Alert Hughes satellite buys TELOCITY( old news - 09:39AM Thursday Dec 21 2000) tags: satellite Press release here. Telocity will be picked up for $2.15/share in cash ($180 million) by Hughes Satellite, of DirecTV fame. A sign of hope, perhaps, for some of the other CLECs trading below a buck. Telocity shares last traded at $1.41. This sale answers the question of what Telocity was going to do when the cash was due to run out early next year. Hughes plans to "integrate" their satellite service with DSL, and target this package at their 9 million user base .. Commentary: This deal, while small in dollar terms, is bold and interesting for the DSL business. On a per subscriber basis, Hughes is spending $4000+, however they evidently see value beyond the pure subscriber counts: The Telocity strategy of providing their DSL subscribers with more than just a modem seems to have saved their bacon in a market downturn.. it is much easier for DirecTV to connect together the DSL part and the Satellite and interactive TV features they have via the capable but mostly unused Telocity gateway. In addition, the aim to bundle the two technologies to the 9 million DirecTV subscribers appears to create an interesting and powerful alternative to cable TV + cable Internet. Convergence? or disaster? Many previous interactive TV efforts have largely fallen flat.. viewers do not seem to be that interested in paying extra to be able to "vote the ending of a soap", join in a quiz show, or even play home editor on a live ballgame. DirecTV will be playing with the idea of juicing up AOLTV and UltimateTV using the faster DSL return path from subscribers with all services. If they get it right, it could be the best of both worlds (huge number of channels available anywhere, plus fast internet, all for one price and one home box). On the other hand, with the vagaries of DSL thrown in, and patchy availability, they have the capability to confuse new customers in all sorts of new ways. Customer service savings.. The acquisition makes a lot of sense from a customer service perspective, as Highes can move Telocity customer support over to their existing support network, thus removing one of the key expenses that makes it hard for a pure DSL company to make money on residential lines. A glimmer of hope for the CLECs? Rhythms should be pleased to know that one of their fastest growing ISP partners is not going to go out of business next year, but with Rhythms market cap currently no larger than Telocity's sale price, they might find their newly beefed up #1 customer wants to negotiate some new and more favorable terms when the current contract is up. Or even, buy them entirely to guarantee a lot of the infrastructure side as well? who knows..
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- Which Telecom Giants Will Merge Next?
- ViaSat Buys Wild Blue for $568 Million
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justin
Australian
join:1999-05-28
Brooklyn, NY | Re: links for info The link is back.
PR newswire pulled it, then produced a new one, leaving no forwarding address. I hate that.
They changed the figure from 179m to 180m in the new release.
whoops, whats a million between friends? | |
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Wolf7
join:2000-11-20
Griffin, GA
clubs:
| It looks like we would lose our static IP and also, possibly being able to easily hook up our lan routers to their gateways. Just a thought.
From what I have heard off both companies. I don't think that I would care to be with either one.
wolf | |
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Archvile2
join:2000-10-22
Natick, MA
|  Reminds me of a certain Dilbert
Dogbert: "Due to some timely leaks to the press, your company's stock value has plunged. However, I'll acquire it for $30."
CFO: "We'll do it. $30 per share is more than fair."
Dogbert: "Yeah, 'per share' would've been fair. Anyone want a copy?" | |
| | Anon | Maybe now Do you think pricing will stay the same? | |
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Brendan
Warr Guitar is here
join:2000-07-14
Littleton, CO | heh
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*Pissed In Colorado* | |
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deakon
@home.com
|  Lots of questions
1) Does Direct TV REALLY believe that they can handle the customer support side of this thing? When we began, we all believed that we could do MASS deployment of service and maintain a dialup support model. Business customers rarely need alot of support whereas, residental customers need a tremendous amount of support. I have had to walk people through replacing the NIC card and it took 3 hours.
2) Why buy a reseller? Telocity is bound by the service that is provided by the CLEC's. One of the major reasons that DSL has hit the skids is that we (the resellers) were able to sell X number of lines (all qualified based on the CLEC's 'qual tool') but when it came right down to it, the CLEC's would only be able to install about 40% of those lines sold. That's like running a car dealership where of 10 people who come to your lot to buy a car, you tell them all that you can get them the car but then you end up working (ALOT) with all of them, only to find out that you have wasted your time on 6 of them. I don't care how good you are as a reseller. If you sell 1000 lines and only install 400, you can't succeed. Why buy a reseller when they could buy a CLEC and a reseller and control the whole loop. Regardless, if the CLEC's don't 'fix' their qual tool, DSL will continue to be a headache for everyone involved.
