Investing Information

Direcway & Wildblue Set to Square Off this Fall?


There is a cat fight brewing between Direcway LLC, Starband and Wildblue Communications for the large number of people in the U.S. who can't get some type of broadband internet and are willing to pay $50 or more to get better speeds. The combatants are telling investors there are 20-30 million "potential users" out there in rural or underserved America...true, but the historical fact of the matter is that up to now, only 500,000 or so have been willing to pay as much as $50-$100 a month for the "so called" high speed services offered by Direcway, Starband and now Wildblue.What has changed to stir all the press and advertising hubub by the companies? The claim is that both the Wildblue ka band and new Direcway 7000 offerings will finally give consumers a more DSL/Cable-like internet experience...ie lower latency and higher upload speeds. They expect that tens of millions of rural Americans will flock to their doors to pay over $50 per month to be "connected". To a degree they are right. It has become virtually impossible to funcion as a business without broadband internet and it is more and more difficult as a consumer to do without it. Even retailers (who obviously target consumers) are building sites that are very difficult to navigate unless you have a fast connection to the net. Pictures chew up bandwidth.

More and more people have found it less expensive to buy over the net...after all, we are nearing $2.50 gas now and who knows where it will end up. Imagine the cost of going to a store in a rural area in a vehicle that is getting 12 mpg (pickup with a V8) with $2.50 gas? Quick math says it would run you about $16.00 for an 80 mile round trip.....do that three or four times a month and buying at home from your easy chair starts looking pretty good. And you have time left over to plow a few fields if you like. Pretty easy picture to get. The problem is that all too many rural Americans already figured that buying from home is a good thing...they just do it by the old reliable U.S. mail order system. No computer or internet required.

The marketing effort by the "combatants" needs to focus on how much better the experience will be over the net. Perhaps they can throw in some instructions on how to overcome the fear of computers and typing as well. This is what I beleive is hampering the efforts to reach rural America by satellite internet...fear of the potential user of new ways of doing things. This is a generational thing...younger rural folks are going to find the internet the only way to travel in the future, but by that time WiMax should cover most of rural America with cable/dsl-like pricing and satellite dishes might be used as birdbaths.

The point of this piece is to arm investors....don't make a long term bet on Wildblue or Direcway! They will provide a bridge to up to 1,000,000 or so underserved rural consumers and could make a splash over the next two years or so, but they will never reach the vaulted numbers they strive for within a timeframe to make a large impact or long term profits in the rural underserved marketplace.

About the Author:
Randy Scott has been involved in the bi-directional satellite internet industry from it's beginning as a Sr. Sales Engineer, consultant and business owner. Randy is the founder of VSAT U.S.(http://www.vsatus.com), a consulting and sales organization, representing the most prestigious satellite internet providers in the America's.


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