Gilat plans two-way service for consumers - Gilat Satellite Networks Ltd - Company Business and Marketing

CommunicationsWeek International, Dec 13, 1999 by Neal Sandler

Israel's Gilat Satellite Networks is to target U.S. consumers with a broadband Internet service it claims is the first to use two-way satellites.

Israel's Gilat Satellite Networks Ltd. is planning to become the first provider of broadband Internet services over two-way satellite to consumer customers.

The company aims to enter the North American consumer broadband market in the second half of next year, and has announced an initiative it says will transform it from a hardware company into a major Internet service provider.

"Gilat is the first to announce an interactive service using two-way satellite to the consumer," confirmed Simon Bull, principal consultant at Communications Systems Ltd. (Comsys), of St. Albans, England.

The Tel Aviv-based company will provide the hardware and software for the Gilat-To-Home service, and is currently negotiating with partners to provide content for the service. "We hope to conclude negotiations with financial and strategic partners in the coming weeks," said Yoav Leibovitch, chief financial officer at Gilat.

There has been intense speculation in the Israeli press that Microsoft Corp. will be a partner in the service, but Gilat has refused to comment. Company officials would say only that negotiations are under way with "some of the major players in the field."

"An agreement with Microsoft would be a major coup for Gilat, since it needs major players to move its initiative forward and offer technical value and content," said Bull.

Gilat's initiative comes on the heels of a deal in June between its main rival, El Segundo, California-based Hughes Electronics Corp., and on-line content and service provider America Online Inc. Under the agreement AOL invested $15 billion in Hughes, and the companies will develop digital satellite TV and Internet services, delivered via Hughes' satellite-based DirecTV digital TV and DirecPC broadband Internet platforms, and AOL TV.

One-way rival

The AOL-Hughes broadband service is due to be available in the United States via Hughes' DirecPC satellite Internet network by early 2000. But unlike Gilat's service, it will be based on a one-way satellite link, with the return path via standard telephone lines.

In March, Hughes announced a $1.4 billion investment in Spaceway, its next-generation satellite system for two-way broadband connectivity, scheduled to launch initially in North America in 2002.

And in Europe a business-to-business service was announced in September by Luxembourg's Societe Europeenne des Satellites, to provide two-way satellite links to corporates. Its Astra-Net service is scheduled to be available in the first quarter of 2000.

Gilat aims to launch Gilat-To-Home in the United States in the second half of 2000, and hopes to have 1 million subscribers within three years. The service will be based on Gilat's SkyBlaster product, a PC-based satellite transmitter for delivering broadband Internet connectivity, and will be geared to subscribers in rural and suburban areas where high-speed Internet access over cable is not currently available.

A study by Comsys estimates the market for broadband IP technology will be 600 million households worldwide by 2010. "Our estimates are for two-way satellite to supply about 5% of the market," said Bull.

Cost advantages

According to Gilat's Leibovitch, one of the major advantages of the two-way satellite technology is cost to users. "We're looking at a standard $55 to $70 monthly fee for subscribers, which is much less than what customers are paying today for broadband Internet service," said Leibovitch. But there would be an additional charge for specific interactive services.

Gilat claimed the new service will be the only true two-way satellite IP broadband service available for the consumer market. "We're the only one to have return channel from the satellite which does not require the use of traditional dial-up terrestrial phone lines," said Leibovitch.

The service will be based on Gilat's VSAT technology and will deliver data at speeds of up to 40 Mbps, with return path speeds of up to 154 Kbps.