3) Delivery of service to the home. Once again, we have an issue with Telocity being a reseller. If Hughes wants to integrate the Web and the TV, that's great. However, the Northpoint Installer is going to say. "Where do you want this." How many people are going to say..."please connect it to my TV." They are not, they are going to connect it to the computer in their "home office". Then when the customer wants to get web enabled TV, what do they do? Run wires across the floor, down the stairs, to the back of the TV? Only sounds like a winner for people who live in a studio apartment, and last I checked, I didn't have alot of those type of customers using both satelite AND DSL. Ok, sure its easy enough to wire a home, but come on, how many typical "residential" users are really going to pay for it, or take that project on themselves.
4) Cost. Finally as the point was made previously, I don't believe that you can provide residential DSL with any type of service for cheap. I honestly believe that you will see the price of Residential DSL go from $39.95 to $69.95 or $79.95 within the next year. It just has no margin and support costs are too high. To that end, What am I going to pay for in this? $49.95 for my DSL service and another $50.00 a month for DirectTV plus another bunch o bucks for all my pay-per-view events and movies-on-demand? So At then end of the month, my bill is like $150.00 for TV and internet, when I could get all the same thing with Digital Cable and Internet for much less. Throw in my phone and my internet, phone, and TV all come on one bill.
Just as DirectPC/TV marriage has not really made a big splash, I don't see the DirectTV/Telocity marriage doing anything but prolonging the agony of the residential DSL user.
Just my enlightened opinion | |
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justin
Australian
join:1999-05-28
Brooklyn, NY
Host:
IPv6
Business Connectiv..
Home/Office setup ..
Console/Handheld g..
Console Tech
| Re: Lots of questions 1) evidently they do. time will tell. They will integrate and idiot proof the hell out of things if they want to survive.
2) because telocity is also an ISP (with POPs), plus has done all the hard work to e-bond to 5 or 6 CLECs and ILECs? Nevertheless, I think buying Rhythms as well might be a good move.
3) they seem to suggest they will be putting the telocity modem into the set-top box. All installs would be line-sharing installs so there is no northpoint installer. Just plug it in and pray for green. The only battle is how to get that set-top box connected to your PC.. running ethernet all over the house is not something many people would enjoy planning for.
4) cost - they have the ability to bundle satellite + internet all in one subscription plan and one box. Thats pretty powerful way of reducing costs. They would have to be considering bundled subscription plans otherwise as you say, the cable competition (where available!) is cheaper.
I'm wondering how their AOLTV product will go now .. this seems like a more direct threat to timewarner/aol cable now. | |
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JYoung
G L 2814
join:2000-06-13
Sherman Oaks, CA
| Re: Lots of questions Before you break out the champange, there's a couple of things you need to consider:
DirecTV is an separate company. It is wholly owned and operated by Hughes Electronics (which is owned by GM) but it is separate (at least the DirecTV employees considers themselves separate). How fast or how well any integration of services will go remains to be seen.
DirecTV has been up for sale for many months now. Several companies have been looking into purchasing them including AOL (primarily as a backup in case the Time Warner merger didn't go through), NEWS Corp(Fox-Murdoch), Viacom (CBS-Paramount), and Comcast.
http://www.latimes.com/business/cotown/20001213/t000118985.html
Hughes recently sold off their Space Satellite and Communications division (the guys who build and program the satellites) to Boeing. This seems like a key cog in a satellite based business
I'm not sure what's going on with Hughes buying Telocity when you consider that the internal Hughes scuttlebutt was that GM was dismantling and selling off divisions. It's confusing to say the least.
GM may just be trying to make Hughes look more attractive to outside buyers. When you consider that they originally purchased Hughes to beef up their automotive electronics, you do have to wonder.
