questions. The best way to keep up-to-date is to refer to www.directvdsl.com . We’ll keep this site current with the latest information on your account, billing issues and next steps.

If you are a DIRECTV subscriber, your satellite television service will not be disrupted in any way. Please do not call DIRECTV customer service regarding your DIRECTV DSL high-speed Internet service, as they will not be able to help you.

It has been our privilege to serve you.

Sincerely,

DIRECTV Broadband Customer Care

[raj2001]

Originally posted by Chaos
They are officially scrapping their DSL service too. Now I'm scrambling for a DSL service that's priced right and offers a static IP address.

Any ideas anyone?

Can you get DSL from your local telco? I get 1500/128 from Verizon for $59.99 per month. There is 768/128 for $49.99. The only problem is that I don't have a static IP and you said you wanted static IP.

Speakeasy.net has some good packages too and I heard they're pretty good. They're via covad and can offer static IP's with some packages. Check them out at www.speakeasy.net

You can also do a comparison search at www.dslreports.com. They have a form where you can just type in your info and you'll see what's available in your area.

[Chris Freeland]

Originally posted by dlsnyder
This also probably doesn't bode well for the DSL partnerships that E* has been putting together. Wasn't E* supposedly going to launch some kind of bundled discount for DSL and DBS service this past summer? They already announced deals with SBC and Earthlink to put together something like that.

I doubt this will effect the E* DSL partnership, the difference is that D* was the owner of their own DSL company. In E* case they just have a marketing agreement with these other company's to sell each others service with some available bundling. As far as I know E* does not have any ownership interest with these DSL company's. I would not be too surprised to see D* go the same rout in the future, this way D* and E* can do some bundling in some markets without the financial risks involved in owning their own DSL company.

[Chris Freeland]

Accidental duplication

[jeffwtux]

Yeah, but do they actually make any money with a "DSL partnership"? Does SBC or Verizon NEED Echostar or Hughes to sell DSL? NO. Their ONLY PROBLEMS are availability and deployment costs. Why should Verizon or SBC give Echostar or Hughes one penny? DSL will end up being a total funnel to the baby bells, without regulatory change. Riding on the back of an baby bell or cable company is a dead business model. Nobody has succeeded and many have tried. Infrastructure should be socialized that is by far the most productive and efficient way to run it. That is a total fact.

[raj2001]

Yeah, but do they actually make any money with a "DSL partnership"? Does SBC or Verizon NEED Echostar or Hughes to sell DSL? NO.

My sentiments exactly! This is why I am saying that everyone who is using the demise of DirecTV DSL to mean that Hughes is going under are DEAD WRONG. Hughes is getting its priorities straight, which is competing in providing television services. Telco's will always have the upper hand when comes to deploying DSL services, because they own the infrastructure.

Cable companies will always be able to provide cable internet and cable TV packages together because they own the fiber and copper on the poles! Satellite companies do not own a single inch of copper cable far less anything else. Satellite access is also not going to be a viable alternative for anyone else except rural areas because of the high latency and the fact that CONUS bandwidth is going to always be limited, merger or not. Both are problems caused by sheer physics and nothing else, and there is nothing you can do about it.

[raj2001]

Originally posted by Rking401
It's just that many were implying before the failure of the merger that the merger would have no effect on the broadband plans of the companies and that the two competing in this area would be better for the consumer.

Unless you are a telco or CLEC, you are always going to be at a disadvantage in providing DSL service. This has nothing to do with the merger at all. Just look at all the other DSL companies that have gone under, simply because they cannot compete with the telco's and CLEC's (like Covad).

Competition between DirecTV and Echostar is always going to be better for the consumer from a standpoint of providing television services. I don't want it to happen where Charlie or anyone can impose mandatory rate hikes, leaving me with no choice but to grit my teeth and bear it or go back to using a rabbit ears. I don't want it where they can drop my favorite channels at will, and I won't be able to do anything about it. TNT and NESN are going to be dropped. E* users have a choice to switch. Do you think that if the merger went through that E* users would still have that choice? Charlie could drop any channels that he deems are unprofitable at will, and there is nothing you can do about it.

I also don't want to be forced to use inferior equipment.

Locals? I already have my locals. And even if the merger did go through, locals for all 210 DMA's would not have been completed for some time. FCC is mandating that all stations go digital by 2006. Do you think that there is capacity on those birds for HDTV LiL for all 210 DMA's using current technology?

