Microsoft has confirmed that it will team up with Israel’s Gilat in the latter’s Gilat-To-Home subsidiary, which plans to offer two-way broadband satellite access to consumers. Microsoft will hold 26 per cent in the company initially, for an investment of $50 million.

The new company will be headquartered at McLean, Virginia.

Gilat’s service will be based on its SkyBlaster IP product. It hopes to launch in the second half of 2000 and has set an ambitious target of one million subscribers within three years. The service will be marketed to subscribers in areas where cable Internet is not available. Microsoft was mooted as a possible partner for Gilat when the latter outlined its plans for Gilat-To-Home in December. Gilat aims to offer up to 40Mbit/s downstream and up 154Kbit/s upstream.

Last summer Gilat’s main VSAT rival, Hughes, which operates the DirecPC Internet via satellite service, partnered with America Online (the latter making a substantial $1.5 billion investment in Hughes).

Meanwhile, Gilat is also working with Echostar on a number of “technology activities”, according to Gilat. Echostar is shortly expected to announce plans for spot beam satellites which could be used to deliver Internet.