A satellite broadband company with a history of financial problems now behind it is hoping a new market focus and its acquisition by an established industry player will make it more profitable for its new owner.
StarBand Communications Inc., which provides satellite broadband services largely to rural users, emerged from 18 months in bankruptcy protection in November of 2003. After a round of cost cutting the company began looking for new sources of funding and in March 2005 it was acquired by Spacenet Inc., a McLean, Va.-based subsidiary of Gilat Satellite Networks Inc. of Israel.
Spacenet now markets the StarBand service under that name, and also markets its Connexstar service to government and executive business users.
A year after the acquisition , Starband’s subscriber levels have stabilized.
StarBand’s subscriber numbers had been on the decline since peaking in 2002 at 40,000. That number had dropped to 30,000 by the time of the acquisition, but in the year since the deal was struck it has stabilized at 30,000, according to Jeff Carl, director of marketing for Spacenet.
Without providing specific revenue numbers, Carl characterized StarBand as a “break-even business.” Gilat breaks down its revenue into business units once a year in its regulatory filings, but those numbers for 2005 have not yet been released, and Carl would not provide estimates.
The Spacenet merger, however, is bringing a number of benefits to the StarBand product, according to Carl. The company was able to consolidate its facilities, moving several of Spacenet’s divisions to StarBand’s newer Marietta, Ga.-based hub.
Consumers also get increased confidence because of Spacenet’s size and longevity, Carl said.
“StarBand gets the stability of being part of a larger company,” he said.
Jimmy Schaeffler, chairman and chief executive officer of The Carmel Group, a market research fi rm in Carmel, Calif., said that SpaceNet’s name may not be enough to make StarB and a major player in satellite broadband like WildBlue Communications Inc. of Greenwood Village, Colo., and Hughes Network System’s Directway product.
“Inevitably, it makes them more powerful, but they still don’t quite have the experience in the sector,” Schaeffler said. “Maybe in this marketplace, there isn’t enough room for a third player who doesn’t have incredibly deep pockets and a lot of experience.”
StarBand’s experience selling and marketing products and services to larger businesses will give it a leg-up in selling StarBand services to business owners, and that’s the direction the company wants to take, Carl said. The company would like to focus its expansion efforts on reaching the business market rather than trying to attract additional consumer customers.
“Spacenet has been in business for 25 years and handled some of the largest commercial networks in the world. We bring a lot of experience and capabilities to serving business customers. We’re really good at it. This is how we can somewhat differentiate ourselves,” Carl said. The company is still focusing on rural users, he added.
Focusing on small businesses will help distinguish StarBand from a growing list of competitors in the satellite broadband market, such as WildBlue, Carl said. He doesn’t believe the new competitors have had a large impact on the company’s subscriber base.
“We haven’t seen a whole lot of impact from it,” Carl said. “I can’t tell you where their growth is coming from, but it’s not coming at our expense. I like to think it’s because our customers are satisfied with the service they’re getting, and those guys are marketing to new people.”
Joanne Dant, who does public relations for WildBlue through the firm October Strategies Inc., said that WildBlue targets both consumers and small businesses, and does not just focus on home users.
“While our markets do somewhat overlap those targeted by StarBand, the WildBlue product has a much broader appeal,” Dant said, citing pricing structure primarily as Wildblue’s advantage.
Schaeffler said focusing Starband on business customers could help narrow the field a bit, but it really depends on how the competition services those customers.
“I usually tend to be pretty positive, but my gut feeling is these guys still have a lot of challenges ahead of them,” he said.
Carl said that Spacenet has been able to slightly reduce StarBand equipment costs, and to provider higher speeds and capability for around the same prices they’d previously charged for slower services.
“You get more for your dollar,” Carl said.
Now that it has merged with Spacenet, the combined company leases space on four satellites to provide its service. Carl said there are no immediate plans to expand that capacity.