--
If you're wondering how he eats and breathes and other science facts, then repeat to yourself "it's just a show, I should really just relax" | |
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Hayward
K A R - 1 2 0 C
Premium
join:2000-07-13
Key West, FL
| Re: Lots of questions said by JYoung:
GM may just be trying to make Hughes look more attractive to outside buyers. When you consider that they originally purchased Hughes to beef up their automotive electronics, you do have to wonder.
Well, so long as the money keeps flowing from somewhere, to get it to a stable and profitable state, thats what counts. (So long as it's not AOL :/ )
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-Hayward
»haywardm.com (Hayward's Key West) | |
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lml2000
Whazzup
join:2000-08-17
Los Angeles, CA
 ·RoadRunner Cable
| [QUOTE=justin
I'm wondering how their AOLTV product will go now .. this seems like a more direct threat to timewarner/aol cable now.
[/QUOTE]
Exactamundo. As I see it, the greatest vulnerability to the DBS platform was the inability to provide the interactive experience the MSOs are pushing for. Sure, there's been a lot of criticisms regarding iTV. But really, how often do those who take on risk and introduce new technology get it right the first time. iTV will be here soon, and it will be very appealing to a certain segment of the population. How large that segment will be remains to be seen, but I think it will be a large portion of the consumer market who are already drawn to DBS, to broadband, and to e-commerce. iTV is definitely in the cross-hairs of those in the broadcast industry. Its a "buried treasure" ready to be claimed.
JMO | |
| | | Anon | Answers to Lots of questions The deal makes perfect sense just not sure about the price.
1. DirecTV has 8 million subscribers currently. I there 800 seat call centers can handle Telocity's 30K subs and next years new adds. New adds will come from DirecTV's base. Look for Telocity to stop the cute advertising in the short term.
2. DirecTV/Hughes had been looking at DSL for quite a few months, 6+, to combat churn to cable's integrated package so an aquisition shouldn't have been a suprise to any industry insider who really knows what is going on. They didn't buy a CLEC because of the EPS impact it would have to the Hughes bottom line (same reason why Verizon killed their deal with NPNT). I don't see anyone buying any CLEC anytime soon, buyers will just wait for the asset liquidation sales in Chp. 11 and buy DSLAMS and Colo space at pennies on the dollar. Remember CLECs are really glorified resellers too, they resell the most important piece, the copper loop. Only the ILEC is in complete control.
The real question people should be asking is why did Hughes pay such a premium for Telocity? I take my hat off to Telocity's bankers for negotiating a great deal. Hughes' board must not watch CNBC or read DSL Reports.
3. Watch for an integrated DirecTV/DSL/Cable modem set top box. The box will have a 40-80G hard drive and serve as a home LAN server/cache. Multiple connections via home pna/wireless 802.11
4. Just another line item on the bill to DirecTV. Your not considering economics of reduced churn by offering a combined package.
The REAL QUESTION PEOPLE SHOULD BE ASKING IS WHAT'S NEXT, I.E. WHO DOES DIRECTV/TELOCITY GO WITH IN TERMS OF A CLEC RELATIONSHIP (NPNT or RTHM). I placing my bets on RTHM in the short term. I would short NPNT if you still can.
Remember it can, and probably will, go to zero. | |
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lml2000
Whazzup
join:2000-08-17
Los Angeles, CA
·RoadRunner Cable
| Re: Lots of questionssaid by deakon:
Some interesting thoughts from someone inside the industry.
1) Does Direct TV REALLY believe that they can handle the customer support side of this thing?
I think so, or they wouldn't have even considered the deal. Hey, I'm a recent sub to DirecTV and have what is considered a "custom" installed, having a installed a remote and separate feed to my Replay recording device. Many of the installers are trained in telco and not just installing a dish on the roof and running coax cable to the set-top box. These guys are going to school and being trained. BTW, the installer who came to my house last week, who use to work for PacBell and has worked in the field with fiber, hinted to me that something "whazzup" when we got to talking about Internet and 2-way access, so this is no surprise, and you can be sure that DirecTV is prepared to make this work.
2) Why buy a reseller? Telocity is bound by the service that is provided by the CLEC's. Sure Telocity is bound to their EXISTING CLEC contracts, but not necessarily to DTV's subscribers. I'm sure you are aware that DTV has a JV operation with SBC.
