STARBAND DENIED PRELIMINARY INJUNCTION
Federal judge has denied preliminary injunction in Starband’s breach-of-contract suit against EchoStar. U.S. Dist. Judge Claude Hilton, Alexandria, Va., issued order denying request for injunction May 24, day after Starband filed suit, court said. Starband, jolted by EchoStar’s decision in March to end distribution agreement, claimed in court papers it was owed “millions of dollars” in monthly and wholesale service fees by DBS provider. Starband charged that as result of EchoStar’s failure to turn over collections and billings functions it was suffering damages of $385,000 per week. It said EchoStar had accounted for 31,000 of its 41,000 subscribers, including 16,000 and 15,000 from retail and wholesale agreements, respectively. EchoStar spokesman declined comment.
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From launch of satellite-based Internet access service in Nov. 2000 through Aug. 1, 2001, Starband sold service through its Web site and EchoStar’s retail distribution network. Under agreement, EchoStar handled billing and collected monthly service fee (MSF). Companies shifted to wholesale agreement (WSF) last Aug. under which EchoStar paid subscriber acquisition cost and was required to pay monthly fee for each wholesale subscriber gained through its distribution network.
Starband said “difficulties” between itself and EchoStar emerged last Dec. after latter proposed buying Hughes Electronics, which operates satellite-based Internet access service under DirecWay brand. Tensions further mounted when EchoStar formed digital subscriber line (DSL) alliances with Earthlink and SBC Communications, Starband said. EchoStar and Starband officials met April 4, when former ended marketing and distribution agreement. Starband then began preparing to assume billing and collection functions starting May 1 and hired 45 customer service reps, set up “lock boxes” for collections and hired printer to manage paper billing process, it said. EchoStar, however, charged that EchoStar hadn’t been paying monthly service fees it had collected or wholesale fees to Starband nor had it turned over customer files. “Moreover, EchoStar has imposed unreasonable conditions upon EchoStar’s delivery of Starband’s customer files, the MSF or WSF,” Starband said.
EchoStar and Starband formed alliance in 2000, at time when former was exploring means for delivering Internet access. EchoStar also worked with now defunct WildBlue, which had proposed Ka-band satellite Internet access service, and invested $100 million in Starband. It wrote off that investment earlier this year. “As a growing business, we couldn’t financially wait any longer to receive payments for the services we provide,” Starband Chmn. Zur Feldman said in May 24 e-mail to customers. “It’s unfortunate we were forced to take this legal step. It was a last resort for us to resolve these issues. We always prefer to settle business matters in a business environment, not in a courtroom.”