DIRECTV Unwraps DSL Service

Coming soon to a retail outfit near you: digital subscriber line (DSL)
Internet service from a satellite TV company.

DIRECTV Broadband Inc., a subsidiary of Hughes Electronics Corp., announced Wednesday it has penned an agreement with Circuit City
to market DIRECTV DSL at $49.99 a month.

Hoping to lure customers away from the competition, the company is selling
its DSL service for $19.99 a month for the first three months and waiving
the activation fee. Unlike most DSL outfits and similar to what cable
Internet service providers (ISPs) provide, the new company isn’t holding
customers to an annual contract, either.

With it, DIRECTV Broadband customers get asymmetrical DSL (ADSL) download
speeds up to 1.5Mbps (with up to 128Kbps upload speeds), a static IP
address, five email accounts and 10MB of Webmail space, 60 minutes of free
remote dial-in access a month, and 10MB of server space for a Web site.

The announcement, the result of an April buyout of troubled DSL provider Telocity by Hughes, is the second one
this month by the electronics. Earlier this month, Hughes announced the
launch of its two-way satellite Internet service later this year, dubbed
DIRECWAY, at $59 a month.

Ned Hayes, DIRECTV Broadband president and chief executive officer, said
the Circuit City deal is a continuation of an agreement the companies have
always maintained.

“We are able to leverage DIRECTV’s strong historical partnership with
Circuit City to build loyal relationships with our subscribers, offering
more choices of how and where they would like to order our service,” Hayes
said. “As we work in partnership with DIRECTV to offer consumers a bundled
whole-house entertainment and information solution, it will be critical to
have a strong national retail strategy and partnership in place.”

The addition of DSL to the DIRECTV lineup gives Hughes a two-pronged entry
into the highly-competitive broadband Internet arena, a sector that has
seen numerous incidences of pricing wars between the many providers looking
to meet the increasing demand for high-speed Internet services.

But with the many failing DSL providers, a pricing point comparable to
cable Internet service and an established base of 10 million satellite TV
subscribers through its sister subsidiary DIRECTV, officials feel they have
a good chance of succeeding.

It’s too early to tell how much of the former Telocity remains now that it
is a small cog in the huge corporation that is Hughes, a subsidiary of
General Motors Corp. that saw revenues of $3.88 billion in
2000. Telocity, before its buyout by Hughes, saw only $9.4 million in
revenues that same year.

But where Telocity lacked in financial standing, it made up in customer
loyalty. With more than 47,000 subscribers, many refugees from other
failing DSL providers, the broadband ISP quickly gained a reputation as a
consumer-friendly company.

While other ISPs, many unable or unwilling to do anything about the many
provisioning, billing and service guarantees promised, Telocity took steps
to ensure they kept their customers, like offering a free month of DSL service if connectivity was lost.

Many of Telocity’s senior management escaped the axe when they were bought
out by Hughes in April. Hayes moved up from his position as Telocity chief
financial officer into the CEO seat, while Telocity co-founders Kevin
Grundy and matt Sepovich kept their senior vice president positions at the
new company.

Wednesday’s deal with Circuit City is part of DIRECTV Broadband’s retail
program, which gives stores a commission for every DSL lead sent that
results in a sale. Officials from both companies wouldn’t divulge the
commission rate.

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