The incumbent carriers these days no longer view themselves as "carriers" per se, but rather ACCESS facilities providers. In other words, they aren't stuck on being the transporter of the data, but are content merely to provide the facilities and create a nice revenue stream by leasing such ACCESS.
Why a buy a reseller v. a CLEC? Its all about ACCESS to customers; its not about owning the nodes along the route. As someone else correctly pointed out, CLECs in a sense, are nothing but resellers themselves. Why deal with a CLEC when you can deal directly with the incumbent yourself? What are your really after? ACCESS.
3) Delivery of service to the home. Once again, we have an issue with Telocity being a reseller. If Hughes wants to integrate the Web and the TV, that's great. However, the Northpoint Installer is going to say. "Where do you want this." How many people are going to say..."please connect it to my TV." . . ."
Don't get stuck on Northpoint this, and Covad that. They don't own the lines; the incumbent does. The only legal rights these CLECs have is to provide the switch to Telocity's existing customer base. This is NOT with DTV purchased Telocity. They purchased it for its backbone, its POPs and its ability to "extend down the channel" to the DBS customer and provided him/her a healthy upstream connection that he/she is without UNLESS he/she has DSL with another provider or a cable modem which DTV would view as a "no-no."
4) Cost. Finally as the point was made previously, I don't believe that you can provide residential DSL with any type of service for cheap. I honestly believe that you will see the price of Residential DSL go from $39.95 to $69.95 or $79.95 within the next year. It just has no margin and support costs are too high. To that end, What am I going to pay for in this? $49.95 for my DSL service and another $50.00 a month for DirectTV plus another bunch o bucks for all my pay-per-view events and movies-on-demand? So At then end of the month, my bill is like $150.00 for TV and internet, when I could get all the same thing with Digital Cable and Internet for much less. Throw in my phone and my internet, phone, and TV all come on one bill.
Yup. That's the way its gonna work. I don't see the price of RESIDENTIAL DSL going up UNLESS it is commensurate with an improved QoS. In other words, the price of DSL will go up, but it will be akin to a "business-class" type of service. You get what you pay for. If you fly coach, expect the plane to be jammed back; if you shove out for business or first class, expect a smooth ride. This is where DSL is headed IMHO. The price of residential "coach" is unlikely to rise in face of competition from the cable guys. Many a cable modem subscriber, IMHO, has been in surfing heaven on borrowed time. As their networks become congested, expect more and more problems, big ones. Remember, these guys are experienced in broadcast, not 2-way access.
Just as DirectPC/TV marriage has not really made a big splash, I don't see the DirectTV/Telocity marriage doing anything but prolonging the agony of the residential DSL user.
This is misleading. DirecPC was something offered to DirecTVs rural customers, who over the past few years, had little or no prospect of broadband via DSL or cable modem. It was clear from the get-go that DirecPC could not compete with terrestrial broadband, and it will not in the future. This Telocity deal is different by its very nature; it terrestrial.
BTW, what industry are you from within?
Just my enlightened opinion
--
Regards,
lml | |
| Ruritani
join:2000-12-15
Pitcairn, PA
| Great News.
Of course, that doesn't mean they would have geniuses on the line, but this is in my viewpoint an equilivance of having Eudora being bought out by Qualcomm. Take a look at their brilliant web pages for support. It wouldn't be difficult to see the same kind of thing being devised by Hughes.
For people who bemoan that the static IP would be lost, I must ask you: Why? When they marry together the satellite system with the DSL system, you have two choice: Have the painful system of sharing IP address through the record, and trying to trace customer usage through their billing system, advertisment systems, et cetera -- OR use a static IP address, and use it as a very easy system to trace what the heck you're doing online. Heck, throw up a system-wide firewall between Telocity and the internet, and use the permanent IP address to keep track of customers.
Heck, they could set up a box that automatically upgrades themselves with new TV schedule, new games, new advertisements, and so on forth. PPPoE doesn't provide the 24/7 system they need to do that.
Seriously, think of this on the business side -- Static IP is much better of an idea than PPPoE for the bottom line.
To those that complains about the cost -- would you gladly get basic Satellite and 640/90 internet, along with all the bell and whistles for under $100? Heck, have a special sale of $69.99 for everything, free install! That would get those 9 millions customers to go, "Hmm, maybe I should upgrade my set top box to get DSL now..."
