StarBand Slashes Workforce

EchoStar, the second-largest satellite provider in the U.S., has returned customers to StarBand but StarBand continues to feel economic pain as it searches for a way to exit bankruptcy.

by Roy Mark of internetnews.com [September 12, 2002]

Bankrupt satellite Internet provider StarBand has slashed its workforce by 36 employees in hopes of preserving cash. The 20 percent cut leaves the McLean, Va.-based firm with approximately 140 employees. The company is reducing employee benefits and decreasing the matching contribution payment to employees' 401(k) investment plans.

In its late May 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 also received court approval of its agreement with EchoStar Communications. 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 had not forwarded millions of dollars in fees it had collected. 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 DirecTV, part of Hughes 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. 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 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 per month, per customer 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.

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