An out-of-this-world effort for StarBand
November 13, 2000
By Stan Hinden,
Stan Hinden, who for 12 years wrote the "Washington Investing" column for The Washington Post, writes a regular retirement column for The Post
Call it the marriage of outer space and cyberspace. While consumers endure long waits for high-speed Internet service from digital subscriber line providers and cable television companies, StarBand Communications of McLean is offering a satellite-based short cut to the Internet.
StarBand advertises its services as "the first consumer always-on, two-way, high-speed Internet service via satellite."
The company says its target audience consists of 55 million residential and small home office customers in suburban and rural areas who are not likely to be reached by high-speed, land-based Internet services.
Subscribers will pay from $59.99 to $69.99 a month with a one-year contract. The equipment needed to use the service will cost $399.
As StarBand prepares to go public with an offering that could raise $287.5 million, the company hopes to follow in the footsteps of the six-year-old direct broadcast satellite television industry, a consumer electronics success story.
In fact, StarBand customers eventually could receive packages of both Internet and entertainment services through the company's small satellite dishes.
The company, which has 127 employees, was founded last January and raised $126 million in equity capital.
But, as of Aug. 31, it had almost no revenue and an accumulated deficit of $88 million.
Spacenet of McLean, which is owned by Gilat Satellite Networks Ltd., an Israeli company, founded StarBand. Initially, StarBand was called Gilat-To-Home, but someone must have decided that a catchier name would be easier to sell.
Gilat (Nasdaq: GILTF) was founded in 1987 and provides products and services for satellite-based communications networks using VSATs —Very Small Aperture Terminals.
Gilat has more than 200,000 satellite dishes installed throughout the world. Its chief competitor is Hughes Network Systems of Germantown.
Gilat has organized commercial networks using thousands of VSATs for customers such as the U.S. Postal Service and the Rite Aid drugstore chain.
In 1999, Gilat had sales of $337 million and net income of $19.6 million in 1999.
The Israeli company bought Spacenet from General Electric in 1998 and GE became Gilat's largest shareholder.
When Gilat created StarBand, it did so in partnership with Microsoft and Echostar Communications, which each own 19 percent of StarBand.
Echostar, whose Dish Network is the second largest U.S. satellite TV service with 4.5 million subscribers, will authorize its 20,000 retailers to sell StarBand's Internet service.
Microsoft, whose MSN consumer Internet service has 3 million subscribers, has agreed to co-market StarBand's Internet service through 7,000 Radio Shack stores.
StarBand's officers include: Co-chairman Yoel Gat, 48, co-founder of Gilat; Co-chairman and CEO Zur Feldman, 42, a former vice president of Packard Bell Electronics and President David Trachtenberg, 38, former president of Prodigy Communications.
In time, StarBand could face competition from companies planning global broadband satellite systems. Among them is Bethesda-based Astrolink, which is backed by Lockheed Martin and TRW.
Astrolink plans to launch the first of nine satellites in 2002. The first four satellites will cost $3.6 billion.
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