Hughes Network Systems, (Hughes), the global leader and North America's largest satellite broadband provider announced this week that it has tied up with the Wal-Mart to sell broadband Internet connections through the retail giant's stores giving customers in rural and suburban areas across North America the opportunity to get satellite high-speed Internet access.
The Hughes service will be sold in 2,800 Wal-Mart stores across the U.S., including locations throughout most of rural America where terrestrial broadband services, such as cable and DSL, are often not available. "The unfortunate fact of Internet connectivity in the US is that even though the country has one the highest penetrations of Internet in the world, an estimated 10 to 15 million households in the rural and suburban areas do not have access to high-speed Internet connectivity because cable and DSL operators do not reach their neighborhood," said Judy Blake a spokesperson of Hughes. "Therefore, because Wal-Mart is the largest retailer in the country and are frequently located in the rural areas, tying up with the retail giant was the perfect way to educate the rural community that there is an alternative that they can get broadband."
Blake added that in as many as 800 of the Wal-Mart stores in rural and suburban America, Hughes service would be the only Internet service sold off-the-shelf.
Hughes plans to offer download speeds ranging from 700Kbps to 2.0Mbps with pricing starting as low as $59.99, Customers will be able to find Hughes service available for purchase in the Wal-Mart Connect Center in the Electronics section.
In addition, every Wal-Mart customer who purchases the Hughes service will receive an "ExpressPay" card for $100.00 to buy anything at Wal-Mart from groceries, toys, or automotive services, at the customer's discretion
In a majority of stores, it will also be available through the "Digital Connection Kiosk," or Wal-Mart customers can take home the Hughes literature and contact the Wal-Mart Call Center to be connected with a Hughes installation specialist spread all across the country.
"This relationship [with Wal-Mart] is a powerful way to make broadband a reality for the millions of Americans and small business owners who cannot get high-speed Internet access," said Mike Cook, senior vice president, North America Division, Hughes."Through Wal-Mart, we are able to offer more Americans the opportunity to experience the convenience and benefits of high-speed Internet in business and every day life."
That may be true, but the moot question is that given Wal-Mart's marketing muscles and reach, could this arrangement make life difficult for competition and eventually create a monopoly market for Hughes by pushing others out?
Unlikely, says the company. For one, Wal-Mart would be not be allowed to undercut prices for the service in order to push sales. "It has to sell at Hughes-set prices and not its own," says the company. And secondly, chances are that most customers, in the markets that provide an alternative in the form of other high-speed Internet access alternatives (like DSL and modems), will prefer to opt for those instead of Hughes' service because of its higher price. "Only those that would want a higher-speed Internet access by paying a little extra may prefer Hughes," said Blake.
However, the point to note is that there are many regions in the country where DSL or cable modem service providers will not come in for a "long- long" time. "In such regions this service will come as a boon," says Blake.
"And on the contrary," she added, "there could be some positive fall-outs of this arrangement as well." According to consultancy Parks Associates, a consumer technology market consultancy firm, there are no more than 500,000 users of satellite broadband Internet in America (and Hughes commands more than 70 percent of that market). That is partly because many of the millions that still use a dial-up connect are not even aware that satellite Internet option is available. "The arrangement with Wal-Mart then could also help spread that knowledge," said Blake.
Nevertheless, since this idea of selling broadband services is new in the country, there could be some interesting spin-offs to this arrangement, feel experts. "If this arrangement is successful, it could certainly spur sales of hardware," says Nick McCoy analyst at retail consultants TNS Retail Forward. Since early this year, Wal-Mart has started selling Internet gear like web-based telephone handsets, Skype (the Internet-telephony service of EBay), and web-based TVs, and reports suggest that such hardware sales for the retailer could get a boost in the rural regions following Hughes deal.
"Hughes will only be selling the broadband service with no other value-addition just yet," said Blake.
Indrajit Basu is the international correspondent for Government Technology's Digital Communities.
Photo by Jared C. Benedict. GNU Free Documentation License, Version 1.2