StarBand, EchoStar Settle Dispute

EchoStar Communications Corp. has agreed to pay $750,000 to settle its legal dispute with bankrupt high-speed Internet satellite company StarBand Communications Inc.

by Roy Mark of www.internetnews.com [June 24, 2002]

The Colorado-based EchoStar, which owns a 30 percent stake in StarBand, also agreed to surrender its voting power in the McLean, Va.-based company.

A week before StarBand's May 31 bankruptcy reorganization filing, the company filed a lawsuit in the U.S. District Court in Alexandria, Va., charging that EchoStar has not forwarded millions of dollars in fees it has collected and is collecting as its billing agent. As part of the filing, StarBand sought immediate injunctive relief to direct EchoStar to transfer back StarBand's customer base and to stop EchoStar from acting as StarBand's billing agent.

The suit claimed EchoStar was collecting more than $850,000 a week in revenue that should have gone to StarBand. In February, EchoStar stopped marketing StarBand services in order to focus its attention on its controversial merger proposal with Hughs Electronics Corp., which, if approved, would combine the nation's number one and two satellite companies.

StarBand delivers its two-way satellite Internet service through small antennas on roofs, walls or poles of consumer homes for residential service or commercial buildings for small office customers. The StarBand Model 360 high-speed satellite modem is connected to a customer's computer. When a customer accesses StarBand Internet service, the signal travels over inside wiring to the rooftop antenna. The antenna then relays the data signals to a satellite. The StarBand antenna accommodates both StarBand high-speed Internet service and satellite TV programming.

The settlement between EchoStar and StarBand requires EchoStar to pay StarBand $710,000 and surrender the service records for 16,000 retail StarBand customers. EchoStar will also pay StarBand $35-a-month, per customer fee to the 15,000 StarBand users it sold service to under the previous contract.

For its part, StarBand agreed not to make any negative public statements about EchoStar and to issue an apology to EchoStar Chairman Charlie Ergen for posting his e-mail address on the Web.

In its bankrupty filing, Starband listed assets of $58 million and liabilities of $229 million. As part of the reorganization, StarBand has a $2.8 million commitment for debtor-in-possession (DIP) financing from majority owner and founding partner Gilat Satellite Networks of Israel.

StarBand has applied for immediate court approval of the DIP financing. The company also announced that ongoing customer and dealer operations are up and running and expects them to be unaffected by the filing. StarBand intends to implement a number of still unidentified cost-saving programs during the reorganization.

— End