So what if individually it would run you $150? At least you'll be paying $69.99, not $40 for just satellite. That's more money to their coffers, and gives them a better marketing data to run with, which equals to more ad dollars. They'll gladly sell DSL for a loss with a package of satellite for that reason alone.
So my privacy will be ruined, my wallet will be depleted, and so on forth. Why am I happy?
Because Telocity will stay alive and continue to grow. My DSL line will be installed, and I'll be using it. 
-T.J. | |
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PK
Premium
join:2000-11-14
Center Line, MI
clubs:
| Ahhh Competition!! The American way,,,, looks like the battle lines have been drawn. (And sounds to me like people are already forming an allegiance behind each!)
I think that this is a great thing for the industry,,, in both aspects. Competition has a way of adjusting itself to the demand of the people.
"Time will tell" - Justin (how true)
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Negativety breeds contempt... | |
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HughesSucks
@205.174.x.x
|  One crappy company buying another
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| | huey7
join:2001-01-18
Middleburg, FL | Re: One crappy company buying another I wonder if the term the blind leadding the blind fits in here? This maggage of companies is like having Ray Charles leading Stevie Wonder down a circular stiarways. Both of them are doing to crash and burn. | |
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dobie0
join:2000-06-22
Englewood, CO
| Hughes everyone hear needs to hope that Hughes keeps telocity separate from Hughes Network Systems (HNS), or the company that runs DirecPC. If HNS takes over telocity's operations, prepare to live with more lies than even your telco says, random outtages that are always blamed on your system, and the dreaded FAP (playfully known as Find Another Provider). | |
| RayComp
join:2000-09-09
Saddle Brook, NJ
| If Hughes wants Telocity to thrive... they need to bounce Telocity's CEO Patti Hart out on her rump!
It's very obvious that her "do nothing" attitude towards customer issues is something that runs throughout the company and has virtually ruined it. How else can you possibly explain not bothering to answer a customer's certified snail mail asking for her help???
She couldn't even bother to have one of her underlings take care of it. ...Or maybe she did and the person she gave the job to didn't bother to take care of it. Either way, the bottom line is that the head of any organization is the one who sets the tone for the organization. That leader is also supposed to follow up on his or her underlings, if they don't then they aren't doing their job!
Kudos to Hughes for waiting until Patti Hart ran Telocity almost into the ground. If Hughes had tried to buy Telocity a little over a year ago, it would have cost them 10 times what they're paying for it. Anybody who can walk in and buy something for ten cents on the dollar is doing ok in my book! | |
| | | LAArt
join:2000-11-08
Los Angeles, CA
| spammer and procrastinator unite Great! On one hand, we have a company notorious for having refused, for the longest time, to stop huge spam runs from their dealers (Hughes DirecTV). On the other hand, we have a company notorious for failing every promise they make to their subscribers, general cluelessness, and some of the dumbest customer service reps. The reps are just slightly smarter than the management, and with this union, we can look forward to crappy service and even crappier support. 3-week NorthPoint crossover? Ha, I laugh, 5 weeks into the ordeal, with no end in sight. | |
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jabbawest
Orbis Hirsutis
Premium
join:2001-11-06
Wylie, TX
| Burger Flipping Techs | |
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Chi-Lobos
@motorola.com
| Re: Burger Flipping Techs AMEN! For two and a half months following the failed cut-over from Rhythms SDSL of the telocity era to the ADSL technology, I am still without service. I am a pretty busy guy, but work support Wireless internet infrastructure, and I know its not fair that I am armed with some general ground rule knowledge of DSL, ATM, and WAN switching, but I don't think I am so intimidating that their technical support people can't call back and check to see if what they have 'done' to help me ever got the service working. I am a busy person, and as much as I enjoy the technical challenge of getting the problem resolved, I simply don't have the time to baby sit someone else's technical support staff. I wonder what metrics they are using to measure their techincal support organization's effectiveness. I am here to tell you that my personal experience has been completely unsatisfying, and I suspect that is the case of many others as well. Working in a customer oriented environment, and experiencing first hand what DTVBB is doing, I wonder how long DTVBB plans on being in this business. The customer support they provide isn't doing anything to ensure customer satisfaction, nor the perpetuation of their existence as a DSL ISP. | |
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Not Dead Yet!!?!