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HNS: High Expectations Despite Technical Limitations

3/21/2005 02:00:00 AM Eastern

With more than 10 million potential satellite broadband customers available in the United States, Hughes Network Systems (HNS) is confident it can expand its small subscriber base this year.

Peter Gulla, Hughes' consumer marketing VP, said prospective satellite customers are not found living just in the wilderness, but in many rural and suburban areas where cable and DSL service is still not available. This leaves these people with two options, dial up and satellite, Gulla said, and even with satellites' technological data transfer limitations and high price tag, it is preferable to dial up.

The trick for HNS is exposing these people to its service. This is already being done through infomercials and commercials running on DirecTV, he said, and the company hopes to attract customers through its network of independent satellite self-installers.

This latter group is particularly important to HNS because it already has a customer base of DirecTV satellite TV owners in its neighborhood, and these people are the most likely to acquire satellite broadband service since they are so closely related.

Despite having these tools in its bag, HNS faces a significant challenge in boosting its current 220,000 subscriber base. The first problem is satellite is not as fast as cable or DSL, particularly on the upload side where its speed is limited to about 50KBps. Download is a faster 500KBps, which is still far below what the other services offer. Gulla said some upload speed enhancements are possible, but there is an overriding engineering issue that limits the speed. This, in turn, means customers cannot take advantage of hot Internet applications like VoIP and gaming, Gulla said.

“The technology was originally designed around browsing the Internet,” rather than for the data-rich interactive experience that it is primarily being used for today, he added.

The original version launched in the mid 1990s used a dial-up modem for uploading data.

The other drawback is price. HNS charges $59 per month, which is pricier than most cable or DSL services, but there is an additional $599 installation charge. Unlike DirecTV equipment, which can be installed by the customer, DirecWay installation is much more exacting and requires a professional installer.

Despite these limitations Gulla was confident that HNS will increase its customer base this year because satellite is the last option for people outside wired service coverage areas.

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