Teledesic is not expected to offer service until at least 2004, although others such as Tachyon.net, which also offers a two-way system, already are available for businesses. Satellite technologies have long been an attractive Internet delivery medium because of their high-bandwidth capacity and particular advantages for broadcasting streaming media. The technology competes against DSL and cable modems, which are rapidly being installed by phone companies and cable operators to satisfy consumer demand for high-speed Net connections and to reap the higher profit margins typically generated by broadband services. Gilat yesterday posted second-quarter earnings that beat consensus expectations. Gilat's slimmer profits are unlikely to cause concern ahead of a major product launch with its development and marketing costs, but the numbers may reflect weakness across the broader satellite industry, which has seen spectacular failures by satellite phone services Iridium and ICO Global Communications.
Analysts expect the service to be most popular, at least initially, in rural and isolated areas.
They're not going after subscribers in the metro areas. Analysts expect satellite Internet access to first take hold in the rural areas where cable and phone companies do not or cannot offer high-speed Net access and eventually spread to larger population centers as prices fall and new services are introduced. A growth curve that even slightly resembles that of satellite TV would be promising for satellite Net access. Since being introduced in the early 1990s, satellite television has cut significantly into the market share of cable TV operators. EchoStar, the No. 2 direct satellite broadcaster, desperately needed an Internet offering to compete against DirecTV and its DirecPC satellite Net service, analysts said.