Under the deal, EchoStar's Dish Network will offer its subscribers EarthLink's DSL service directly and through retailers. EchoStar customers who sign up for the DSL (digital subscriber line) service will get credits of up to $10 a month on service charges.
EarthLink's DSL service costs $49.95 a month. The deal applies only to new EarthLink subscribers who sign up for a minimum of Dish Network's America's Top 100 programming package, which runs $33.99 a month or more, depending on premium channels.
EchoStar customers who can't get EarthLink DSL will get a discount on dial-up service.
Bundles of satellite TV and DSL service have been tried before with limited success. Hughes Electronics' DirecTV bought DSL provider Telocity in 2001 with hopes of offering customers bundled services. DirectTV DSL had 160,000 subscribers. But late last year, DirecTV watched itswith EchoStar unravel and later decided to its DSL operations.
For EarthLink, the EchoStar partnership is the latest move to grab more broadband subscribers. The third-largest Internet service provider has partnered with cable giants AOL Time Warner and Comcast to gain broadband market share. EarthLink ended 2002 with 779,000 broadband subscribers, a 65.4 percent increase from 2001.
Like America Online and other ISPs, EarthLink has to move its dial-up customers to broadband service. EarthLink's total number of dial-up subscribers for 2002 declined 4 percent to 4.03 million from the preceding year. Meanwhile, a Nielsen/NetRatings study showed that U.S. households using dial-up access declined by 10 percent, compared with a 59 percenthouseholds.
Dial-up ISPs are being squeezed from above by cable and telecom companies that offer broadband service, and from below by profitable value-minded companies such as United Online, which offer dial-up service for $9.95.
According to Salomon Smith Barney analyst Eileen Furukawa, EarthLink is navigating the dial-up-to-broadband transition better than some of its larger rivals, but the game is still in the early innings.
"We believe the pressures EarthLink has navigated so well thus far--migration of dial-up users to broadband, new competition from facilities owners (DSL, cable) in broadband--are likely to intensify in the next 24 months," said Furukawa.