Starband, Wildblue target IPO "space"
By Stephen Lacey
Redherring.com, October 17, 2000
Starband Communications and Wildblue Communications are trying to launch the world of wireless Internet connectivity into an entirely new orbit. By utilizing geostationary satellites to offer broadband access, the duo point to a revival of satellite-based communications. But it's not going to be an easy mission for the startups. Companies like Iridium, Teledesic, and GlobalStar (Nasdaq: GSTRF) all tried the satellite route and ended up burning cash and investors at a fast rate.
To be sure, with Echostar Communications (Nasdaq: DISH) backing both companies, and General Motors (NYSE: GM) contemplating a spinoff of its Hughes Electronics subsidiary, the financial stakes are high and the IPO market will play a pivotal role in launching the industry's attack.
While analysts give Hughes the early nod in the terrestrial Internet access race -- in large part because its DirecTV subscriber base is double that of Echostar's Dish Network television service's -- Echostar has brought plenty of company to the table. Gilat Satellite Networks (Nasdaq: GILTF) and Microsoft (Nasdaq: MSFT) have bankrolled Starband, while Gemstar-TV Guide International was an early backer of Wildblue (formerly iSky).
There are many similarities between the two factions. Hughes beams its DirecTV service to more than 9 million subscribers over the same Ku-band frequency that will be employed by Starband's satellite network when it launches its broadband service in November. Hughes's DirecPC one-way (satellite download, telephone outgoing) Internet service will also launch over Ku band later this year. Hughes is also working on a strategy to utilize the higher frequency Ka-band spectrum that Wildblue will utilize for content distribution when it launches in the first quarter of 2002.
The Starband service, which can download data at speeds of up to 600 Kbps, will retail for about $60 per month through Radio Shack's 7,100 stores nationwide. Because the service will combine high-speed access and satellite television service on the same dish, Starband will initially target Echostar's 4.2 million Dish customers. The company also intends to pursue Microsoft's 3 million MSN subscribers.
Filing last Wednesday, lead manager Merrill Lynch offered no timing for Starband's $287.5 million IPO. Wildblue, which filed its IPO documents last week and also has no scheduled timing, tapped Donaldson, Lufkin & Jenrette as lead underwriter for its $200 million offering.
WHAT'S THE FREQUENCY?
Because of Echostar's minority stakes in both satellite platforms -- it owns 19 percent of Starband and 12.6 percent of Wildblue -- analysts note that it will have less operational control of its Internet service offering than Hughes does of its service.
"If this really takes off, Hughes may be in a better position to develop new and creative broadband initiatives," notes Jimmy Schaeffler, subscription television analyst with The Carmel Group.
Moreover, Hughes is in a better position to transition toward the higher frequency Ka band. Although Wildblue will specifically target that spectrum, Starband has offered no initiative other than to point out that Gilat is working on Ka-band satellite technology. Hughes has bid for the rights to develop "plenty" of Ka band, Mr. Schaeffler says.
Because of the higher frequency, Ka band boosts Internet access speeds to up to 1.5 Mbps, double what the Starband network offers. As a result of the higher frequency, narrow, high-bandwidth spot beams allow Ka-band operators to increase capacity through frequency reuse, according to Wildblue's prospectus. For example, Wildblue's second satellite, Wildblue II, is expected to have aggregate upstream and downstream bandwidth of 6 GHz as compared to about 1.6 GHz for Ku-band satellites.
"The physics of Ka band in the radio spectrum gives you more bang for your buck," says Amy Cosper, editor of Satellite Broadcast magazine.
DOWN TO EARTH
Because of their ability to offer comparable speed and achieve significant economies of scale, the development of such satellite-based networks should have far-reaching effects on "terrestrial" wireless players such as Netro (Nasdaq: NTRO) and Airspan Networks (Nasdaq: AIRN).
Hughes's DirecPC, Starband, and Wildblue will be able to launch high-speed Internet access on a national basis. Satellite operators will also be able to multicast information, or simultaneously send common content to millions of subscribers, thereby eliminating potential congestion of terrestrial networks. |
