Aug. 16 (Bloomberg) -- Dish Network Corp. is preparing to introduce a nationwide broadband-Internet service using a satellite from sister company EchoStar Corp., according to three people familiar with the situation.
The EchoStar 17 satellite, launched into orbit July 5, can support download speeds of 15 megabits per second, although introductory nationwide packages will probably offer rates of 5 megabits so the system can take on more capacity, said one of the people, who declined to be named because the plans are private. Dish and EchoStar can handle about 2 million new Internet customers with the service, the person said.
The move is the result of technological advances for the U.S. satellite industry, which can now use higher-frequency bands to offer faster broadband to more people. The capacity for these kinds of services has climbed "by an order of magnitude," said Deepak Dutt, vice president of investor relations at EchoStar, who declined to comment on the Dish deal.
Dish expects to formally offer the service in late September or early October, mainly to subscribers in rural areas who may not have access to cable broadband, two of the people said. Bob Toevs, a spokesman for Englewood, Colorado-based Dish, declined to comment.
EchoStar and Dish became separate companies in January 2008, with Charlie Ergen remaining the chairman of both. The details of how they will split revenue and how much the service will cost consumers are still being discussed, one of the people said.
Dish shares fell 0.2 percent to $31 at the close in New York. The stock has climbed 8.8 percent this year. EchoStar, up 36 percent this year, rose 0.2 percent to $28.45.
Dish already offers satellite broadband through a partnership with Carlsbad, California-based ViaSat Inc., though that only covers certain parts of the U.S., including areas east of the Mississippi River and the West Coast. It gives some customers speeds of as much as 12 megabits per second. The new offering will augment that product and give Dish nationwide coverage, the people said.
By packaging satellite broadband with its current video service, Dish can offer customers a bundled option. That means it will compete more directly with cable companies, as well as satellite rival DirecTV, AT&T Inc.'s U-verse and Verizon Communications Inc.'s FiOS.
Dish may need to add more satellites to expand the service beyond 2 million people while maintaining the same speeds. The company, which has a total of about 14 million customers, hasn't disclosed how many users are served by the ViaSat agreement.
Dish is waiting for Federal Communications Commission approval to use its wireless spectrum to offer mobile Internet and phone service, which the company could bundle with satellite TV and broadband. That would give users a so-called quad play.
The EchoStar service is meant for customers who can't get the faster speeds provided by cable and phone companies in more urban areas. Comcast Corp., the largest U.S. cable provider, offers as much as 305 megabits per second. Verizon FiOS, meanwhile, goes as high as 300 megabits.
Most home Internet users typically don't notice a difference in speed beyond 25 to 50 megabits, according to Jonathan Atkin, an analyst with RBC Capital Markets in New York.
Dish Chief Executive Officer Joseph Clayton said in January that the market potential for satellite broadband service is "substantial, given the nearly 8 million to 10 million mostly rural American households that are unserved."
Separately, Dish reached an agreement in principle with Sinclair Broadcast Group Inc. on retransmission fees, keeping 70 broadcast stations on the air for its customers. The companies agreed today to extend their existing programming contract two weeks to allow both parties to sign off on a final agreement.
Dish had said earlier this week Sinclair was demanding more money for its stations than any other broadcast group in the country.