Echostar Communications Corp. and DirecTV Inc. will market satellite broadband Internet service offered by Wildblue Communications Inc., the companies announced June 9. As part of the agreements, Wildblue will be the only satellite-based Internet solution the two U.S.-based satellite-TV providers can offer their customers for the next five years.

The deals, combined with a similar but non-exclusive agreement with AT&T in May, have given Wildblue reason to be excited about its prospects going forward. Wildblue ended 2005 with 25,000 subscribers and is adding 10,000 per month, Brad Greenfield, Wildblue’s vice president of sales and marketing, told Satellite News. "We are now at 60,000, and we just don’t know where we’ll be at by the end of 2006."

The partnerships "are all classic wholesale distribution deals," said Greenfield. "We are selling them equipment and technical services like provisioning, as well as the satellite and terrestrial network transport. But they are responsible for selling the product and providing customer care, billing and installation. While it’s a Wildblue basic product, they can do with it what they want." Wildblue’s equipment will be separate from both companies’ platforms, "but they may be integrated in some form in the future," he said.

DirecTV and Echostar will brand the satellite broadband services under their own names, adding the tagline "Powered by Wildblue." The deals will put Wildblue in front of a much wider audience by using the brand names and sales infrastructure of the more well known companies.

"Wildblue gets a big credibility boost from this deal," said Max Engel, Frost & Sullivan‘s satellite industry analyst. "Any time they can get a major established player such as Echostar, DirecTV or AT&T to sign on, they are able to piggyback on those trusted names. No longer are people going to say, ‘Isn’t Wildblue that company that went bankrupt a while ago?’ Instead, they’ll now say, ‘Wildblue’s available with AT&T, DirecTV and Echostar. Those are trusted names; I’ve been dealing with them for years! Of course, I’ll buy Wildblue’s service.’"

The two satellite TV providers and AT&T will be Wildblue’s main distributors, Greenfield said, though the broadband Internet provider will continue to offer the product through its other channels, such as the National Rural Telecommunications Cooperative (NRTC).

However, with Echostar and DirecTV free to set their own prices, one has to wonder if NRTC-affiliated dealers will be able to compete?

"Our dealers can elect to stay with us or migrate to work with Echostar or DirecTV," Greenfield said. "We’ve got about 1,000 dealers today, and the majority of them are Echostar or DirecTV dealers."

DirecTV spokesperson Robert Mercer would not provide any pricing information on the service but said the launch will take place "sometime in the coming months." Echostar did not return calls seeking comment.

While Wildblue has the exclusive broadband deal in place for the next five years, DirecTV will continue "to explore a variety of options for broadband service," Mercer said. "This deal certainly is not the end to our continuing exploration of other broadband options."

There is a good reason why both carriers will probably continue this search and even adopt a terrestrial broadband solution. Wildblue does not have the capacity to handle both companies’ combined 27 million subscribers. With just 25,000 subscribers signed up by the end of 2005, Wildblue had to stop selling service in the Midwest due to a lack of capacity on Anik F2.

"We continue to improve the handling capacity of our current Anik F2 satellite with software and network upgrades," said Greenfield. "We are also launching Wildblue 1 in November of this year, which will triple our capacity."

In truth, Wildblue is not meant to provide a total broadband solution for AT&T, DirecTV and Echostar. The service is designed to serve Wildblue’s core market of rural America, which only comes to 10 million to 15 million potential subscribers.

"Even with Wildblue onboard, Echostar and DirecTV still have to create a credible bundle that can compete with the current triple-play offering provided by cable, and a similar product that is expected from the telcos," said Jimmy Schaeffler, chairman of the Carmel Group. "They also need to create offerings that are entirely theirs in order to control their own destinies in the marketplace."

The Wildblue deal will put pressure on its satellite Internet competitors, Starband and Hughesnet, Schaeffler said. "They will really have to step up in order to compete," he said.

Aruna Slekys, vice president of corporate marketing for Hughes Network Systems, downplayed the competitive threat. "We’re not sure these Wildblue deals actually mean anything to Hughesnet," he said. "We’ve got approximately 300,000 consumer and small business subscribers, and we’re growing by 10,000 subs a month. We’ve done this through retail and Web sales, so our model is working for us. If anything, these deals confirm that there is a healthy market for all of us."

–James Careless