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Internet Users Left Stranded After Intelsat Satellite Fails

By Mike Musgrove
Washington Post Staff Writer
Tuesday, November 30, 2004; Page E01

Commercial satellite operator Intelsat Ltd. lost use of one of its satellites Sunday -- a mishap that left some Internet customers stranded and could jeopardize a proposed $5 billion deal to sell the company to a group of four venture capital firms.

Dianne VanBeber, vice president of investor relations at Intelsat, said yesterday that it was not clear what had happened to the Intelsat Americas-7 satellite, but that it had suffered a "sudden and unexpected power loss" early Sunday morning.

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Intelsat was able to switch many of its customers, such as the Playboy Channel and the Nebraska lottery system, to some of the other 27 satellites in its fleet within hours of the loss. But other Intelsat customers, such as StarBand Communications Inc., a satellite Internet service provider, are still experiencing outages.

VanBeber declined to estimate what the loss of the uninsured satellite would cost the company, other than to say it would not be material to the firm's financial results. However, the loss could affect plans to sell the company.

A consortium of private investment groups formed under the name Zeus Holdings Ltd. had arranged to buy Intelsat this year for $3 billion plus the assumption of nearly $2 billion in existing debt. The loss of the satellite gives Zeus Holdings the right, under the terms of the contract, to walk away from the deal, Intelsat said.

At least one of the groups in the venture said it has not made a decision about what to do.

"We're evaluating the impact of the loss," said Clare Sillars, a spokeswoman for Apax Partners Inc., one of the investment firms in the consortium.

Plans to send another satellite aloft in December should absorb some of the impact from the loss, Intelsat said. The company bought the Americas-7 satellite from Loral Space & Communications Ltd. this year as part of a $900 million deal for five satellites. The Americas-7 was launched in 1999.

A spokeswoman for Loral, Jeanette Clonan, said that the company would be working with Intelsat to figure out what went wrong with the satellite, but that it would probably be days before Intelsat and Loral engineers figure out the problem.

Intelsat is incorporated in Bermuda but most of its workforce, or about 850 employees, is based in Washington. Intelsat has not lost a satellite since 1972.

Though Intelsat was able to switch many customers to other satellites after the Americas-7 satellite lost contact Sunday morning, not every customer can easily be moved. StarBand Communications, a McLean company that provides wireless high-speed Internet access to residential customers, may be mired in troubles for weeks or months.

StarBand had about 20,000 customers who relied on the satellite for their Internet access, all of whom are now without access. Those customers, many in rural areas, will have to readjust their satellite dishes to point to another satellite -- once StarBand and Intelsat figure out which satellite to use.

"We've had better ways to start the week," said Howard Lossing, vice president of marketing at StarBand, who found out about the problem when he learned his service at home was down Sunday morning.

Joel Loucka, a StarBand customer in Beach Bluff, Tenn., has already ordered a second phone line because he needs to be online and on the phone simultaneously to run his Web-hosting company, based out of his home in the woods.

Loucka is reluctant to go to another wireless Internet company because he has already shelled out $600 for equipment to get online through StarBand (his subscription costs an additional $60 per month).

"I'm going to wait this out and see how it plays," he said, adding, "I don't think this is going to clean up any time soon."

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