[Martyva]

Rural customers only choice for high speed brodband is through satellite. I suppose we should require the 14 rural folks, that are left out there, to move into the city, so we can import all of our food.

[markh]

raj2001, nowhere in this thread can I find anyone who has said Hughes is going under. It is true that Hughes is dropping the DirecTV DSL service and the Hughes CEO has said that it is going to be difficult to keep offering broadband by satellite.

I think Rking is just saying that with a merger the company would have been more likely to offer satellite broadband. Now where would he get an idea like that? Maybe because the link he posted quoted Hughes CEO Jack Shaw saying just that. Nobody said or implied Hughes was going out of Business.

I'll bet ya that NESN and TNT don't leave E* either. I understand you don't want mandatory price hikes, I'm waiting for the voluntary increases to come along myself, too. :) But bargaining with the providers instead of just signing the check for whatever they want helps keep prices down.

I'm happy for you that you have your locals, I don't understand why you think it's a good thing that more people won't be able to get theirs. Like it or not, a merger would in all probability have made locals and broadband internet access more likely for more people. Small rant over.

[James_F]

Yea but satellite broadband and DSL reseller are two different things. Why would you buy DSL from DirecTV when you can buy it from so many other places cheaper. DSL was never going to work and just putting the DirecTV brand on something isn't going to make if profitable.

[Richard King]

This has nothing to do with the merger at all.
Rural customers only choice for high speed brodband is through satellite.Bingo!! That is the market that satellite "broadband" is aimed at, not areas that have DSL. Without the merger, splitting the potential "broadband" customers in half, it is not a viable market to provide satellite internet to these people. The Directv DSL service was simply a way to attempt to build the DSL market through a satellite provider and provide a single source for DSL and television. It didn't work. Once again, though, if the merger had gone through, both DirecTv and Dish would be marketing the product to their customers, no longer splitting the market in two and, hopefully, allowing the merged operation to make a profit.

[raj2001]

Originally posted by markh
raj2001, nowhere in this thread can I find anyone who has said Hughes is going under.

I'm sorry, but I just couldn't help but notice the increase in the number of posts that cheer on the rise of Echostar and pit the demise of Hughes that have popped up after the death of the merger. Maybe it's just my perception, but that's what I see.


I think Rking is just saying that with a merger the company would have been more likely to offer satellite broadband.

There are already two consumer oriented satellite broadband services (StarBand and DirecWay) and people only keep them until they can get better alternatives like cable and DSL. Satellite broadband for the consumer is always going to be a very small market, because the majority of people have better alternatives. Merger or not, this is economic reality, supply and demand.

I'm happy for you that you have your locals, I don't understand why you think it's a good thing that more people won't be able to get theirs. Like it or not, a merger would in all probability have made locals and broadband internet access more likely for more people. Small rant over.

Did you even read my post carefully? Sure everyone would have locals if the merger went through, but it would have taken away the choice that I have between two providers. I specifically did not choose Echostar because I viewed their service as inferior. I do not want to have to be forced to use something that I did not choose.

Besides, in 2006 the FCC is going to mandate all stations to turn off analog transmissions FOREVER. This means that locals will now be in HDTV, requiring more bandwidth. Even with a merger, there would not be enough bandwidth for HDTV locals for the DMA's currently serviced, far less for locals for all 210. WE haven't even begun to talk about regular "cable" channels or premium channels. That's why I am saying there is no sense in a merger at all. Both companies need to find another way to squeeze more out of the bandwidth they already have.

[Chris Freeland]

Originally posted by raj2001



Besides, in 2006 the FCC is going to mandate all stations to turn off analog transmissions FOREVER. This means that locals will now be in HDTV, requiring more bandwidth. Even with a merger, there would not be enough bandwidth for HDTV locals for the DMA's currently serviced, far less for locals for all 210. WE haven't even begun to talk about regular "cable" channels or premium channels. That's why I am saying there is no sense in a merger at all. Both companies need to find another way to squeeze more out of the bandwidth they already have.

No, you are incorrect, just because the analog signal is turned off and all local channels are digital does not mean that the satellite delivered locals will have to be delivered in HD, to the contrary they will be delivered in SD Digital and will not consume any more bandwidth then they do today. HDTV will continue to be a high end product for quite some time, the mases will be quite satisfied with SD DTV.