By Theresa Foley

Mass marketing of satellite-Internet access in Europe is under way, as two startups try to attract large numbers of subscribers who want high-speed Net access using satellite systems that are already in tens of millions of homes. Europe On Line (EOL) has offered Internet services to consumers over the SES Astra satellites for eight months, while Internethypergate.com (IHG) says it will start its free satellite-Internet service this summer.

SES Astra says EOL was using four-plus transponders by mid-February. IHG has reserved five Eutelsat transponders to serve Europe, and was negotiating with GE for GE 4 capacity to serve the United States.

While no one disputes the appeal of the Internet market, questions remain about whether or not the consumer market is ready for a direct-to-home Internet solution. First into the market with four years of experience, Hughes Network Systems has only had limited success in selling satellite Internet via its DirecPC offering. DirecPC has more than 100,000 satellite-Internet users since introduction in 1997, but only about 30,000 of them are believed to be residential users, and anecdotes about service problems abound.

EOL and IHG will go after the masses and must have larger numbers of customers to survive. They will stick with the one-way over satellite formula that DirecPC has used, but their access speeds are advertised as higher and service prices are lower. Whether the quality of service is better remains to be seen.

DirecPC also will look a lot different in a year, after it revamps its product this fall into two-way over satellite instead of the current one-way over satellite technique, in which a slow telephone line is required to request the data. The new DirecPC equipment comes along at the same time that Gilat will introduce a new two-way Gilat-to-Home product in the United States. With at least four companies offering the services, the race to sign on satellite Internet access customers will occur on both sides of the Atlantic.

EOL and IHG have strikingly different business models. EOL prices its services for about 15 Euros ($15) a month. Its subscribers also must buy digital PC cards at about 150-250 Euros ($150-250) and/or set-top boxes at 600 Euros ($600), plus they must have access to Astra through a dish or cable.

IHG, on the other hand, plans to give satellite dishes, PC cards and services to “qualified customers.” A form on the Web site is filled out by applicants, who are then screened by undisclosed criteria. Neal Lachman, vice-president and one of the founders of IHG, says the satellite pipe to the subscriber will offer true broadband at up to 40 Mbps. This will allow the subscribers to enjoy a broadband shopping experience at the planned 3-D Hypercity, a virtual shopping center that will be entered through the IHG portal. “Every big company on the Internet is willing to buy a showroom or shop,” according to IHG’s extensive research, Lachman says.

Lachman’s ambition is to serve 15 million subscribers within a year or two. If it gets there, IHG could be nearly equivalent to America On Line’s (AOL) 20 million users, and he notes AOL’s $180-$200 billion market value prior to the merger with Time Warner. “If I can get 15 million subs, our company will be invaluable,” said Lachman. “But we are not money-greedy. We want to build a company on satellite technology.”

In May, 10,000 subscribers will be allowed to start using the service, and by year end, the number will grow to a million or more, he says. Within two years, Lachman thinks he’ll get 40-50 million users.

Already in business with a less lofty-minded business plan is EOL, which started commercial service in November 1999.

“Satellites and Internet are a marriage made in heaven,” says Candace Johnson, president of EOL. By mid-January, Johnson says 15,000 subscribers have signed on, even though early customers have had to use digital PC cards since USB boxes were not yet available. The return channel to request Web pages is dial-up telephone service, but the satellite downlink speed over which the data is delivered–1 Mbps for IP-based streaming video and 2 Mbps for digital file downloads–is much faster than phone line access.

EOL is focusing on three markets–the PC cards, USB boxes and satellite Web TV boxes. Johnson has been associated with the satellite business in Luxembourg for nearly 20 years, and her tenaciousness has paid off in the past. “What I care about is building this market. I never give up, I never go away and I never take no for an answer,” she says.

Satellite Internet looks like it has a role in the new converged, digital world. The drive to build respectable subscriber bases for the service in North America and Europe is starting, and by year-end, subscriber levels for the competing services will indicate just how ready customers are to use the technology.

Theresa Foley is Via Satellite’s Senior Contributing Editor.